The document explains the differences and similarities between real and financial assets. Real assets are physical and generate revenue, while financial assets are non-physical and can be quickly converted to cash. It discusses aspects such as valuation, liquidity, growth potential, and their roles in investment and inflation hedging.

1. By:-
eFinanceManagement.com
https://efinancemanagement.com/financial-accounting/real-vs-financial-assets
Real vs Financial Assets

2. 1. Meaning
2. Differences
3. Similarities
4. Reference
Content

3. Real Assets:
Real assets are generally the physical assets that help a company to generate revenue. These are the assets that a business
or investor owns, such as land, building, and more.
Financial Assets:
Financial assets are non-physical assets. One can quickly convert them into cash. A point to note is that such assets
represent a claim on the underlying value of another asset.
Meaning

4. 1. Valuation:
All real assets carry an intrinsic value. While the value of the financial assets has a relation to the underlying asset.
2. Liquidity:
The financial assets are liquid. Real assets, however, are not as liquid as financial assets.
3. Tangible:
Financial assets may not necessarily have a physical form. Real assets, in contrast, are present in physical form.
4. Growth:
The growth in real assets could be very slow. In contrast, financial assets offer unlimited potential for growth.
5. Purpose:
The primary objective of holding real assets is to generate revenue. In contrast, one buys financial assets
for investment purposes.
Differences

5. 6. Accounting:
In the accounts, one shows real assets at their historical value less depreciation. While financial assets are usually valued
based on their prevailing market prices, if that exists.
7. Inflation Hedging:
Real assets offer more protection against inflation as the value of such assets and the income they help generate grow
with inflation. On the other hand, financial assets may or may not offer protection against inflation risk.
8. Balance Sheet:
Real assets are shown on the asset side of the balance sheet. Financial assets could come on either side depending on
their value.
Differences

6. Following are the similarities between financial vs real assets:
• The valuation of both assets depends on their ability to produce cash flows.
• The presence of either of the asset can help a business or individual survive the crises.
Similarities

7. Reference
To know more about it, click on the link given below:
https://efinancemanagement.com/financial-accounting/real-vs-financial-assets