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In Finance, What Are Tangible Benefits?

T.S. Adams
T.S. Adams

In financial lingo, tangible benefits are benefits which can be measured in concrete terms: they are measurable and expressible in specific dollar amounts. Listing tangible benefits is a good way to determine the end result or bottom line of a particular investment strategy or business plan. Over-reliance on tangible benefits, however, can undermine or even negate the impact of non-cash returns of a particular plan.

Understanding financial terms eases the process of deciphering financial reports and facilitates smoother communication with any financial professionals who use these terms as part of their normal lexicon. When financial advisers and other accounting professionals talk about tangible benefits, they usually do so in order to provide an immediate method of expressing the results of a particular financial strategy in terms that even a lay-person can grasp. Everyone understands the concept of hard, concrete profit. This makes these benefits a good point at which to begin a conversation among the various stakeholders involved in an investment strategy or business venture.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

Another advantage of expressing things in this fashion is that it eases comparisons between the effectiveness of different plans. For example, saying that Business Plan A resulted in tangible benefits of $100 US Dollars (USD) for the year while Business Plan B resulted in benefits of $200 USD makes it simple to see which plan is the best on paper. It provides a starting point for fiscal analysis to modify or improve an investment or business strategy.

However, tangible benefits should not form the entire basis of fiscal analysis. To continue with the previous example, although Business Plan A generated fewer tangible benefits for the year, it should not be dismissed so easily. The flip side of the coin — intangible benefits — must be considered as well. In other words, does Business Plan A convey advantages that are not expressed in raw dollar amounts? Perhaps the most telling example of this involves advertising and marketing campaigns.

On paper, considering only their direct tangible benefit, advertising and marketing campaigns always lose money: on their own, they generate no revenue whatsoever. However, they are beneficial because they can expose the public to a particular product, increasing sales indirectly by increasing the popular perception and desirability of the product as a status symbol. Thus, considering only the tangible results of these plans can result in shortsighted errors in judgment. When evaluating any investment strategy or business plan, a financial professional can help you weigh the influence of the various relevant factors on profitability and performance.

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