Question

Which is a characteristic of a fixed asset?

A) Short-term and impermanent.
B) Only leased, not owned, by the company but used in normal operations.
C) Exist physically so they are tangible assets.
D) Offered for sale as part of normal operations.

Answer 1

A fixed asset is characterized by being a long-term, stable, and not easily changed tangible asset, such as machinery or buildings, with associated costs that are constant regardless of production levels.

Step-by-step explanation:

A characteristic of a fixed asset is that it is long term, stable, and not easily changed. Fixed assets are tangible assets that exist physically and are used in the normal operations of a company over a long period. They contrast significantly with short-term assets, which are more impermanent and not as stable.

Examples of fixed assets include buildings, machinery, and equipment necesarry to produce a product or deliver a service. The costs associated with these assets, often referred to as fixed costs, do not fluctuate with the level of production, making them predictable over time.

For instance, the rent of a factory remains constant whether the production levels are high or low. This stability is what generally defines a fixed asset within a business context.