{"id":8237,"date":"2023-06-30T14:25:29","date_gmt":"2023-06-30T08:55:29","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=8237"},"modified":"2023-06-30T14:25:29","modified_gmt":"2023-06-30T08:55:29","slug":"financial-assets","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/","title":{"rendered":"Detailed Understanding of Financial Assets"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Financial assets are liquid assets that draw their value from contractual rights or ownership claims. These are treated as liquid assets because one can convert economic resources or ownership into cash anytime.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">They are also considered financial security or instruments as companies use them widely to finance real estate and own tangible assets. Some examples of financial assets are shares or stocks, bonds, cash, mutual funds and bank deposits.\u00a0<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d7793f1e6ea\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d7793f1e6ea\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#What-are-Financial-Assets\" >What are Financial Assets?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#Understanding-Financial-Assets\" >Understanding Financial Assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#What-are-the-Types-of-Financial-Assets\" >What are the Types of Financial Assets?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#What-are-the-Classifications-of-Financial-Assets\" >What are the Classifications of Financial Assets?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#Advantages-of-Financial-Assets\" >Advantages of Financial Assets\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#Liquid-vs-Illiquid-Financial-Assets\" >Liquid vs Illiquid Financial Assets\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/financial-assets\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-are-Financial-Assets\"><\/span><b>What are Financial Assets?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are mainly three categories of assets including real, intangible, and financial assets. While real assets have a physical form, intangible does not. However, financial assets can have both. In other words, financial assets may or may not have a physical form or existence. The essence of this asset can be determined based on the demand and supply in the marketplace of their trading zone. In addition, most financial assets hold a fair amount of risks.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The significant types of financial assets are retirement investment instruments and demand deposit accounts like savings accounts or fixed deposits. It is quintessential to maintain a balance of financial assets in a company as it determines the smooth money flow in the business.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Understanding-Financial-Assets\"><\/span><b>Understanding Financial Assets <\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Let\u2019s take an example of a 100 rupee note. It will be constituted as real assets; whereas the total bank balance reflected in the mobile application of the bank will act as intangible assets. On the other hand, the value of this financial asset increases or decreases based on the ownership or claims.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What-are-the-Types-of-Financial-Assets\"><\/span><b>What are the Types of Financial Assets?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Cash or Cash Equivalents\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The cash or cash equivalents present in the balance sheet determine a company&#8217;s asset value. These are instruments, present in cash form or are quickly convertible into cash. Some examples are savings accounts, petty cash, money orders, etc.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Bank Deposits\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Bank deposits are savings, fixed or current deposits which are maintained with financial institutions. It serves as the most common way to preserve your financial assets for safety assurance and interest-earning scope after a while. Moreover, the level of interest rate varies across the bank deposits. For instance, an account holder of a money market account enjoys a comparatively higher rate of interest as compared to savings account holders.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Stocks\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Stocks means all shares of a company listed in the stock market for investors to buy. When an individual invests in shares it means he or she owns a part of the company&#8217;s ownership. Hence, by actively holding a part of a company&#8217;s ownership, shareholders are liable in bearing the profit and loss of that company.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Bonds\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Bonds are popular financial instruments issued by the government or any other firm to raise funds for long-term or short-term projects. This acts as a debt for the lenders as the investment money in the project calls for repayment along with interest. This payment will take place upon the completion of the maturity date of the bonds.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Loans &amp; Receivables\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Banks or other financial institutions offer loans which act as financial assets for these entities. It is because by lending a sum of money to the borrower financial institutions can charge interest during the time of repayment.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Real Estate Investment Trusts (REITs)<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">REITs are companies that contain ownership and management of income-generating real estate properties. It includes office buildings, apartments, or shopping malls. Investors can buy shares of REITs and receive dividends from the rental income generated by the properties.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What-are-the-Classifications-of-Financial-Assets\"><\/span><b>What are the Classifications of Financial Assets?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Current Assets\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">One of the prominent classifications of financial assets, these are mostly cash and cash equivalents, share and securities, prepaid liabilities, etc. Every company keeps hold of current assets to meet the short-term obligation of the company.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Non-Current Assets\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Companies mainly acquire non-current assets to achieve future goals and reach profitability. Some examples of non-current assets are long-term investments, land and property, trademarks, plant and equipment, etc.