Non-operating assets are those that are not related to a company’s primary operations. These types of assets typically contribute to a company’s non-operating income and, as such, are omitted when evaluating the financial performance of a company’s core business.

Non-operating assets are usually divided into two categories: those intended to produce income and those intended to provide an opportunity for profit. The former asset class, which is designed to generate income, can include real estate, investments in securities, and other passive investments. The latter class can include available capital for venture capital investments and other active investments.

Examples of non-operating assets with the sole purpose of producing income can include savings accounts, bonds, certificates of deposit, and real estate. Non-operating assets that provide an opportunity for increased profitability may include venture capital investments, derivatives, derivatives trading, and foreign exchange trading. Aside from passive investments, many companies also have intangible non-operating assets that have the potential to generate revenue. These include intellectual property such as patents, copyrights, and trademarks. Additionally, some companies also invest in artwork, antiques, and other collectibles because of the potential for long-term appreciation.

The purpose of including non-operating assets in a company’s overall financial portfolio is to diversify risk and provide a secondary source of revenue when the main source of income is not performing as expected. Furthermore, non-operating assets can be a form of tax mitigation since the modifications of the tax treatment of non-operating income can result in lower taxes for the company. Despite their potential to generate revenue and strategically diversify risk, non-operating assets are usually regarded as a form of speculative investment, and as a result, companies tend to keep them at acceptably low levels to avoid over-diversifying and taking on too much risk.

In conclusion, non-operating assets are important for increasing the balance sheet’s diversification and generating additional revenue. Although non-operating assets provide the opportunity to generate income and diversify risk, it is important to note that they typically have a different degree of risk due to their speculative nature. As a result, companies should make sure that they adhere to acceptable levels of risk when utilizing non-operating income-producing assets.