Asset Base

The value of your company’s assets, often used to secure a loan.

The calculation of your assets doesn't change if you, say, spend a ton of dough stocking up on inventory. Like if you're a zombie fashion hosiery company and you're stocking up on um...stockings (the thick kind that keep zombie goop inside their bodies) you'll spend a lot of cash to buy that inventory. But the calculation of your assets inherently doesn't change. Rather, the assets go from very liquid (i.e. in the form of cash) to very illiquid in the form of hard-to-sell zombie hosiery.

Lenders care about asset bases because it is what drives their perception of risk in lending you money. If you're Apple or Google with $100 billion just in cash on the books, how well would a lender sleep loaning the company $10 billion in Australia to build out a manufacturing facility if that ten is backed by the hundred in the U.S.? Yeah, probably little sleep lost.

But now instead of GOOG, it's loaning money to Best Buy who may or may not even be around in 10 years. So they'd want to know about that asset base...like if Best Buy actually OWNED instead of leased their stores, there's at least a load of assets behind the loan that the lender could sell to get their money back. Zombie Apocalypses happen all the time so lender sensitivity to asset base size... matters.