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The Interaction Between The Tangible And Intangible Economics Essay

Introduction: Assets is one of the most controversial concept in financial accounting. The historical accounting scientist are trying to give a satisfactory definition of the assets, but so far, an authoritative, academics and practitioners are accepted definition, has not yet appeared. The resources formed from past transactions or events by enterprises owned or controlled, and the resource be expected to bring economic interests to enterprises which is called assets. Classified according to different criteria, assets can be divided into different categories. In accordance with the length of the consumption period, can be divided into current assets and long-term assets; according to the specific form, Long-term assets can also be further classified, according to whether the physical form, can be divided into tangible and intangible assets.
Tangible Assets: Tangible Resources
Financial: Firm’s cash account and cash equivalents
Firm’s capacity to raise equity
Firm’s borrowing capacity
Physical: Modern plan and facilities
Favorable manufacturing locations
State of the art machinery and equipment
Technological: Trade secrets
Innovative production processes
Patents copyrights trademarks
Organizational: Effective strategic planning process
Excellent evaluation and control systems
Source: (Strategic Brand Management 2003)
Assets that are relatively easy to identify are called tangible resources. they include the physical and financial assets that an organization uses to create value for its customers. Among them are financial resources (e.g.: a firm’s cash and accounts receivables as well as its ability to borrow funds) physical resources (e.g.: the company’s plant equipment and machinery as well as its proximity to customers and suppliers): many firms are finding that high–tech .computerized training has dual Benefits; it develops more effective employees and reduces cost at the same time ( J.B. 1991)
A tangible asset is the physical form of assets, including fixed assets and current assets, tangible assets consist primarily of: housing, machinery, equipment, and other forms of assets. Narrow sense of tangible assets usually refers to fixed assets and liquidity. Generalized tangible asset including: funds, resources, products, equipment, apparatus, plant, personnel information, including all the factors of production. Generally speaking, the tangible asset is the assets of a certain kind of form. (Jobber. 2012)
Existing assets to the specific material and product form, including the production of tangible assets and non-produced tangible assets. Production of tangible assets is the production activities to create assets; tangible non-produced assets are natural assets without production achieved. Production of tangible assets, including tangible fixed assets, inventory (stock) and precious items . Tangible fixed assets, that is including residential, houses and buildings, machinery and equipment, raw materials and supplies, on the move, that is finished goods, and resell the goods; Non-production of tangible assets include land resource, uncultivated biological resources and water resources.(Wilson. 2005) Tangible assets can be further divided into physical and financial assets. Physical asset is the value in use of the property or material. Financial asset is the currency and securities.
The value of the tangible assets created by its physical nature, that is, given the value of tangible assets by tangible, physical and visual factors. The value of the tangible assets from its material characteristics, their property rights are intangible, but it comes from their material characteristics.
Intangible Assets: Intangible Resources
Human: Experience and capabilities of employees
Managerial skills
Firm specific practices and procedures
Innovation: Technical and scientific skills
Innovation capacities
Reputation; Brand name
Reputation with customers for quality and reliability
Reputation with suppliers for fairness, non-zero-sum
Source: (Strategic Brand Management 2003)
Much more difficult for competitors and for that matter . A firm’s own managers to account for or imitate are intangible resources .which are typically embedded in unique routines and practices that have evolved and accumulated over time .these include human resources (e.g.; experience and capability of employees, trust ,effectiveness of work teams, managerial skills ),innovation resources (e.g., Technical and scientific expertise ,ideas and reputation resources (e.g.: brand name ,reputation with suppliers for fairness and with customers for reliability ,and product quality . a firm’s culture may also be a resource that provides competitive advantage. (.Barney.1991)
Intangible assets refer to enterprises for the production of goods or rendering of services, for rental to others, or for administrative purposes and holds a long-term, non-monetary asset without physical form.
