2.7.1.3. Non-Allowable Assets
A firm’s assets include cash, securities, property, inventory, and office equipment. Liquid assets are assets that can quickly be converted into cash. The securities a firm owns are a liquid asset. So are the securities a brokerage holds on behalf of a customer, just as the cash acquired from a bank loan is a liquid asset.
Non-allowable assets are illiquid assets, assets that cannot be quickly sold at fair market value. These include fixed assets, unsecured receivables, and assets that are unlikely to be collected. Because non-allowable assets should not be included in net capital, their value must be subtracted from net worth. Here is a list of some of the non-allowable assets.
Fixed assets and prepaid items. Fixed assets, like office buildings, real estate, computers, and other equipment, are hard to sell in an afternoon. Prepaid items, such as rent and insurance, are also difficult to recover quickly. These are non-allowable assets.
Unsecured receivables. Receivables are mo