Personal Finance & Money Asked on March 25, 2021
Cash in hand, unused land, living home do not generate any stable income when compared to cash deposited in the bank, rented land and rented home.
Why are they still considered as an asset?
An asset is simply something that has value and is worth something. It doesn't necessarily need to generate any income (stable or otherwise). Cash is an asset because you can use it to buy things. A home is an asset because it is a place for you to live. Unused land could be put to use (build structures on it, agricultural use, recreational use), leased/rented for income, or sold.
Some assets (e.g. stocks/bonds, investment real estate, etc.) do provide income, but providing income is not a prerequisite for something to be considered an asset.
Answered by yoozer8 on March 25, 2021
I think that Deepak is slyly trying to score a point on Buffett/Graham here. Buffett says that gold, bitcoin, etc. are not investment assets because they have no earnings.
But because physical cash can immediately start earning interest in the bank, it is still an asset even if some weirdo decides to bury the cash in the backyard.
Answered by Orange Coast- reinstate Monica on March 25, 2021
I would say the definition you linked to in a comment is incorrect, or at least misleading. As yoozer8 noted, an asset is simply something that has value; it doesn't need to produce income just by existing.
Think about it this way. Suppose you own a valuable asset like a rental property. Then you sell it for a million dollars. Now you have no rental property but a million dollars in cash. If cash were not an asset, then you would have impoverished yourself by trading away your asset for a non-asset. Why would anyone do such a thing?
Of course, that's not the case. In selling something you are simply trading one asset for another. The definition you quoted refers to "generating revenue", but that only has meaning if the revenue itself is considered an asset (otherwise why would you care about getting it?).
And anything you can sell can generate income, because you can get income by selling it. So even if something doesn't passively "produce" income, it's still an asset as long as you can somehow convert it into money.
Answered by BrenBarn on March 25, 2021
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