Financial Asset Tangibility Status And Contribution To Company Development

In context to the present business environment, it is seen that every profit-earning company urges for profit maximization while increasing the value of the business through increased goodwill. So, in turn, companies can attract investors at a large rate while assuring the shareholders for a secured higher return. Therefore, in this context, it is observable that role financial assets are highly significant for both the development of the company and the business environment in which it is operating. Often it is said that prior to putting up a business it is necessary to know and understand the assets and that is widely implacable for financial assets. A financial asset is referred to as a liquid asset, which would get its value from certain contractual ownership or right claims. Therefore, for company cash, bonds, stocks as well as bank deposits or mutual funds would be considered as financial assets. 

Before evaluating the tangibility status of the financial assets, this is important to understand the concept of the financial assets. Financial assets of any organization could be considered as liquid and non-physical in nature. In accordance with this situation, it can be clearly stated that in a company or in an organization there are two types of assets, namely, fixed assets as well as financial assets (Corbetet al. 2018). Fixed assets are generally considered as the physical and tangible ones, for example, motor vehicles, furniture, and buildings could be categorized as fixed assets. These kinds of assets could create long-term value for the organization. This needs to be noted that these fixed assets are non-current assets in this context. On the other side, financial assets are liquid in nature. Generally, the current assets of the organization are known as financial assets. Mutual funds, cash, stocks, bonds as well as bank deposits are the assets that can be categorized as financial assets. Moreover, it needs to be understood that they have short-term value for the company as these liquid assets can be generated in cash within one year. This is definitely a profitable situation for any company (Jiet al. 2018).

Therefore, by its nature, it can be found out that, unlike other fixed asset tangibility ratios, financial assets don't possess any necessary inherent physical worth or any kinds of physical formations under different circumstances. Instead of this, the value of fixed tangible assets reflects the demand and supply factors across the marketplace within which these assets trade. The value could be identified by the risks these assets basically possess while perform within the market. According to several research financial assets consists both the nature of real assets as well as intangible assets (Leet al. 2021). This is natural and justifiable as financial assets don't have any physical value and only have some stated value. For example, the value of this assets generally can be stated on the piece of paper, like dollar bill or listed on securities market in this situation. But the organisations, like private listing or public listing companies could get some interest from these bonds or securities. Therefore, it can be stated that the value of the financial assets therefore can be derived through contractual claim on the underlying assets. Now this is important to discuss about the tangibility status of the financial assets. But in the relation to this discussion, it needs to be noted that the tangibility status of the financial assets could vary based on the nature of the company (Ghorbeland Jeribi, 2021). For example, IRS or Internal Revenue Service requires the business or organisation to report both real assets as well as financial assets as tangible assets. This is mainly because of tax purposes and due to this the authority wants to separate both tangible as well as intangible one.

Now considering the above discussion this can be identified that to understand the tangibility status of the financial assets, it would be appropriate to understand the functionality of the financial assets. In general, it can be found out that there are two key economic functions of the financial assets. First one is to transfer funds from the individuals who already have some surplus funds for the investment purpose to the organisation that need proper source of financing the tangible assets. Secondly, risks which are associated with the investment purposes in tangible assets should be redistributed among the several counterparts as per risk aversion as well as their preferences (Green, 2019). Now according to the tangibility status of the financial assets of any organisation, IFRS has categorised different types of financial assets. These different types in this context are, such as, cash, equity instrument of the organisation, contractual rights to exchange any financial liabilities or assets among several organisation according to the proper and favourable conditions and policies, contractual rights to receive financial assets from any other organisations which is further known as receivables and lastly, a contract through which equity instruments of the organisations could be settled under different circumstances. Thus, by the nature of these financial assets it can be stated that some organisation considered these as tangible as they can derive value and on the other side, some considers these financial assets as intangible ones because they don’t have any physical value in this situation (Fiechteret al. 2017).

In accordance to the above types, it can be identified that along with these types there are some other types as well, namely, bonds, money markets, financial derivatives as well as equity stakes and other account holdings. Most of these types of bonds don’t generate any monetary value unless they convert into the cash or liquid money and at that time those money or liquid cash could be considered as the tangible ones. But it should be remembered that regarding the stocks both their value as well as prices could fluctuate. Now to understand tangibility status of the financial assets it would be more appropriate to discuss about the stocks, bonds as well as certificate of deposits or CD (Gope, 2018). These three types of instruments also could be considered as the financial assets. Stocks could be considered as the financial assets which don’t have any expiration date and if investors purchase these stocks, they could become the co-owner of the organisation and are eligible to share the profits as well as losses of the organisation. These stocks could be clearly held indefinitely as well as could be sold to another person also. On the other side, bonds could be considered as another type of financial asset through which the organisations could finance their short-term obligations if there’s any. The lender here could be known as bondholder and bond certificate in this context could be consisted of maturity date, interest which needs to be paid as well as how much money has been owed (IONESCU, 2019). Again, certificate of deposits or CD could be considered as a financial asset through which investors could deposit money within a financial institution or bank for a definite time period with a definite interest rate. This instrument could have interest rate monthly and can be held from three months to five years according to the policies of the contract. In case you have any confusion and want to know more about the banking system, then take finance assignment help from SourceEssay.

