Relevance of Asset Management in the modern world
Modern world is more economically driven and happiness and well-being of a person is more dependent on wealth and resources than other factors. Moreover, due to a shift from agriculture to other sectors, management of financial resources is gaining more and more importance these days.
In this context the term ‘asset’ can be defined as something under one’s possession that can be readily converted into cash. As such, assets include bank account, stocks and bonds, possessions, buildings and land, equipment. Assets also include intangible assets such as a patent or a copyright, or the goodwill of a business.
Now, if we define assets as something that can be converted into cash, then if a person were to convert all of their assets into cash and then repay all of their debts, bills or ‘liabilities’, then the excess balance would be what is known as financial equity or ownership. In such a case, if a person cannot repay all his liabilities and is left with outstanding ones, then he is said to have negative equity. Such a condition can lead to bankruptcy, which is a formal and legal declaration that a person’s creditors are unable to be paid. This may lead to restrictions being imposed on a person that restrain them from the full participation in economic life that other people enjoy.
Management of assets by large businesses also includes protection of assets through a business life insurance policy, which enables businesses to protect shares, key people within the company or their employees.
It is not only large business houses, we, as individuals too indulge in some form of accounting analysis each day. While purchasing or consuming goods, we pay for these from the assets that we already have control over, or assets that we create by receiving payment ourselves.
Thus, in a fast growing commercial economy, the need and importance of the concept of asset management cannot be over-emphasized.
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