Where do the assets come from? Why are they sometimes called holdings? Is this a mistake or is there any difference between these terms? What is the meaning of the word holdings?
Essence
Any person who knows at least a little French will say that avoir is a verb that means "to own, to possess". In general, this fully reflects the essence of holdings in a broad sense - this is cash in any form, as well as property, through which the obligations of their owner can be repaid. More often, this term is used to refer to bank finances that are stored abroad in foreign currency, but this can equally apply to an individual.
Where do they come from? Like any assets, they need to be earned or invested. If start-up capital allows (or legislation requires), then assets should be created immediately. But it is better to increase turnover by temporarily sacrificing reserves.
Varieties
Holdings are not only “live” money, but also, for example, letters of credit, bills, checks, precious metals, etc. They differ in various liquidity and, depending on this, the company chooses what will be the composition and size of its assets in a certain period of time.
In this sense, holdings of money is not a tautology, since that is the name of the most easily accessible source of funds - cash or non-cash. They are characterized by the greatest liquidity, which means that they will be the first to pay off debts.
All other assets - securities, bills, letters of credit, checks, transfers, as well as any short- or long-term financial investments, etc., although they can serve as sources of funds, it takes time to realize them. So they are less liquid and therefore not so valued.
There are various types of holdings:
- free;
- blocked;
- a specific mode of use;
- operating (for current payments);
- insurance (reserve);
- investment;
- compensatory.
Of course, they have different purposes, their forms differ, but in general, holdings are all of the above.
Using
As is clear from the definition of this concept, holdings are funds that are intended to repay the obligations of their owner. In addition, they are used to conduct business activities, because in fact they are assets that allow the company to stay afloat and even make a profit.
If we talk specifically about bank holdings, then they are used for international operations and settlements. In addition, they can serve as a kind of "pillow" in the event that a financial institution has any problems, that is, roughly speaking, this is a kind of piggy bank. That is why the rational and proper allocation of banking assets is one of the most important and serious issues of managing the aforementioned institution.
What is the difference between this term and assets? Perhaps it has already been erased. If earlier it was possible to say with a sufficient degree of certainty that assets are a term that is used exclusively in the banking environment, now this is not so. This word can denote the funds of any individual or legal entity, as well as the whole state. So, in fact, there is no difference in these concepts.