Now in terms of tangibility status, the financial assets could be both highly liquid as well as illiquid financial assets. Now, this is also important for the researchers to know about these types of financial assets and whether they could generate any kinds of advantages as well as disadvantages in this context or not. Based on the above discussion it can be found out that cash, as well as cash equivalents, are considered as the purest form of liquid financial assets (Groffand Mörec, 2021). These liquid accounts therefore could be transferred into the funds through which bills can be paid or other financial emergencies can be fulfilled. Hence it can be stated that maintenance of funds within the liquid financial assets could result in greater capital preservation. Different liquid assets, namely, savings as well as checking accounts could have a limited ROI capability. Therefore, considering all the factors from the above this can be seen that liquid financial assets have both advantages as well as disadvantages. Regarding its advantages, this can be found out that liquid financial assets could be converted into cash easily. On the other side, some financial assets also could have the ability for value appreciation. Again, the disadvantages or cons of the financial assets could be identified. It can be seen that financial assets which are highly liquid could have little appreciation (Keyand Kim, 2020). Also, it is impossible or hard for illiquid assets for converting into cash. Lastly, this needs to be remembered that financial asset’s value is only strong like the underlying entities.

Furthermore, by its name, it can be found out that illiquid assets are totally opposite of liquid financial assets. For example, fine antiques, as well as real estate, could be considered as illiquid financial assets. These assets are illiquid because they have value but they can’t be converted easily under different circumstances. Hence considering the overall situation, it can be found out that this can vary whether the financial assets are tangible or not from organisations to organisation (Ercegovac, 2018). But it is important to remember that financial assets are the mix of both real assets and intangible assets, hence financial assets have both features of real assets as well as intangible assets in this context. Now this is important for the researchers to examine how this tangibility status of the financial assets could help in the development of the organization under different circumstances. The next sections of do my assignment will depict this discussion with proper justification.

And, significantly it can also be stated that financial assets help in increasing the business valuation while contributing towards profit maximization for further development of the company (Yatsyk, 2018). Moreover, as financial assets tend to be highly liquid and can be converted into cash easily to pay off or cover financial urgencies, therefore, companies, as well as management’s reliability on financial assets, also increases. Based on all of these major aspects of financial assets and their tangibility status, this study through the critical discussion below would further provide in-depth insights into the way financial assets and their tangibility status contribute towards company development. 

Under “IFRS 9 Financial Instruments” financial asset is fundamentally measured at fair value plus costs of transactions, unless, it would be carried at fair value through profit and loss, within which the costs of case transaction would be expensed on an immediate basis (Valaskovaet al. 2018). Moreover, while identifying as well as determining the tangibility status of financial assets, it can be seen that tangible current assets exhibiting value through contractual claims are considered as financial assets. Therefore, it is certain that the tangibility status of any financial asset depends on the ownership rights or value deriving from contractual claims. Moreover, the business model within which a financial asset is held would most likely be determined base on the way the company would typically manage the assets. That means financial assets and their tangibility status determination are based on facts instead of management intention.  However, the initial measurement of financial assets under IFRS 9 further includes an exemption that is trade receivables without a major component for financing are fundamentally recognized at transaction price (Fenget al. 2018). Moreover, on the other hand, it is also to be viewed that financial assets is in between the other two assets as they might seem intangible or non-physical or tangible or physical. Therefore, to measure its tangibility status, the claim of ownership or payments contractual rights would be necessary as it derives value from those claims on underlying assets. And, these underlying assets can be real or intangible. Therefore, it can be said that financial assets’ worth might be depending upon underlying tangible or real assets like; ETFs and shares of REITs, however, market supply alongside the demand also influences the value of financial assets.  Furthermore, it is also analysed that whether the financial asset is an equity instrument or a non-equity (debt) instrument for measuring followed to the initial recognition (Klychovaet al. 2017). Therefore, it is seen that if the financial asset involves equity instrument, then, it would be measured at fair value as per comprehensive income if it is not up for trading or any irrevocable election has been made during initial acquisition. However, a subsequent measurement for financial asset that is debt instrument would be measured at amortised cost if it meets characteristics of contractual cash flow.  Get to know more about TFs and shares of REITs from the dissertation assignment help team of SourceEssay.

