Non-Core Assets
What Are Non-Core Assets?
Non-core assets are assets that are either not essential or just presently not utilized in a company's business operations. Non-core assets are much of the time sold when a company needs to raise cash. A few businesses sell their non-core assets to pay down debt. Despite the fact that non-core assets are not critical to a company's core operations, they really do have value and can create a return on investment.
Figuring out Non-Core Assets
A non-core business asset can be any sort of non-essential asset with respect to generating revenue and the core business operations of the company. A non-core asset could be a factory or property that is done being utilized. Non-core assets could likewise be a whole subsidiary or a holding in another company. Regularly, non-core assets can incorporate the accompanying:
- Real estate
- Commodities
- Idle equipment
- Natural assets
- Investment securities
- Land that is not being utilized
Non-core assets can likewise be alluded to as non-operating assets on the grounds that they might produce income or give a return on their investment yet are not essential to the continuous operation of the company. Apple Inc. could claim marketable securities, for instance, that create investment income. In any case, the securities are not essential to generating revenue for the company's core operation of selling iPhones.
Whether an asset is thought of, non-core is completely relative to the company. An asset that is non-core for one company may be a core asset for another. An oil company could sell off some real estate that is viewed as a non-core asset. The real estate company that purchases it fully intent on forming it into an office park would think about the property a core asset.
Non-Core Assets versus Core Assets
Core assets incorporate the assets that are critical to a company and its business operations. All in all, core business assets are required for the company to produce revenue and stay beneficial. Core assets can incorporate equipment, machinery, industrial facilities, and distribution channels, like vehicles. Core assets can likewise incorporate a trademark or a patent.
On the other hand, non-core assets are the assets that are not critical to the production of a company's goods, nor are they critical to generating revenue. In spite of the fact that non-core assets have value and can be important to a company, they're normally not seen as core or central to the overall profitability of a company.
Real World Examples of Non-Core Assets
At times a company will veer off a subsidiary that it considers non-core into a separate company. Selling off non-core assets can't raise cash yet additionally make a company more efficient. In the event that those non-core assets required maintenance and different expenses, for example, taxes, dumping them would dispense with those costs, bringing about greater profitability.
Chesapeake Energy
Chesapeake Energy Corporation (CHK) reported a net loss of $308 million for all of 2019 as per the company's finish of-year earnings report documented on February 26, 2020. The company additionally had roughly $8.9 billion in outstanding debt. The company announced that it would improve its liquidity or funding "with $300 to $500 million in proceeds from expected non-core asset sales." The funds are to be utilized to pay debt, for example, bonds, that are developing in 2020.
Honeywell International
In 2018, Honeywell International Inc. (HON) announced through a press release that its two side projects would become independent companies per the filings with the U.S. Securities and Exchange Commission (SEC).
Garrett Motion Inc. was the side project of Honeywell's transportation systems business and Resideo Technologies, Inc. was the side project of Honeywell's Homes and ADI Global Distribution business. Accordingly, the companies became separate, legal elements. As indicated by Honeywell, the sale of the non-core assets created around $3 billion, which were to be utilized to pay down debt and buy back shares of stock.
Features
- A non-core asset could be investment securities or a factory or property that is done being utilized.
- Non-core assets could likewise be a whole subsidiary or a holding in another company.
- A non-core asset can be any sort of asset that is not essential to generating revenue and the core business operations of a company.
