Core assets

From CEOpedia | Management online

Core assets are the assets without which the company would not be able to generate profit. Core assets are profitable components of a business and form the fundation of an investment portfolio. Assets may be a physical or non-physical things. It depends on the type of industry. They include all valuable and important property of the business that help in gain benefits. In every business some assets are so essential that are called core assets. Maintaining the amount of equity at an appropriate level often determines the stable and long-term development of the company.

Analysis of core assets is one of crucial points of company analysis. If the core assets are old, require renovation or investments, the company can be unable to compete on the market. In case of financial problems, core assets should be the last to be sold because without them the company can not function property. Basic assets help the company stay viable and they are necessary to carry out business strategy in company. Company which sell off their core assets is on the fastest way to bankruptcy or dissolve their achievements. The company should own them or lease them in order to operate in certain industry. (Yu Q., Miche Y., Séverin E., & Lendasse, A., 2014, 296-302)

Keeping core assets on optimal level should be part of every business strategy. Companies should plan how many core assets will be required in following years and plan how to obtain them. Core assets are things reusable. All business activity is based on them (Lee K., Kang K. C., & Lee J., 2002, p.1-2)

Typical core assets are:

The core assets in one industry can be normal assets in another.

Examples of Core Assets

Different business have different core assets. It depends on the industry or geographic region of enterprise. What is core assets in one company can be non core assets in other business. For example, in a company that produces clothes the core assets are sewing machines, dressmakers and textile. Without these things, the company could not function.

Investors and analysts are watching core assets in company. This helps them decide to invest money or not. Worrisome trends or changing the structure in core assets is important information for them. Usually long-term capital finances core assets in company (for example bonds). We use term "core assets" to describe the Basic functional part of assets that built details of the core. Asset management system monit details of the core (Reinhartz-Berger I., Tsoury A., p.1-3)

Core assets are profitable components of a business and form the fundation of an investment portfolio. Equity constitutes a very important economic category for every enterprise. They ensure financial stability, high guarantee for creditors and provide a solid basis for financing.

See also:

Advantages of Core assets

  • Core assets provide a company with the necessary resources that it needs to generate profits.
  • Core assets can be used to acquire additional assets, such as through acquisitions or expansion.
  • Core assets can help to increase the value of the company.
  • Core assets can help to reduce financial risk and provide stability.
  • Core assets are important for long-term growth and success.
  • Core assets can help to build brand loyalty and recognition.
  • Core assets provide a company with a competitive advantage.

Limitations of Core assets

  • Core assets may be depleted quickly if they are not managed properly.
  • Core assets can be expensive to acquire, maintain and replace.
  • Core assets may become obsolete, decreasing their value over time.
  • Core assets may not be able to generate returns in a timely manner, thus increasing the risk of loss.
  • Core assets may be illiquid and difficult to convert into cash.
  • Core assets may be difficult to measure in terms of value and performance.
  • Core assets may be subject to wear and tear, leading to degradation of quality over time.

Other approaches related to Core assets

  • Core asset management: Core asset management is essential to ensure the long-term success of a business. It involves taking an in-depth look at the company's assets and liabilities, understanding their value and making strategic decisions to ensure their optimal use.
  • Asset diversification: Asset diversification is a way of spreading risk by investing in different types of assets. It entails investing in different asset classes, such as stocks, bonds, real estate, commodities, and cash.
  • Risk management: Risk management is the process of identifying, assessing, and mitigating risks associated with core assets. It includes evaluating the level of risk associated with each asset, developing strategies to manage and reduce risk, and managing the investment portfolio to ensure that it is balanced.

In summary, core asset management, asset diversification, and risk management are important approaches to ensure the success of a business. They involve understanding the value of the company's assets and liabilities, diversifying investments, and managing risk. Proper management of core assets is key to the long-term growth and stability of a business.


Core assets — recommended articles
Capital restructuring — Trading capital — Appropriation of retained earnings — Total capital — Assets funding strategy — Asset base — Capital Base — Investment project — Optimal capital structure

References

Author: Iwona Tuleja

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