Generalized intangible assets including financial assets, long-term equity investments, patents, trademarks, etc., because they do not have a material entity, but the performance of some kind of legal rights or technology.
Intangible assets including patents, technology, brands, copyrights and royalties, the use of the land . Intangible assets can be divided into identifiable and non-identifiable intangible assets. Identifiable intangible assets, that is including patents, proprietary technology, brands, land use rights and concessions,. Intangible assets following conditions are satisfied at the same time, in order to be recognized .The intangible assets related to the economic benefits are likely to flow to the enterprise; the cost of the intangible asset can be measured reliably.( Ghemawat.1991)
Role of intangible Assets¼š Use of intangible assets as security for loans (such as trademarks, patents, copyrights, equity pledge registration as security for loans), commercial registration, increase investment, equity participation, shareholders funded immaterial property, license to use, transfer, lease contract, liquidation auction;
Increase brand awareness, show the strength of enterprises, enhance cohesion, brand image¼›(Jorissen. 2007)
The enterprises operating intangible assets with international standards, and then enter the international market Protection of intellectual property rights claims is based requires companies to crack down on counterfeit products, infringement and litigation .Through the evaluation of Intangible assets, the business of the inventory can be completed¼Œ to provide the management information to operators thus reasonable allocation of resources.
Project financing, joint venture, merger, acquisition, attract investment, investment in intangible assets, investment, Intangible assets is the core attraction of foreign investment such as commercial brand, corporate profitability, sales, channels, personnel , etc.
Intangible assets capital to invest in shares can bring many benefits for the enterprise. First of all, can ease the difficulties of registered capital and increase investment. Some people want to start a business, because of lack of funds to run the new company, can use intangible assets as part of the of registered capital to be registered, especially in some high-tech enterprise, especially; The number of enterprises registered capital is too low, giving the marketing difficulties, want to increase the registered capital, but the lack of funds, then can use the immaterial property investment shares to overcome this difficulty.( Gregory 2003)
In the era of the industrial economy, the economic growth is mainly dependent on the plant, equipment, funds, and in the era of knowledge economy, patents, proprietary technology, trademarks, goodwill, information, computer software and other Intangible assets of innovation and sustainable development of economic growth play a decisive role.
Intangible assets unlike land, buildings, machinery and equipment as a specific physical form in front of people, but in the era of knowledge economy, it does play a role can not be ignored for the sustainable development of enterprises.
In the era of knowledge economy, the process of economic globalization in further exacerbated, it should be recognized that there is a process of continuous improvement of the status and role of intangible assets, when the increasingly competitive market, the more complex the business activities, intangible assets continues to increase, while its status and role of the more trend in the core, so that the number of high-tech enterprises are facing the danger instance to be suspended because of the loss of Intangible assets and can not sell their products.( Wilson, D. 2005)
Role of intangible assets in Fast-paced Technology Market: In the day-to-day purchasing behavior, will you confused with a wide variety, all kinds of brand? And do not know how to make your decisions? What are the determinists to help you to choose goods finally? Of course, we want to buy the most cost-effective products, imagine that, we can not get them to try one by one, we will proceed from experience to choose reputable manufacturers and the well-known brands. In our selection process, in fact these Intangible assets play a role in the process. It has a strong appeal and influence, sometimes forcing us to make not entirely rational choice, wonderful role of the brand is to be able to win the goodwill of consumers to obtain the trust of consumers, which products sold, win opportunities to make goods in an invincible position in the competition for a long time.( Riezebos.2003)
In the context of the era of knowledge economy, the value of Intangible assets can be much higher than the tangible assets, because the value of the tangible assets, after all is limited, while the value of Intangible assets can be unlimited200 brand value rankings released by the United States in November 2003, Coca-Cola topped the brand value of up to $ 70.45 billion, which strong value of intangible assets is evident. No wonder the boss of the Coca-Cola Company said: Even now, all the property of the Coca-Cola was burned, we still can dominate the world with this brand again. This is the brand’s equity and also is the power of intangible assets. This kind of self-confidence and competitive advantage also reflected in other international brands. For example, Intangible assets and tangible assets ratio of 70% versus 30% respectively in the world famous Microsoft, It can be predicted that the proportion of Intangible assets will continue to expand in the future of the company’s new assets. The United States has been able to occupy a dominant position for a long in the world, relying on its powerful economic force, In fact, that is expanding the tremendous power of intangible assets which included in enterprises and products. (Saudagaran. 2001) Intangible assets growth with the support of modern marketing tools and modern technology means, its speed can be much higher than the growth of the tangible assets of the enterprise, which means giving enterprises more excess profits.
