What is a financial asset?
Financial asset is the intangible representation of the monetary value of the physical item. It receives its monetary value from the contractual agreement on what it represents. While the actual asset, such as the land, has physical value, the financial asset is a document that itself has no basic value until it is transferred to cash. Common types of financial assets include certificates, bonds, shares and bank deposits.
One of the most common types of financial assets is a deposit certificate (CD). The CD is an agreement between an investor and a bank in which the investor agrees to maintain the amount stored in the bank in exchange for a guaranteed interest rate. The bank can offer a higher interest payment amount because the money is to remain unaffected for a specified period of time. If the investor selects the CD before the end of the contractual terms, he will lose interest payments and are subject to financial sanctions.
Another type of finance Asset is a bond. Bonds often sell corporations or government to investors to help finance torattled projects. These are a type of legal document that describes in detail the amount of money lent by the investor the debtor and the length of time to pay. The bond represents how much interest is guaranteed to be returned to the investor together with the original amount of the loan.
shares are one of the only financial assets that do not have an agreement. Investing in shares means that the investor has partial ownership of the company and shares the profits and losses of the company. He or she can keep shares all the time and decide to sell it to another investor.
The money that is inserted into a bank account is also calculated as a financial asset rather than the actual asset. When cash is inserted into a bank account, proof of funds is a bank statement that summarizes the value account. Saved cash is not considered to be a physical asset because the bank uses money to finance its business and agrees with JThey are returning when the account holder decides to download it.
The valuation of financial assets is the process of determining the amount of cash to which the assets can be converted. This process is often used to find the personal wealth of a person for legal reasons, such as his ability to repay the debt. The value of the financial asset may change drastically depending on the moment it is awarded. For example, the value of shares may change daily depending on the company's profit.
Financial asset is usually provided with a due date in a contractual claim. If it remains untouched and does not transfer to cash to this date, its value usually increases. The payment of the asset before the maturity date may eventually become a person's financial sanction because it violates the conditions of the agreement.