Financial asset definition
/What is a Financial Asset?
A financial asset is an asset whose value comes from a contractual claim. These assets are frequently traded. Financial assets include the following items:
Cash
Equity of another entity
A contractual right to receive cash or similar from another entity or a potentially favorable exchange of financial assets or liabilities with another entity
A contract probably to be settled in the entity's own equity and that is a nonderivative under which the entity may receive a variable amount of its own equity instruments, or a derivative that probably will be settled other than through the exchange of cash or similar for a fixed amount of the entity's equity.
As opposed to more tangible assets (such as property), financial assets do not necessarily have a physical form. They are more likely to be intangible assets whose value is derived from the demand for them in the financial markets.
Examples of Financial Assets
Examples of financial assets are as follows:
Stocks. Represent ownership in a company and entitle shareholders to a portion of the company's profits, usually in the form of dividends.
Bonds. Debt securities issued by a government or corporation.
Mutual funds. Pooled investment funds that are managed by professionals and include various assets like stocks and bonds.
Money market instruments. Short-term, liquid financial instruments such as Treasury bills or commercial paper.
Cash and cash equivalents. Bank accounts that offer a small interest rate in return for holding funds.
Options. Contracts giving the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price.
Cryptocurrencies. Digital currencies and tokens that are traded on exchanges and used as a store of value or medium of exchange.
Each of these assets can have varying degrees of risk, liquidity, and expected returns, catering to different investor preferences and financial goals.