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Simple English definitions for legal terms
earning asset
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A quick definition of earning asset:
An earning asset is something that a person or a bank owns that generates income, usually in the form of interest. For a bank, loans are considered earning assets because they earn interest. For an individual, earning assets could be things like rental properties or stocks that pay dividends.
A more thorough explanation:
Definition: An earning asset is an item that is owned and has value, and generates income for the owner. This can include cash, inventory, equipment, real estate, accounts receivable, and goodwill. Banks consider loans to be earning assets because they generate interest income for the bank.
Examples:
- A rental property that generates monthly rental income for the owner is an earning asset.
- A stock portfolio that generates dividend income for the owner is an earning asset.
- A business that generates profits for the owner is an earning asset.
These examples illustrate how earning assets generate income for the owner, and can be used to build wealth over time.