Real Assets vs Financial Assets

Real asset can be defined as “assets that are tangible or physical in nature such as property, plants and equipments.As an example in our bank many real assets can be identified such as the buildings, computers, lands that we own, ATM machines, vehicles, machineries such as note counters and etc.

Financial assets can be defined as “assets in the form of stocks, bonds, rights, certificates, bank balances, etc., as distinguished from tangible, physical assets” (Pension Boards-UCC, 2009). For our bank financial assets can be identified as our investments in bonds issued government and companies, bills issued by government and companies, shares of other companies and debentures of other companies, loans we have lent, reserves we hold at Central bank and etc.

Real assets are tangible and financial assets are intangible in nature. Real assets are used in day to business operations to produce/generate an output where as financial assets are used to generate a return by investing activities.  In general by investing in real assets company generates an income by way of profits earned from production utilizing the asset, rent (from lands) and gain/loss on disposals. By investing in financial assets company earns dividends, interest income and capital gains/loss upon disposal of assets.

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One thought on “Real Assets vs Financial Assets”

  1. Nora says:

    the way you clarified the difference was really helpful , thank you

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