Importance of fixed assets for a business in UAE
It refers to all the assets which are owned by the company and use it to generate revenue. These are not meant to be sold within a financial year, instead, these are utilized for a longer period of time. These assets are the core part of a company which is to be maintained very well to generate sufficient income for the company. It includes buildings, lands, machinery, vehicles, furniture and computers etc.
What is the importance of a fixed asset?
The fixed asset can be useful for a company in many ways some of which are listed below:
- If a company has its own fixed assets such as lands and building etc. It needs not to acquire any assets on rental or lease basis which may increase the cost of the company. It can use it for longer periods till it gets exhausted.
- It enables the interested parties of the company to increase their confidence in the company, by which they won’t hesitate to invest or provide any kind of assistance to the company.
- It reflects whether the company is profitable or not and improves the goodwill of the firm.
- The accurate valuation of fixed assets will help to know about the net worth of the company and whether the company is progressing or not.
- If the company maintains all the fixed assets in a systematic manner, then it may induce investors and mergers to invest in the company. And the efficiency of the company and its fixed assets is calculated on the basis of the fixed asset turnover ratio.
- The company can acquire a competitive advantage if they have appropriate maintenance of the fixed assets.
- If the owner of the company decides to sell it then it can easily be sold if it has quality fixed assets, hence, it will give a positive remark during due diligence.
- If the company is facing any kind of problems in cash flow management then it can sell some of the fixed assets to resolve those problems as the selling of fixed assets is entered as a cash flow in investment activities.
- The fixed asset depreciates with the continuous use, and the accurate recording of depreciation will give the actual value of the fixed asset and there won’t be any error regarding the value of assets.
What if you don’t have fixed assets?
Fixed assets play a vital role in building up a business, every business relies on its fixed assets to generate income. If a businessman starts a business without having adequate fixed assets then he may not able to generate adequate profits and income. Let us consider a company XYZ which was owned by Mr. Tom, his company dealt with the perfume manufacturing. But at the initial stage, the company owned very less fixed assets i.e. only some computers and furniture, for the production of perfume and other facilities it used to get those machinery, land and building on lease and rental basis, due to which they were obliged to pay huge sums as security to use the assets, hence, the cost of the company increased. Similarly, other outside parties were nervous to invest in the company due to lack of proper fixed assets. The financial institutions also refused to invest or provide assistance to the company because it was not able to produce the collateral security or documents related to assets it owned. The goodwill of the firm was also affected. In fact, the company was undergoing a huge loss and was dissolved in future. This clearly reflects that every firm must own adequate fixed assets which are important to carry out the business. Having and managing these fixed assets will provide remarkable return to the firm in long run and it may help to face adverse situations where smooth cash flow gets affected.
CDA in Fixed Asset Management Services
CDA team is ready to assist the clients at regarding their queries and needs about accounting, bookkeeping, VAT registration, tax consultancy, bad-debts accounting and auditing. We provide well experienced and professionalized experts dealing with all the requirements of the clientele so that the clients receive what they expect in a personalized manner.
Hope you have a clear understanding of the importance of fixed assets for a business in UAE. Need help in fixed asset management services in UAE? Feel free to contact CDA for quick support.