What are Earning Assets?
Earning assets are assets that generate income like interest or dividends.
How Do Earning Assets Work?
Typically, earning assets require very little ongoing work from the owner of the assets. Interest-bearing accounts, CDs, dividend stocks, preferred stocks, bonds, and similar instruments are earning assets.
Why Do Earning Assets Matter?
For individuals, earning assets can be useful in funding retirement; for companies, earning assets often are places to deposit excess cash. Because many types of earning assets are offered by banks, the supply of earning assets is often dictated by the amount of excess reserves banks have. This is one reason that reserve requirements affect interest rates.
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