Furthermore, the in-depth insights into the tangibility status of financial assets exhibit that they are highly attributable in contributing towards company development. Financial assets which are also recognised as securities or financial instruments as intangible assets are being used for financing ownership of company’s assets that are tangible in form of types of equipment and real estate. Therefore, by funding the ownership of tangible assets available in the organisation, the financial assets are observed to be contributing towards company’s overall development. Generally, it is viewed that financial assets have two major functions (Valaskovaet al. 2018). The first one is transferring funds from those areas that are having a fund surplus for investing in those areas, which requires source of financing the tangible assets. The second function is that financial assets help in redistributing risks that are related to investment in tangible assets among several counterparties as per their risk aversion and preferences. Thus, from these functional viewpoints of financial assets, it can be said that by contributing and influencing the economy, a company can make its development through the financial assets.

On the other hand, the tangibility status of financial assets reflects that they are highly liquid. Therefore, any company despite its size small or large would be facilitated by having highly liquid assets in its financial position statement (Prabhawaand Nasih, 2021). This is simply because; financial assets that are highly liquid such as; short-term investments, marketable securities, cash as well as accounts receivables, and stocks are important as they are readily convertible into cash. Based on that, all of the liabilities that are yet to be paid or due can be covered. As a result, company would be able to hold its liquid position in a sound and efficient manner and with the available string liquidity position the cash flow cycle would also be operated efficiently, so company would have enough cash or fund to finance its day-to-day operations. In this way, it is also seen that tangibility status of financial assets contributes to development of a company. Moreover, in this context, it is also noticed that financial assets would involve short term as well as long term funds (Evansand Price, 2020). And, short term funds must not be utilised for funding assets that are illiquid as they cannot be sold quickly for receiving cash to fund the repayments. Thus, from internal perspective of a company, it can be said that tangible liquid assets such as; the current assets would be contributable to development of a company by helping in maintaining the stable financial position with proper liquidity.

On the other hand, it is also seen that financial assets are also used as sources of funds Sometimes companies raise funds through issuing corporate bonds, while at certain points investors use receivables and loans for generating funds. And, financial assets by deriving ownership rights and claims help in sourcing those funds, based on which companies are able to issue bonds and equities, which adds market value to the company (Gaioet al. 2021). Additionally, financial assets involving stocks and derivatives are most likely to generate higher returns in a short time span along with the implacable risk of the market. Therefore, as depicted by finance coursework help professionals generating higher returns on income, the financial assets are observed to contribute towards the development of a company. On the other side, it is also seen that for the development of the company, management majorly considers investors' attraction towards the company. The more investors get interested in the company; the better would be the market exposure for higher valuation of the company, which as a whole denotes the development for the company. Therefore, it is seen that financial assets through their view of tangibility status would give investors more security when the capital is highly parked in the liquid assets. Additionally, financial assets also distribute risks based on the preferences as well as appetite of the risks of parties that are involved within the investment of the intangible assets (KOVALEVAet al. 2018). Thus, it also contributes to the development of an entity by representing legal claims for future cash anticipated at defined maturity and rate. The counterparties engaged in that agreement would be the company, which would pay future cash and investors. Thus, by indicating towards proper investment overview considering the properties of risk and return predictability as well as liquidity, fixed assets are highly attributable towards the company’s development as a whole. 

In accordance with the above discussion and critical evaluation throughout the study, it has been found that financial assets are a crucial aspect of any organization. All the time, companies are bound to have a good and efficient record of its financial assets, so companies can use the financial assets based on their tangibility status whenever is funding required. Fixed assets involving tangible liquid assets like; current assets would be highly attributable during covering up the company’s financial emergencies. On the other hand, fixed assets involving bonds, securities as well as equity, debt instruments, and derivatives help in investment by contributing through risk and return predictability and market exposure to the investors who invested capital in the assets of the company. In this context, it can also be implied that every financial asset holds a different yet specific goal for the company that is holding the financial asset. Since, every type of financial asset has some sort of risk and reward related to it, henceforth, from a financial advisor’s perspective, it is always recommended to maintain a mix of several fixed assets to have a certain optimal portfolio. It would not only facilitate the company development but would also help inappropriate functioning of the company without facing any asset dearth.

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