Definition: The term fixed asset refers to a long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income. The general assumption about fixed assets is that they are expected to last, be consumed, or converted into cash after at least one year. As such, companies are able to depreciate the value of these assets to account for natural wear and tear.

In Plain English: Fixed assets are long lasting pieces of property or equipment that companies use to make money.

Example: Your shoe company owns a factory that produces the shoes. The factory itself costs $1M and houses $500k in equipment. In total (without accounting for depreciation) your company has $1.5M in fixed assets.

Fixed assets, in most cases, are necessary to generate income. They add value to your company and allow you to generate revenue for the business.