Earning Assets

  

When a company or individual has assets that just sit there making money for them, they’re called “earning assets.” Ideally, earning assets provide a relatively steady stream of income at little to no maintenance, making them good for long-term "set and forget"-type planning.

Earning assets are investments that will keep on giving, and assets that can later be sold for their inherent value. Yep, your typical stocks and bonds can be earning assets, but also landlord income (which does require more upkeep, though), CDs, and other debt instruments designed to gain interest and/or dividends.

When you hear “make your money work for you,” it’s either someone telling you that you should open an investment account that you don’t already have, or they want you to invest in their startup. Which might be a scam. And, uh...it’s probably a scam. Tread carefully.

Related or Semi-related Video

Finance: What is a Current Asset?16 Views

00:00

Finance, a la shmoop. What is a current asset? Current yeah it's kind of a [Picture of a currant on a plant]

00:08

socialist raisin there, you know they all look about alike but that's a [Soldiers marching in front of Stalin with currants for heads]

00:12

currant and has nothing to do with current as cur-rent remember it like

00:18

your rent comes due soon, you rent a place for a year or less usually or at [Guy sticks his head out of pile of overdue bills]

00:24

least that's how long, you know lock in your rental rate. So if your [Someone signing a contract]

00:28

asset is current then it can be turned into cash within a year. That's how we

00:34

remember it here around Shmoop. Examples? A bond coming due in a year or less. [Bond document]

00:38

Companies store their cash all the time in short term paper like certificates of

00:43

deposit or Bank CDs which come due in less than a year. that's a current asset. [List of short-term paper]

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And companies buy these kinds of bonds so they get a little more interest than

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from their banks you know checking account. They buy stocks as well, shares [New interest rate is very small]

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of goog can be easily converted into cash quickly. Shares in Google are a [Current asset stamp]

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current asset. Ounces of gold, yep easily a current asset. All right you get the

01:06

idea, so what's not current well fourteen thousand acres of solar panel land that [Huge fields full of solar panels]

01:11

your company owns. If you ever had to sell it while there are very few buyers

01:15

and it likely would take more than a year just to figure out all the [Calendars popping up]

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regulatory restrictions on selling it. A big old factory well can't sell that on [Red cross appears on a factory]

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Amazon or Ebay, definitely not current. Your brand equity

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in your corporation like the relationship you've developed with your

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consumers, yeah it's another non-current asset you can't exactly go to the bank [Guy going up to the bank and pleading]

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and convert brand loyalty to USD. So that's it current assets they live here [Arrow pointing to current assets on a balance sheet]

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on this side of the balance sheet way up top in the good view seats high on the [Current assets in a tree]

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vine of the tree. So put down those currants, stop ranting about the [Stalin holding a currant]

01:49

proletariat and for God's sake just buy some raisins. [Guy pointing to a box of raisins]

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