Certified Financial Management Specialist Practice Exam

What type of assets are considered fixed assets?

1. Long-term tangible properties

2. Cash and cash equivalents

3. Short-term investments

4. Receivables

The correct answer is: Long-term tangible properties

Fixed assets are defined as long-term tangible properties that a company uses in its operations to generate income and are not expected to be converted into cash within one year. These assets are typically characterized by their physical substance, and they include items like buildings, machinery, vehicles, and equipment. These assets have a useful life of more than one accounting period and are subject to depreciation over time, reflecting their gradual loss of value as they are used in the business. The other options represent assets that do not qualify as fixed assets. Cash and cash equivalents are short-term assets readily available for use, while short-term investments are also not held for long-term use but rather for quick liquidity. Receivables, representing amounts owed to the company by customers, are short-term assets as well, typically expected to be settled within one year. Thus, only long-term tangible properties fulfill the criteria for fixed assets.