As more and more business is being done today with credit instead of cash, this item is a significant component of the balance sheet. A firm's inventory is the stock of materials used to manufacture their products and the products themselves before they are sold. A retail firm's inventory generally will consist only of products purchased that have not been sold yet. Generally, fixed assets refer to items such as equipment, buildings, production plants and property. On the balance sheet, these are valued at their cost.
Depreciation is subtracted from all except land.
Fixed assets are very important to a company because they represent long-term illiquid investments that a company expects will help it generate profits. Depreciation is the process of allocating the original purchase price of a fixed asset over the course of its useful life. It appears in the balance sheet as a deduction from the original value of the fixed assets. Intangible assets are non-physical assets such as copyrights, franchises and patents. To estimate their value is very difficult because they are intangible.