Let us look at the following data: In the high-tech is widely used in the United States, the research and development expenses of non-financial firms as a percentage of GDP, rose from an average of 2.2% in 1980-1989 to an average of 2.9% in 1990-1997, The proportion of investment in the world in tangible assets fell to 14.1%. At the same time, the S

Inflation An Increase In Money Supply Economics Essay

Inflation an increase in money supply or an increase in price levels which is measured as an annual percentage increase. Therefore, when there is an increase in food price of inflation, there are two effective theories that cause the problems. Thus, there are economic concepts that are geared towards the problem. However, these concepts that are being applied should be evaluated in a most effective an efficient manner.
Further on in the project you will read and get more understanding of each particular heading on “Food Prices Rising”. The references provided opportunity for further reading and explanation on the concepts in this paper.
Problems of Food Prices Rising in Inflation and The Reason Why it Consider as an Economic One.
Article: Food Prices Rising
What is Inflation?
According to, inflation is an increase in money supply or an increase in price levels which is then measured as an annual percentage increase.
When the value of a dollar does not stay constant a gradual inflation will occur which is then observed in terms of purchasing powers, which are real, tangible goods that money can buy. For example, if 3% of inflation rate occurs annually, then theoretically a $1 bag of sweets will cost $1.03 in a year.
Causes of Inflation When Food Price Rises
According to, the causes of inflation are cause by at least two theories that are generally accepted. These are:
Demand-pull inflation- this theory states that if demand is increasing more than supply, food prices will therefore increase, and this usually will occur in growing incomes.
Cost-push inflation- for increase in food prices to maintain their profit margin, companies’ cost must group. Increased cost such as wages, taxes, etc.
Inflation is considered evil by most individuals, but it isn’t necessarily so. Reason being, inflation affects different people in different ways, but it depends on whether it is anticipated or unanticipated. Thus, if compensating and the cost isn’t high, the inflation rate is said to corresponds to what the majority of people are expecting (anticipated inflation). For example, bank can vary their interest rates and buyers can make an agreement or disagreement of contracts that may include automatic wage hikes as their food prices level increases.
Problems which arise when there is unanticipated inflation:
Creditors lose and debtors lose only if the lender doesn’t anticipate the inflation of food price increasing correctly. But for those who borrow, this is similar of getting on interest-free loan.
Domestic- products become less competitive only if the inflation rate of food price is greater than that of other countries.
Uncertainty about what will happen next that will makes corporation and consumers less likely to spend and therefore, this will hurt economic output in the long run.
Economic Theories Pertaining to Inflation When Food Prices Rising
Economic theories or models pertaining to inflation are approach on food price when rising. They are as followed:
The excess demand approach- suggests that inflation on food price rising is a situation in which the total demand for goods exceeds the total supply of goods.
The quantity theory of money approach-states that there’s an equal relationship between the national income rates at market prices and the velocity of circulation of the money supply. In other words.
M is the merchandise of money in circulation
V is the velocity of circulation
P is the general food price level
Y is the total income
Keynesian theory-a general increase in food price level which is created by an increase in the aggregate demand both over and above the increase aggregate (total) supply. An increase in government expenditure (G), in private consumption (C) and in private earnings (E) will show an increase in aggregate demand only if an economy which to be at its full employment output level.
