Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

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.

Current Assets

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.