What distinguishes fixed assets from current assets?

Fixed assets are characterized as long-term assets that a company uses in its operations to generate revenue rather than for immediate sale. This category includes items such as buildings, machinery, and equipment, which are critical for the operational capacity of a business. Unlike current assets, which are expected to be converted into cash or consumed within one year (like inventory or receivables), fixed assets have a longer lifespan and are not readily convertible into cash.

The distinction lies in the purpose and duration for which the assets are held. Fixed assets provide utility over time, supporting ongoing business activities, while current assets are more liquid, helping maintain day-to-day operations and financial stability. This classification is key in financial reporting and analysis, as it impacts a company's balance sheet and overall financial health, influencing both operational strategy and tax considerations.