Nonfinancial Asset

What is a 'Nonfinancial Asset'

A nonfinancial asset is an asset with a physical value such as real estate, equipment, machinery, gold or oil. For example, gold is considered a nonfinancial asset because it has inherent value based on its use in jewelry, electronics, dentistry, ornamentation and historically as currency. Cash, on the other hand, is a financial asset because its value is based on what it represents. The paper the cash is printed on has very little value by itself.

BREAKING DOWN 'Nonfinancial Asset'

The value of a financial asset can be based on the value of a nonfinancial asset. For example, the value of a futures contract is based on the value of the commodities represented by that contract. Commodities, which are tangible objects with inherent value, are an example of a nonfinancial asset. Futures contracts, which do not have inherent physical value and whose value is based on the assets they represent, are an example of a financial asset.

RELATED TERMS
  1. Carrying Value

    An accounting measure of value, where the value of an asset or ...
  2. Real Asset

    Physical or tangible assets that have value, due to their substance ...
  3. Relative Value

    A method of determining an asset's value that takes into account ...
  4. Asset Base

    The underlying assets giving value to a company, investment or ...
  5. Level 2 Assets

    Assets that do not have regular market pricing, but whose fair ...
  6. Level 3 Assets

    Assets whose fair value cannot be determined by using observable ...
Related Articles
  1. Investing Basics

    What is a Real Asset?

    A real asset is a physical asset that has value.
  2. Investing Basics

    What's an Asset?

    An asset is a resource with economic value.
  3. Savings

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  4. Investing

    Why is Gold a Counter Cyclical Asset?

    Gold is widely considered a safe haven during market turbulence. History has proven gold performs counter cyclically to the state of the U.S. economy.
  5. Fundamental Analysis

    The Market Value Versus Book Value

    Understanding the difference between book value and market value is a simple yet fundamentally critical component to analyze a company for investment.
  6. Professionals

    Balance Sheet Components - Assets

    CFA Level 1 - Balance Sheet Components - Assets. Learn about the different types of assets. A top down approach into the components of long-term and current assets.
  7. Bonds & Fixed Income

    Safety and Income: Real Assets - Gold, Real Estate and Collectibles

    By Brian PerryThe term "real assets" refers to a broad category of investment options that are characterized by the fact that they are tangible (as opposed to stocks, bonds, and CDs which are ...
  8. Fundamental Analysis

    Intrinsic Value

    Learn more about this way of valuing a company or an asset based on an underlying perception of its true value.
  9. Markets

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  10. Investing Basics

    Explaining Financial Assets

    A financial asset is intangible property that represents a claim on ownership of an entity or contractual rights to future payments.
RELATED FAQS
  1. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  2. What is the difference between economic value and market value?

    Learn about the differences between economic value and market value. Discover how they serve different purposes for businesses ... Read Answer >>
  3. What is the difference between carrying value and market value?

    Understand the difference between carrying value and market value. Learn when a company uses carrying value to value an asset ... Read Answer >>
  4. What is the difference between carrying value and fair value?

    Learn about the carrying value and fair value of assets and liabilities, what the carrying and fair value measure and the ... Read Answer >>
  5. What can cause an asset to trade above its market value?

    Learn some of the factors that can affect the price of an investment asset and the major reasons why an asset might trade ... Read Answer >>
  6. What can cause an asset to trade below its market value?

    Understand how market price can differ from actual fair value, and the reasons that an investment asset might trade below ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center