What is the difference between financial and real asset?
Real assets are assets that can be put to productive use to generate a return
e.g. machinery and equipment
Financial assets are assets that represent a claim to a series of cash flows against an economic unit
Example:
- Shares
- A claim against a company
- Cash flows = dividends and sale price
- Bonds
- A claim against the bond issuer
- Cash flows = interest and principal
- Bank accounts
- A claim against a bank
- Cash flows = interest and principal