Nonfinancial Asset
Candlefocus EditorReal estate refers to physical land and buildings used to generate a return on investment. Examples of real estate include office buildings, investor-owned apartments, hotels, warehouses, retail centers, and agricultural land. Aside from returning rent or capital gains, these properties offer businesses such benefits as tax deductions and building equity.
Due to their physical characteristics, factories and their accompanying equipment are considered nonfinancial assets. Examples of such equipment include vehicles, computers, desks, chairs, and delivery trucks. These items produce value by helping a business carry out its operations, such as manufacturing products, providing a service, or distributing goods.
Intellectual property is one of the most unique nonfinancial assets. Unlike land and equipment, intellectual property includes abstract ideas and knowledge owned by a company. The three broad categories of intellectual property are trademarks, copyrights, and patents. Trademarks are words, symbols, and sounds that distinguish a product or service from others. Copyrights are designs, drawings, or literature composed by a staff member. Patents provide legal protection to an invention.
Whereas financial assets are easily valued and more liquid, nonfinancial assets involve more tangible goods and abstract ideas. Businesses can use these assets to increase their market value and borrowing power. They may also benefit from long-term investments in their factory equipment, real estate, and intellectual property. For this reason, nonfinancial assets remain advantageous for companies seeking to increase their cash flow and optimize their operations.