What would be an example of a fixed asset?

Fixed assets are long-term tangible assets that a company uses in its operations to produce goods and services and are not expected to be consumed or converted into cash within a year. Machinery exemplifies a fixed asset because it is a physical asset that a business uses to facilitate its operations, such as manufacturing or construction activities.

Unlike cash, which is a liquid asset, and inventory, which consists of goods available for sale and is typically cycled through quickly, machinery has a longer lifespan and is essential for the continuous operation of a business. Accounts receivable represents money owed to a business by its customers, which can be converted into cash within a short period, and therefore is also not classified as a fixed asset.

Understanding fixed assets like machinery is crucial because they are often significant for a company's operational capabilities and can influence financial analysis and decision-making regarding business growth and investment.