What is a financial asset?

Financial assets are financial products, in which the buyer acquires a right to collect an amount of money from an issuer that sells that product. These assets can be issued by any economic unit, such as companies, banks or governments. We can find fixed income financial assets or variable income financial assets.

In accounting terms, the buyer of a financial asset has a right (asset) to be collected, and the seller an obligation (passive). On the one hand, the buyer has the right to collect the future income that will be produced, and the seller has the obligation to pay it.

Thanks to financial assets, the corporations that issue it can finance themselves through the generation of debt. In addition, investors are looking for a return on investing in that debt. Some examples of financial assets can be commercial paper, the issuance of public debt or bank deposits.

Financial asset characteristics

  • Risk: it is based on the guarantees that the issuer offers to fulfill its obligations.
  • Profitability: the profitability of a financial asset is focused on the interest produced by its purchase. The higher the risk, the higher the return.
  • Liquidity: refers to the degree of conversion of the asset into money without suffering losses.

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