Real and financial Assets

A firm acquire real assets to carry on its business. Real assets can be tangible or intangible. Plant, machinery, factory, furniture etc. are examples of tangible real assets, while technical know-how, patents, copy rights are examples of intangible real assets.

The firm sells financial assets or securities such as shares and bonds or debentures, to investors in capital market to raise necessary funds. Financial assets also include borrowings from banks, finance institutions and other sources.

Funds applied to assets by the firm are called capital expenditure or investment. The firm expects to receive return on investment and distribute return as dividends to investors.