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Simple English definitions for legal terms
financial asset
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A quick definition of financial asset:
A financial asset is something that you own that has value, like money in the bank or stocks. It's listed on a balance sheet along with other things you own, like property or equipment. Some financial assets can be easily turned into cash, while others are harder to sell. They're important because they help you understand your financial situation and can be used to pay off debts or distribute to heirs.A more thorough explanation:
A financial asset is an item that has value and can be owned. It is listed as a current asset on a balance sheet and includes things like cash, inventory, equipment, real estate, accounts receivable, and goodwill. Financial assets can be used to produce goods or services, or they can be readily converted into cash.
Examples:
- Cash
- Stocks and bonds
- Accounts receivable
- Real estate
These examples illustrate financial assets because they are items that have value and can be owned. Cash is a financial asset because it can be used to purchase goods or services. Stocks and bonds are financial assets because they represent ownership in a company and can be sold for cash. Accounts receivable are financial assets because they represent money owed to a company by its customers. Real estate is a financial asset because it can be sold for cash or used to generate income.