Difference between Financial Assets and Real Assets
Assets are the Oxygen of the Business. These assets can be classified as either "Real" or "Financial" assets.
Before deep-diving into the comparison between real assets and financial assets, let's understand the meaning of these assets by definition.
Financial Assets are in the form, which can quickly be converted into cash. This means that Financial assets are highly liquid includes the different types of investments like stocks and bonds.
Real Assets are the lifeblood for any business. All types of businesses need real assets. Real assets consist of land, buildings, machinery, raw materials, trademarks, patents, etc.
I would like to add that real assets are divided into two parts.
Tangible Assets are the assets that physically exist like land, buildings, material, etc.
Intangible Assets are the assets that do not exist physically like trademarks, patents, goodwill, etc.
Difference between Real and Financial Assets
Liquidity: One of the main difference between Real and Financial Assets is Liquidity. Generally Real Assets have less liquidity because these assets are more cumbersome to exchange in comparison with Financial Assets.
Valuation: There are some factors which affect the value of real assets like Location, Expected benefits, Future Costs, exchange costs, etc. On the other hand, financial assets valuation is independent of such location or any other factor.
Written by: Kalpesh Agrawal