Financial instruments are legal documents that have monetary value or represent a legally enforceable agreement between two or more parties regarding a right to payment of money. There are number of types of documents that are properly identified as financial instrument, including derivatives and cash instruments. (Tatum M., 2015) A financial instrument may be a hard copy or virtual document. The classification of financial instruments is divided into two categories: financial assets and other financial instruments. Financial assets are non-physical asset whose value is derived from contractual claim, such as bonds, stocks and bank deposits. Financial instruments under the financial assets are special drawing rights, monetary …show more content…
Monetary gold is any actual gold that determine a government’s currency value. (Investor Words, 2015) SDRs are national reserve asset which was created to supplement the existing reserves of other countries. The SDR also serves as IMF's unit of account and other organizations. The most liquid financial assets are the currency and deposits. Notes and coins in circulation represents currency. (from pp. 25-26 of Monetary Statistics Manual) The issued coins and notes are considered liabilities of the central bank. Currency mainly used s a medium of payment and/or exchange for goods and services. Notes are printed with security features and the coins are created through the process of minting. All claims represented as bank deposits on Central bank and other depository corporations are considered deposits. There are two types of deposits: transferable deposits and non-transferable deposits. Deposit is a very common way of securing …show more content…
Interests are earned from the maturity of the securities. Borrowing is a source of funds for credit institutions. Just like the securities other than shares, an interest is earned from the amount provided. A loan is an arrangement between the lender and the borrower in which the latter agrees to return the money or property lent along with interest at some future point in time. A loan may be in short-term (loans with 1 year or less maturity), medium-term (1-5 years of maturity) or long-term (loans that exceed the maturity of medium and short term loans). Shares and other equity cover all instruments and records acknowledging claims on the residual value of a corporation. The shareholders of shares and equities are entitled to dividends. Financial derivatives are financial instruments that are link to a specific financial instrument through which specific financial risks can be traded in financial markets in their own right. The main purpose of financial derivatives is to provide insurance by transferring the risk from one person or firm to another. These derivatives can derive profit from the changes in interest rate and equity markets around the world and in the currency exchange rate shifts. (from pp. 31-33 of Monetary Statistics
Even before the creation of the Federal Reserve, banks were used by the public just as we use them today. Deposits were made into savings accounts. Loans were taken out to mortgage a home or finance a new business. Banknotes were issued and spent when the public borrowed from the banks. Borrowers spent these banknotes just as paper money is spent today. These bank notes were valued as money since they were backed by the promise that they would be exchanged on demand for either gold or silver.
Financial=total economic resources that must be spent or invested as a consumer. An example of Financial buying is a house. at the moment I want to purchase a new house, but the houses i like are out of my price range which is considered a luxury purchase.
Trading securities are posted on the balance sheet and are reported at the fair value market. Some examples of debt security would be: corporate bonds, convertible debt, U.S. Government bonds. Debt investments are classified as trading, available for sale, or held to maturity.
There are two basic ways of financing for a business: Debt financing and equity financing. Debt financing is defined as 'borrowing money that is to be repaid over a period of time, usually with interest" (Financing Basics, 1). The lender does not gain any ownership in the business that is borrowing. Equity financing is described as "an exchange of money for a share of business ownership" (Financing Basics, 1). This form of financing allows the business to obtain funds without having to repay a specific amount of money at any particular time. There are also a few different instruments that could be defined as either debt or equity. One such instrument is stock options that an employee can exercise after so many years with the company. Either using the debt or equity method, or a combination of the two methods can be used to account for stock options or other instruments with the similar characteristics.
Numerous amounts of people have financial problems when they get out of high school, so what should the school board do? In 2007, thirty-four out of fifty states have personal finance courses in their curriculum (Bernard 4). A financial literacy course seems to be what a majority of states are doing. Financial literacy courses have their pros and their cons just like everything else. Financial literacy courses bring up some very important questions.
High school seniors takes deep breaths and parade onto the stage. The beginning of a new chapter awaits as they make the journey from one point of the stage to the end. They reflect on what they have been taught in those many years of high school. The most terrifying fact while graduating high school is the next step: making it on their own. Because they have taken part in the appropriate classes, the students are certain that they have gained the correct knowledge to begin making their mark on the world. In high school, it is crucial to achieve the appropriate classes in order to feel ready to take on the world ahead as an adult. However, many students lack proper education. One key example is financial literacy. Financial literacy is the
Financial liberalization is a process whereby restrictions on financial markets and financial institutions are eliminated which involves the removal of controls by the government namely, credit and interest rate controls. In the early 1970’s, the research on financial liberalization was initiated by McKinnon and Shaw (1973) who argued that state control of credit, interest rate and other financial variables was responsible for the retarding economic growth in the world economy (Abiad, Detragiache & Tressel, 2008). McKinnon and Shaw (1973) emphasized that allowing market forces to determine economic variables
There are two main ways to raise money for a project, growing business, or startup company: debt financing and equity financing. Debt financing includes long-term loans, while equity financing is the process of raising capital through the sale of shares in an enterprise. It is essentially the sale of an ownership interest to raise funds for business purposes.
In classified balance sheet categories of assets are: current assets, investments, fixed assets, intangible assets, etc.
10.1.1 The accounting officer of an institution must take full responsibility and ensure that proper control systems exist for assets and that –
A few sources of finance are short term and ought to be paid back within a year. Other sources of finance are long term and can be paid back over several years.
In the modern world, financial markets play a significant role, with huge volumes of everyday dealings. They form part of contemporary economic lifestyle and determine the level of success of many people. Humans have always been uncertain of what the future holds and thus, tried to forecast it. The forecast of course cannot omit the likelihood of “easy money” by forecasting the prices of equity markets in the future.
Financial statement are purely technical, it gives us information about financial information which are presented in a structured manner.
Accounting aids the government and organisations in decision making for their financial stability. This numerical data helps solve real life problems and contributes to how the economy and businesses perform.
It is a known fact that the banking industry plays a huge role in today’s society, the industry has grown rapidly of many decades and still growing. The banking sector is that sector of the society that is actually responsible for the handling of financial assets for other sector of the economy, they do this by investing the financial assets in order to create more wealth in the society while regulating all the activities involved in the process. (What is the banking Sector 2015)