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What are Non-Productive Assets?

Edukasistan.com - Hello guys! In this opportunity, we will discuss about Non-Productive Assets. An asset that is problematic is a type of asset that is useless. Non-productive assets are assets owned by a company that cannot generate profits.

Unlike equity investments that can provide income for its owner, non-liquid assets are actually invested in business debt. Well, to find out what Non-Productive Assets are, let's see the details in the following review!

What are Non-Productive Assets?

What are Non-Productive Assets
What are Non-Productive Assets

Non-productive assets are resources that provide no return for their owner. Examples of Non-Productive Assets can include contracts held by a bank, official deposits with the central bank, check debts, and problem assets.

In addition, Non-Productive Asset types also include cash and bank accounts that do not generate interest, property or real estate that is not liquid and its value decreases over time. In a company or business, Non-Productive Assets should be reviewed for quality every month.

Difference between Productive and Non-Productive Assets

When discussing Non-Productive Assets, we often want to compare them to productive assets. The main difference between the two is the benefits and profits generated. Non-productive assets are assets that provide no value, while productive assets can provide returns over time.

Productive assets are bank investments in the form of currency or foreign exchange in the form of loans, securities, interbank investments and debt and account management transactions. These productive assets seek profits from the money issued or borrowed by the bank.

Types of Assets

After reading the explanation above, you surely understand that Non-Productive Assets are assets that should be avoided. Here are some things to consider when choosing assets:

1. Securities

Securities are important documents that show ownership of valuable assets. Securities are often used as collateral for bank loans. Securities that can be used as credit agreements include promissory notes, bonds, credit protection, drafts, etc.

2. Credit

Credit cards are something that cannot be avoided by everyone. According to the definition, credit is an invoice or the giving of money based on an agreement between the borrower and the lender. The agreement can be made between the bank and another party that requires the borrower to pay off the loan with its interest at a certain time.

3. Stock

Stock refers to investment in a company operating in the non-financial capital market sector. This type of investment can also be capital, while for debtor companies it is targeted as much as possible to overcome the risk of defaulting on credit.

4. Fund Storage

The fund storage referred to is the capitalization of banks or institutions to other banks. This capitalization can be in the form of giro, time deposits, certificate of deposits, call money, bank credit, and so on.

5. Administrative Account Transactions

Complying with the productive assets component is one way to avoid assets that do not provide a return. What needs to be done to avoid non-productive assets is administrative account transactions.

This component consists of commitments and contingencies, such as active irrevocable letters of credit (L/C), issuance draft guarantees, acceptances, import drafts for future L/C, standby L/C, conditional securities sales repurchase agreement, and other guarantees with credit risk.

Tips for Avoiding Non-Productive Assets

If your business is running well, it will be very important to decide where and how to invest your money. You cannot invest this fund at the same time, so that the investment does not generate a profit return. Well, here are some tips that can be applied to avoid Non-Productive Assets.

1. Know the type of resources offered

When investing or applying for a loan, it is very important to know the type of asset. Problematic assets are investments that provide intangible assets, whether stocks, mutual funds, deposits, and others. So, you have to be careful with the type of lender or lender from an unknown company.

2. Pay Attention to Risks and Benefits

Unrealistic investments usually offer large profits in a short period of time. You have to be careful with offers like this, because it is a characteristic of unhealthy and dangerous investments.

That is an explanation of the understanding of non-productive assets, differences, and how to avoid them. Non-productive assets are a type of asset that should be avoided because they have no potential to generate value in the future.

There are several ways you can do to avoid this, one of which is not easily tempted by investment offers with unrealistic interest. In addition, to be safer, make sure to always invest through institutions directly supervised by the Government.

Thus, our discussion this time on Non-Productive Assets. Hopefully the writing above can provide information, if there are any wrong words please forgive and thank you for reading. See you in the next discussion.

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