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
Anyone 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 must 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 different 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 what can be called the most easily accessible source of funds - cash or non-cash money. They are distinguished 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 said 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.
Features
Holdings are a potentially powerful tool for influencing their owner. The fact is that when it comes to foreign property, it is obvious that it obeys the laws of the state where it is located. And in some cases, accounts can be blocked, so the owner can not dispose of the funds on them. This may be relevant during periods of wars, economic blockades and other conflicts. In addition, partial blocking of holdings can help counteract the export of capital from the country.