Difference Between Financial Assets And Physical Assets

a. Distinguish between physical assets and financial assets.

Assets are known as anything with a value that is capable of being owned or controlled to produce value. Assets also can be converted into something of value such as cash. Assets can be classified in many ways and one way of classifying them is by segregating them into physical and financial form. Physical assets are tangible things which can see, touch and hold onto physically. For example, land, houses, car, buildings and any other form of tangible assets are included in physical assets. Physical assets such as house can serve both as an investment and a place to stay.

Financial assets are indirect or intangible form of investment. This means that financial assets cannot be seen,

Distinguish between money market and capital market.

A financial market is a market that involved buyers and sellers to trade in financial assests such as bonds, stocks, currencies and so on. Different financial markets serve different types of customers or different parts of the country. There are many components to a financial market, two of the most commonly used are money markets and capital markets.

Money markets are the financial markets in which funds are borrowed or loaned for short periods. It is also the markets for short-term and highly liquid debt securities. The average amount of time that companies borrow money in a money market is usually up to one year or less. The instruments that used in the money markets are collateral loans, deposits, acceptances and bills of exchange. Institutions like central banks, commercial banks and acceptance houses are operating in money markets. Short-term debt that issued by money markets is often for the purpose of covering the operating expenses or working capital of a company. This may help these companies to maintain the appropriate level of liquidity on a daily

Distinguish between primary market and secondary market.

Primary market is the market that a company publicly sells new stocks and bond for the first time. It may happen when a company need to raise capital for its business. The company will approaches the primary market and issue shares in an Initial Public Offering (IPO). In the primary market, investors buy securities directly from the companies which are issuing securities and start sharing risk and returns of the company. When the capital of a company raised, it will get listed on the stock exchange where the stocks can be traded.

Secondary market is the market in which securities and other financial assets are traded after their initial offering in the primary market. In secondary company, the investors trade among themselves without the involvement of issuing company. The securities price in secondary market are not set by issuing company. It is depends on the forces of demand and supply of the securities and the fluctuating interest rate.

The distinguish between primary market and secondary market is primary market deals with the newly issued securities while the secondary market deals with the securities which already traded. In primary market, company collect funds directly from investors through selling the securities. In the secondary market, the money that earned from selling the securities does not go to the company but goes to the investor who sells the