Non-Financial Asset
What It Is:
A non-financial asset has a value based on its tangible characteristics and properties.
How It Works/Example:
A company's balance sheet includes several types of assets and liabilities. Assets include financial assets, such as cash, stocks, bonds and non-financial assets. Examples of non-financial assets include land, buildings, vehicles and equipment.
Non-financial assets also include R&D, technologies, patents and other intellectual properties. The following is an example balance sheet with assets listed first, and liabilities listed second.
| Cash | $100,000 |
| Stocks and Bonds | $200,000 |
| Accounts Receivable | $350,000 |
| Inventory | $100,000 |
| Total Current Assets | $750,000 |
Long Term Assets
| Building | $300,000 |
| Equipment | $125,000 |
| Depreciation | -$50,000 |
| Total Long Term Assets | $375,000 |
Current Liabilities
| Accounts Payable | -$100,000 |
| Mortgage Payment | -$50,000 |
| Total Current Liabilities | -$150,000 |
Long-Term Liabilities
| Mortgage Balance | -$250,000 |
| Total Long Term Liabilities | -$250,000 |
Owner's Equity
| Total Assets | $1,125,000 |
| Total Liabilities | -$400,000 |
| Net Owner's Equity | $725,000 |
Why It Matters:
While financial assets pay the bills, non-financial assets are important in evaluating the long term viability of a company. Non-financial assets are an important part of the company's ability to incur debt by providing collateral with sustainable market value.
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Cached on February 8, 2012, 8:05 pm