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

Redundant Asset

What it is:

A redundant asset is an asset that generates income, but is not linked to the fundamental operations of the company.

How it works (Example):

Also known as a non-operating asset, a redundant asset usually generates some type of revenue or return for the owning company, but does not play a part in the company's operations.

For example, if a company previously manufactured plastic model kits but later transitioned into manufacturing plush children's toys, the dyes used to create the parts for the model kits would be labeled redundant assets because they are not incorporated in the manufacturing of plush toys.

A company's asset portfolio is also an example of a redundant asset (except if the company is an investment company or mutual fund).

Why it Matters:

Companies have to report redundant assets on their balance sheet in order to reveal their full financial picture. Redundant assets are omitted from most analyses of growth and revenue projections, because they are unrelated to a company's production capability.