Certified Financial Management Specialist Practice Exam

What term describes long-term tangible assets such as machinery or land?

1. Fixed Assets

2. Current Assets

3. Intangible Assets

4. Variable Assets

The correct answer is: Fixed Assets

The term that describes long-term tangible assets such as machinery or land is "Fixed Assets." Fixed assets are physical assets that are used in the production of goods and services and have a lifespan that extends beyond one year. They are crucial for the ongoing operations of a business and typically involve significant investment. The classification as "fixed" indicates that these assets are not easily converted into cash within a short period, unlike current assets which are typically short-term resources. Examples of fixed assets include buildings, vehicles, and equipment, all of which are essential for carrying out a company's core functions. Current assets refer to resources that a company expects to convert into cash or use up within one year, thus they do not include long-term items. Intangible assets, on the other hand, represent non-physical assets such as patents, trademarks, and goodwill, which are also distinct from tangible fixed assets. Variable assets, while a less common term in financial contexts, usually refer to assets whose value can fluctuate, further emphasizing the stability and longevity characteristic of fixed assets. Keeping these distinctions in mind helps in correctly identifying and categorizing the types of assets within financial statements.