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Group 2 Financial Assets

Financial assets are liquid assets that derive their value from contractual rights or ownership claims, such as cash, stocks, bonds, and bank deposits. They represent ownership of an entity or contractual rights to payments. Common financial assets include stocks, which provide ownership in a company; bonds, which are loans that must be repaid by a date with interest; and certificates of deposit, which allow depositing money in a bank at a guaranteed interest rate for a set time period. The most liquid financial assets are cash and cash equivalents like checking and savings accounts, as they can easily be converted to cash.

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27 views

Group 2 Financial Assets

Financial assets are liquid assets that derive their value from contractual rights or ownership claims, such as cash, stocks, bonds, and bank deposits. They represent ownership of an entity or contractual rights to payments. Common financial assets include stocks, which provide ownership in a company; bonds, which are loans that must be repaid by a date with interest; and certificates of deposit, which allow depositing money in a bank at a guaranteed interest rate for a set time period. The most liquid financial assets are cash and cash equivalents like checking and savings accounts, as they can easily be converted to cash.

Uploaded by

Lady Lou Ignacio Lepasana
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FINANCIAL ASSETS

What is Financial Assets?


→ A liquid asset that gets its value from a contractual right or ownership claim.
EXAMPLES OF FINANCIAL ASSETS:

Cash
Stocks
Bonds
Mutual Fund
Bank Deposits
UNDERSTANDING A FINANCIAL ASSET

→ Most assets are categorized as either Real, Financial or Intangible.

Real Asset – physical asset that draw their value from substances or properties such as:
• Precious Metals
• Land
• Real State
• Commodities like soy beans
• Wheat
• Oil
• Iron
Intangible Asset- are the valuable property
that is not physical in nature.
They include:
• Patents
• Trade marks
• Intellectual property
Financial Assets- are in between the other two assets.

- It may seem intangible-non- physical with only the stated value on


a piece of paper.
Such as:
 dollar bill
Listing on a computer screen
- What that paper or listing represents, though, is a claim of
ownership of an entity, like a public company, or contractual
rights to payments-say, the interest income from a bond.
More common types of Financial Assets that
investors encounter are:
 Stocks- Financial Assets with no set ending or expiration date. An investor
buying stocks becomes part owner of a company and shares in its profits and
losses. Stocks may be held indefinitely or sold to other investor.
 Bonds- are one way that companies or governments finance short-term
projects. The bondholder is the lender, and the bonds state how much money is
owed, the interest rate being paid, and the bond’s Maturity date.
 Certificate of Deposit(CD)- allows investor to deposit an amount of money at a
bank for a specified period with a guaranteed interest rate. A CD pays monthly
interest and can typically be held between three months to five years
depending on the contract.
Pros and cons of Highly Liquid Financial
Assets

 The purest form of financial assets is cash and cash equivalents- checking
accounts, savings accounts, and money market accounts.
- liquid accounts are easily turned into fund for paying bills and covering
financial emergencies or pressing demands.
 Other variety of liquid might not be as liquid. Liquidity is the ability to
change the financial asset into a cash quickly. For stocks, it is the ability
of an investor to buy or sell holdings from a ready market. Liquid markets
are those where there are plenty of buyers and plenty of sellers and no
extended of lag-time in trying to execute a trade.

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