Ace Your DECA Finance Exam 2025 – Hustle, Bustle, and Bank on Success!

Fixed assets are long-term tangible assets that a business uses in its operations to generate income. These assets are not expected to be converted into cash within a year and include items that are essential for the production and delivery of goods and services.

The key components that qualify as fixed assets are land, buildings, and equipment. These resources provide the necessary infrastructure and tools for a business to operate effectively. For example, land and buildings house the company's operations, while equipment is utilized for manufacturing or providing services. These assets are typically recorded on the balance sheet at their historical cost and are subject to depreciation, reflecting their declining value over time due to wear and tear.

The other options fail to meet the definition of fixed assets. Cash reserves and investments are considered current assets or financial assets rather than fixed assets. Inventory is classified as a current asset that is intended for sale or production within a year, and accounts receivable represent amounts owed to the business, making them current assets as well. Financial instruments and marketable securities likewise fall under short-term or liquid assets, which are not fixed in nature. Thus, the classification in the answer as fixed assets is accurate and aligns with standard accounting principles.