What are Non-Current Assets?

Published on October 06, 2025 | 3 min read

Summary

Non-current assets are assets that generate economic value for one or more years, such as land, buildings, machinery, and goodwill. These assets are funded using long-term financing, such as term debt or an equity funding structure.

Key Takeaways

Non-current assets are long-term assets that stay with the company for more than one year.
These assets are classified into two categories: tangible and intangible assets.
The formula for non-current assets is: Tangible assets + intangible assets + financial assets.

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Understanding Non-Current Assets

Non-current assets are used in business for more than one year. These assets directly support business operations and generate economic value over a long period.

Details of the non-current assets of any company are found in the balance sheet. These assets are classified into two categories: tangible assets and non-tangible assets.

Tangible Assets

Tangible non-current assets are called fixed assets because they have a physical substance. These assets can include equipment required by the company to manufacture or produce products.

The assets that are used in manufacturing products depreciate in value over time. However, a few assets, like land and buildings, appreciate their value over time.

Intangible Assets

Intangible assets are non-physical assets that create value for a company for a period exceeding 12 months, such as patents, trademarks, and copyrights.

Intangible assets are assets that do not have physical substance, such as goodwill, patents, trademarks, and intellectual property. Despite not having physical substance, intangible assets create value for a company for a period in excess of 12 months.

How to calculate Non-Current Assets?

To calculate the non-current assets, you need to apply a formula:

Non-Current Asset = Tangible Non-Current Assets + Intangible Non-Current Assets + Financial Non-Current Assets.

Here, financial non-current assets are investments or resources that your business holds for the long-term, usually to generate returns or support strategic goals.

Examples of financial assets are securities or bonds.

What is the Book Value of Non-current Assets?

The book values give you the full value of non-current assets after adjusting for depreciation or amortisation.

To calculate the book value, you need to use the following formula:

Book Value: Purchase Price - Accumulated Depreciation / Amortisation.

Which Financial Ratio Depends on Non-Current Assets?

The value of non-current assets is used for determining some of the key financial ratios:

Non-Current Assets Turnover Ratio

It evaluates how effectively a company uses its long-term assets to generate revenue.

Total Asset Turnover Ratio

It measures overall efficiency by comparing revenue to total assets, which includes both current and non-current assets.

Debt to Asset Ratio

Measures the percentage of total assets, including non-current assets, that are financed by debt.

Return on Assets

It determines profitability relative to total assets.

Role of Non-Current Assets While Analysing Balance Sheet

Non-current assets play an important role in analysing the balance sheet:

Assessing Operational Capability

Assets like property, plants, and equipment indicate the scale of operations and ability to produce goods and services.

Long-term Strategy

A high proportion of non-current assets indicates a capital-intensive business focused on expansion.

Asset Valuation

These assets are recorded at cost and reduce in value over time via depreciation or amortisation, which affect net income and net asset value.

Leverage and Collateral

Large fixed assets are often used as collateral to secure long-term loans, affecting the debt-to-equity ratio.

Non-current assets enable companies to operate, grow, and remain competitive over time. Understanding how they are calculated,the final ratios they influence, and their role while analysing the balance sheet is crucial. This helps investors and stakeholders gain a clearer picture of the company's asset base.

About Author

Subhasish Mandal

Sub-Editor

Finance professional with strong expertise in stock market and personal finance writing, he excels at breaking down complex financial concepts into simple, actionable insights. Holding a Master’s degree in Commerce, he combines academic depth with practical knowledge of technical analysis and derivatives.

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About Upstox

Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.