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Assets cannot by themselves generate future cash flows. If a house just sits there, it cannot generate cash flows, it needs a tenant to do that. A hundred dolla
by PakG1 8y ago
Assets cannot by themselves generate future cash flows. If a house just sits there, it cannot generate cash flows, it needs a tenant to do that. A hundred dollar bill cannot generate cash flows by sitting under your pillow. It needs to be put to work to generate cash flows. Assets can be used to generate cash flows, but they cannot generate cash flows just by existing. Hence the difference between asset and security, though both can be ascribed to have value.
- evrydayhustling 8y agoSecuritization is about ease of trading - which is helped by but not defined by ease of collecting cash flows. An asset is exactly something that can generate future cashflows, even if only by being sold. A security is a special kind of asset that can be easily traded on paper without changing it's value or taking on transformative effort. So, your goose that lays golden eggs is indeed an asset, but it might be hard to trade because many folks aren't well prepared to own a giose. If you wrap it up in contracts about someone who will house and feed the goose, collect and sell the eggs and forward the money to the holder of a deed - congrats, that deed is now a security.