Financial Assets Definition
Financial assets definition is a contractual security that possesses a claim upon a company or person’s real assets. In comparison, a company invest the cash received from issuing financial assets and invest in real assets.
Financial Assets Examples
Some examples include the following:
Stock – This is an investors claim upon the ownership of a company.
Bonds – This is a claim upon interest payments and a principal payment in the future from a company. It is a liability to the company.
Loans – Treat this financial asset the same way as the bond above.
Insurance – This financial asset pays out if the terms of the contract are met. In other words if a person has car insurance. The money paid monthly goes toward a financial asset that will pay off if that person has a wreck or if the car breaks down.
Note: These are only a few examples of financial assets, and does not incorporate all of them.
Financial Assets Meaning
A financial asset has a claim upon the real assets or tangible money generating assets owned normally by a company. They are often traded and offered in a financial asset market like the S&P 500 or the Dow Jones. As a result, this means that the value of a financial asset can often change. The main contribution of financial assets is to fund companies or money generating entities. They are offered in the market so investors can put their savings to work, and companies can invest in a real asset like a manufacturing plant to make money.
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