Question

1. What is a “financial asset”? What is a “real asset”? Can they be related? Explain how.

Answer 1

Financial assets mean all such tangible assets which can be converted quickly into cash like stocks, bonds, Bank deposits, notes receivables etc.

These assets have monetary value and that will be realised once they are converted into cash

Real assets are those assets which refers to value generating physical assets like real estate, commodity,land , building metals and precious collections etc .

Yes, they are related as valuation of both financial and real asset are based upon their capacity to generate the cash flows. These are assets which help the business to survive and sustain in the long run and they are interrelated.