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Advantages-of-Financial-Assets\"><\/span><b>Advantages of Financial Assets\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Flexibility<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Financial assets offer flexibility in terms of investment size, time horizon, and risk tolerance. Investors can choose to invest small or large amounts depending on their financial capacity. They can also select short-term or long-term investments based on their investment goals and adapt their strategies according to changing market conditions.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Income Generation<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Financial assets can generate income through dividends, interest payments, or rental income. Dividends are paid by companies to their shareholders, interest payments are received from bonds or fixed-income securities, and rental income can be earned from real estate investments. As a result, investors can maintain a regular cash flow.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Liquidity\u00a0<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Liquid assets are generally more liquid than physical assets. They can be easily bought and sold in the financial markets, allowing investors to convert them into cash quickly if needed.<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>Scope for Capital Appreciation<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Many financial assets have the potential to generate capital appreciation over time. For example, stocks and equity-based investments can increase in value as the underlying companies grow and become more profitable. Real Estate Investment Trusts (REITs) and properties can also appreciate, providing potential capital gains.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Liquid-vs-Illiquid-Financial-Assets\"><\/span><b>Liquid vs Illiquid Financial Assets\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<tbody>\n<tr>\n<td><b>Basis of Difference<\/b><\/td>\n<td><b>Liquid Financial Assets\u00a0<\/b><\/td>\n<td><b>Illiquid Financial Assets\u00a0<\/b><\/td>\n<\/tr>\n<tr>\n<td><b>Convertible<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Generally, liquid assets are the type of assets which can be easily converted into cash, not depreciating their market value.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Most illiquid assets cannot be converted to cash easily and are sold only by passing the ownership of the same.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Examples<\/b><\/td>\n<td><span style=\"font-weight: 400;\">Some of the common examples of liquid financial assets are cash, bank deposits, mutual funds, money market accounts, shares, etc.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Some of the common examples of illiquid financial assets are real estate instruments, land, art pieces, jewellery, machinery and equipment, etc.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><b>Rate of Appreciation<\/b><\/td>\n<td><span style=\"font-weight: 400;\">The appreciation rate of liquid financial assets is lower than illiquid assets. In addition, sometimes, there are losses or risks involved in investing in liquid financial assets.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Illiquid financial assets have a better rate of appreciation compared to liquid assets. Hence, the holder of illiquid assets can get the benefit of the appreciated value of the assets after a few years.\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p><b>How does RazorpayX Helps Businesses Manage Financial Operations?\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">RazorpayX, an impeccable business banking suite is available with easy-to-use facilities for small business owners. The diverse range of banking solutions ensures hassle-free and quick management of finances.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To ensure a business owner operates seamlessly, RazorpayX offers a <\/span><a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\"><span style=\"font-weight: 400;\">vendor payment<\/span><\/a><span style=\"font-weight: 400;\"> facility to forward all invoices at one go through email. In addition, with the help of this portal, companies can import invoices from any accounting tool. It even allows vendors to attach invoices through vendor portals.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, budding entrepreneurs can meet their financial goals with the <\/span><a href=\"https:\/\/razorpay.com\/x\/forex\/\"><span style=\"font-weight: 400;\">forex funding<\/span><\/a><span style=\"font-weight: 400;\"> facility of this business banking suite. This facility is led by an expert team of forex who offers correct information related to forex rates, current RBI guidelines, etc. Hence, with this service businesses can reach their goals and cater to capital requirements for investment.\u00a0<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x?r=blog_cta_business_banking_financial_assets&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX<\/a><\/div>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\t\t\t<div id=\"rank-math-rich-snippet-wrapper\" class=\"\">\n\n\t\t\t\t\n\t\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<p>Financial assets are liquid assets that draw their value from contractual rights or ownership claims. These are treated as liquid assets because one can convert economic resources or ownership into cash anytime.\u00a0 They are also considered financial security or instruments as companies use them widely to finance real estate and own tangible assets. Some examples<\/p>\n","protected":false},"author":151156542,"featured_media":8238,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[3485,3679],"class_list":{"0":"post-8237","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"tag-finance","9":"tag-financial-assets"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/8237","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156542"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=8237"}],"version-history":[{"count":1,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/8237\/revisions"}],"predecessor-version":[{"id":8239,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/8237\/revisions\/8239"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/8238"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=8237"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=8237"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=8237"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}