Financial Market and Financial Instruments
Market is simply defined as an area for potential exchanges. Thus market is a group of buyers and sellers interested in negotiating the terms of purchase or sales of goods and services.
Similarly, financial market is that market is traded- loaned or borrowed-in-terms of different financial assets or instruments stocks and bonds are traded. "Securities" means shares, stock, bond, debenture, debenture stock issued by a corporate body or a certificate to unit saving scheme or group saving scheme issued by any corporate body in accordance with the prevailing laws or negotiable certificate of deposit or treasury bill issued by Nepal Government and it includes the securities issued under full guarantee
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Real assets can be tangible or intangible. Plants, machinery, office, factory, furniture and building, precious metals are examples of tangible assets while technical knowhow; technological collaborations, patents and copyrights are intangible assets. Generally, real asset posses productive capacity and are less liquid in comparison to financial assets. The capital formation is the direct outcomes of this productive investment.
Financial Assets or Instruments are cash, evidence of an ownership interest in an entity, or a contractual right to receive, or deliver, cash or another financial instrument.
Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:
Cash instruments are financial instruments whose value is determined directly by markets. They can be divided into securities which are readily transferable and other cash instruments such as loans and deposits where both borrower and lender have to agree on a transfer.
Derivatives instruments are financial instruments which derive their value from the value and characteristics of one or more underlying assets.
“Financial Assets or Instruments are pieces of paper representing an indirect claim to real assets held by someone else. These pieces of paper represent debt or equity commitments in the form of IOUs (written document providing
Financial Instruments A financial asset is something which is defined as an entitlement of future cash flows. However, a financial instrument is a broader term used to describe financial assets and other assets in which there are no organised secondary markets to trade them. However, a financial security is something that can be traded in a secondary market. Attributes of Financial Assets Financial assets are those that: • • • • Have a return of yield expressed in terms of percentage. Have risk in which there is probability the actual return will differ from the expected return. Are liquid in that they can be sold at current market prices with reasonable transaction costs. Are expected to have a set time-pattern of cash flows in or out.
“An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.” (Myburgh, et al., 2013)
Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as
Assets are to be recorded and valued based of the type of asset there are.
and the all the stock within the store. An asset to the company can be seen as anything that has
Debt securities included under this topic include any investment that would be considered a loan to a company, municipality or the government and its agencies. These include corporate or municipal bonds and U.S. Treasury securities and other instruments expressly stated within the codification. Equity securities covered under this section must have an easily attainable market value and include corporate stock, U.S. Treasury securities, and business investments greater than 20%. In this case, the code will dictate the method of accounting to be used as well as financial statement presentation. (GAAP) (FASB ASC 320-10-05-2, 2016).
Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt. A credit instrument
1. Noninterestbearing notes 2. Loss contingencies 3. Committed lines of credit 4. Accounts payable 5. Pledging arrangements __ Use accounts receivable as collateral.__ __ Often require compensating balance.__ __ Only formal credit instrument is the invoice.__ __ Effective interest higher than stated interest.__ Recorded if probable and amount is known or__ reasonably estimable.__
Assets that are constructed or otherwise produced for an entity’s own use, including assets constructed or produced for the entity by others for which deposits or progress payments have been made.
4. Financial assets are receivables between companies where they both agree with the contractual rights that they will receive cash or other financial assets (Donald Kieso).
Assets are things that a company owns that have value. This usually means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. Assets also include things that can't be touched but nonetheless exist and have value, such as trademarks and patents. Cash itself is an asset, as well as
asset. Hence, cash flow statement is very important in personal finance because it tells a person
In the financial markets, the most common forms of marketable securities are stocks and bonds. Though they have some similarities to each other, they differ greatly in many aspects. Broadly speaking, both financial instruments enable one to invest in corporations, public and/or private, with possible profitable returns in the future.
Assets can be hard goods such as computers and equipment, but can also be information and intellectual property.
A financial intermediary, by definition, is responsible for the process of transferring money from economic agents with a surplus of funds to economic agents with a deficit of funds, and is known as financial intermediation. This is achieved by means of a financial security, such as stocks and bonds. The mechanism that allows the trade of such financial securities is known as a financial market. Financial markets aim to facilitate the raising of capital, as well as the transfer of risk between economic agents and also international trade. Typically, the borrower will issue a receipt, or financial security, to the lender that promises to pay back the capital gained. Securities such as these can be freely bought or sold within financial