Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Non-Operating Asset

What it is:

A non-operating asset is an asset that generates income, but is unrelated to the core operations of the company.

How it works (Example):

Also called a redundant asset, a non-operating asset usually generates some form of revenue or return for the owning company, but play no role in the company's operations.

For example, if a company used to manufacture plastic model kits but later moved into manufacturing plush children's toys, the dyes used to create the parts for the model kits would be considered non-operating assets because they are not used in the production of plush toys.

A company's asset portfolio is also an example of a non-operating asset (except in the case of an investment company or mutual fund).

Why it Matters:

Companies must report non-operating assets on their balance sheet in order to reflect a complete financial picture. Non-operating assets are excluded in most analyses of growth and revenue projections since they are unrelated to a company's main production capabilities.

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