What is a Non-Operating Asset?
A non-operating asset is an asset that generates income, but is unrelated to the core operations of the company.
How Does a Non-Operating Asset Work?
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 Does a Non-Operating Asset Matter?
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.
