Utah General Contractors - Business and Law Practice Exam

Which of the following is an example of a fixed asset?

1. Cash

2. Inventory

3. Machinery

4. Accounts receivable

The correct answer is: Machinery

A fixed asset is a long-term tangible piece of property or equipment that a business owns and uses in its operations to generate income. These assets are not expected to be converted to cash within a year and typically have a useful life of more than one year. Machinery qualifies as a fixed asset because it is used in the manufacturing or operational processes of a business. It has a significant lifespan, is not intended for sale in the regular course of business, and contributes to generating future economic benefits. In contrast, cash is a liquid asset that can easily be used for transactions, inventory refers to goods ready for sale, and accounts receivable are amounts owed by customers for sales made on credit. All these options represent current or liquid resources that are expected to be converted to cash quickly and do not serve the purpose of long-term operational use like fixed assets do.