However, a situation like this happens when a full employment of output which a given economy is unable to increase its output or total supply in response to an increase in total demand.
According to the graph above, when monetary and fiscal policies are being used by the government to improve full employment of production levels, an increase in aggregate demand level of the economy from AD0 TO AD1 would then result in the creation of full employment level of equilibrium output represented at point E. If the aggregate demand level chose to increases further from AD1 to AD2, the general food price levels shall increase since the employment of production level will remain unchanged at YF. The output level will not change since all resources are fully employed at the point of YF.
An aggregate demand level over and above the full employment of production level will create an inflationary gap of EF. In addition, an aggregate demand below the full employment of production level will create deflationary gap of ED.
Monetarism- in order to grow or increased production, the money supply must increase within a given economy.
Since the monetarist explains the relationship using the theory of nature rate of unemployment, there will be a level of equilibriums output, and both corresponding level of unemployment and employment naturally which will then decide the situations based on features such as resources employment, etc.
The expansionary monetary policies will result in decrease level in the natural rate of unemployment and will then increase the production in short run, but the effectiveness of the expansion policies will be limited in the long run and but will then lead to an inflationary situation after words.
Structuralism- mainly used to explain the nature and basics of inflation in developing countries. Reasons for causing the food price rising rates in developing countries is because it is effected by the in-elasticity of the following:
Production level and capacity
Capital for mutations
Institutional framework
In-elasticity of the labour force and employment structured
High in-elasticity in the agricultural sector
Economic Concepts
Scarcity-states when there is only a finite amount of resource (human and non- human).
Resources- (factor of production) are scarce factor of production such as.
Land- original fertility and mineral deposits, water and climate
Labour- humans contribution towards workforce, whether thinking and doing.
Capital- all manufacturer resources such as building, machines, equipment and improvements to land.
Entrepreneurship- a situation when making basic business policy’s decisions is occurring.
Opportunity Cost- to obtain something or satisfy a want, the highest valued alternative must have in consideration.
Production Possible Curve (PPC) – Which shows the different combinations of goods that a product can produce given its resources and the state of technology.
Good A
Good B
Thus, the PPC includes the maximum amount of two goods that can be produced if all the resources are used in the most efficient way. Such, all the combinations on and below the PPC are attainable (X, A, B, Z), and the combinations that are above are unattainable (M).
Benefits of Applying the Economic Concepts
Evaluating the Economic Concept using the technologies whereas resources and time factor comes in place. Thus, the output and input methods should be measured in the same basis.
Time factor, an appropriate time period that has to be determined depending on the type of production system, for example, 5-10 months or 12 years. During that period, resources, particular activities, and other factor will change and require analysis and monitoring.
In conclusion, when inflation of the food price rises, there will be a decrease in demand supply. Thus, between 2007 and 2008 the Congressional Budget Office found that comparison attempt to meet government mandates at about 10-15 percent of food price inflation has a direct result biofuels production. This unintended consequence has prompted US to speak out against biofuels mandates time and time again.
An outline of the problem of the food prices rising as being research
A recommendation of the economics concepts are being employed to correct the issue of the food price rising on inflation.
Research of the economic theories pertaining to the problem has being evaluated.
The benefits of applying the economics concepts should are binge aware of in order to reduce the food price levels on inflation.
Base on the judgment of the food price rising in inflation, it’s either an increase in money supply or an increase in price levels which is measured as an annual percentage increase. However, as the food price rises, every dollar that’s own buys a smaller percentage off a good or service. It then affects different people in different ways but it depends on whether it is anticipated or unanticipated. Thus, if compensate and the cost isn’t high, the inflation rate is said to be an corresponding to what the majority of people are expecting (anticipated inflation).
In effect, that’s how the economic theories and the economic concepts come in place to solve the problem of food price rising in an economic problem of inflation.