What is Installment Credit?
Installment credit is the extension of bank credit.
When we obtain credit from banks by way of loan the bank sets the fixed monthly installment as repayment type of loan along with interest up to a certain period of time till the loan gets re-paid along with interest.
Here bank or finance company charges the penalty if the borrower is unable to pay the installment.
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Installment credit is the extension of bank credit.
When we obtain credit from banks by way of loan the bank sets the fixed monthly installment as repayment type of loan along with interest up to a certain period of time till the loan gets re-paid along with interest.
Here bank or finance company charges the penalty if the borrower is unable to pay the installment.
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What is Mutual Credit?
In mutual credit, money is not used as in this case if one person owes another person for something and that another person also owes to the first one then the credit becomes the mutual credit.
So credit gets cancel with each other and in case if a balance remains after that then the same is settled by the mode of cash or equivalent.
Like in business one person is creditor as well as debtor. Hence, they mutually settle the payments.
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In mutual credit, money is not used as in this case if one person owes another person for something and that another person also owes to the first one then the credit becomes the mutual credit.
So credit gets cancel with each other and in case if a balance remains after that then the same is settled by the mode of cash or equivalent.
Like in business one person is creditor as well as debtor. Hence, they mutually settle the payments.
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What is Service Credit?
In-service credit the credit is given for services availed earlier. Like lawyers ask for final fees once the case is over, the accountants charge after filing the returns, electricity bills, telephone bills, gas bills, and all post-paid bills are the examples of service credit.
Service credit borrower is allowed to pay after availing the service at the fixed intervals. But if the service receiver fails to pay at fixed intervals it may result in cancellation of services or charging of penalty for the late payments.
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In-service credit the credit is given for services availed earlier. Like lawyers ask for final fees once the case is over, the accountants charge after filing the returns, electricity bills, telephone bills, gas bills, and all post-paid bills are the examples of service credit.
Service credit borrower is allowed to pay after availing the service at the fixed intervals. But if the service receiver fails to pay at fixed intervals it may result in cancellation of services or charging of penalty for the late payments.
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What are Financial Instruments?
Financial instruments are certain contracts or any document that acts as financial assets such as debentures and bonds, receivables, cash deposits, bank balances, swaps, cap, futures, shares, bills of exchange, forwards, FRA or forward rate agreement, etc to one organization and as a liability to another organization and these solely taken into use for trading purposes.
Types of the Financial Instrument
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Financial instruments are certain contracts or any document that acts as financial assets such as debentures and bonds, receivables, cash deposits, bank balances, swaps, cap, futures, shares, bills of exchange, forwards, FRA or forward rate agreement, etc to one organization and as a liability to another organization and these solely taken into use for trading purposes.
Types of the Financial Instrument
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Types of the Financial Instrument
The three types of financial instruments are mentioned below:
1 - Money Market Instruments
2 - Capital Market Instruments
3 - Hybrid Instruments
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The three types of financial instruments are mentioned below:
1 - Money Market Instruments
2 - Capital Market Instruments
3 - Hybrid Instruments
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What are Money Market Instruments?
Money market instruments include call or notice money, caps and collars, letters of credit, forwards and futures, financial options, financial guarantees, swaps, treasury bills, certificates of deposits, term money, and commercial papers.
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Money market instruments include call or notice money, caps and collars, letters of credit, forwards and futures, financial options, financial guarantees, swaps, treasury bills, certificates of deposits, term money, and commercial papers.
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What are Capital Market Instruments?
Capital Market Instruments includes instruments like equity instruments, receivables, and payables, cash deposits, debentures, bonds, loans, borrowings, preference shares, bank balances, etc.
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Capital Market Instruments includes instruments like equity instruments, receivables, and payables, cash deposits, debentures, bonds, loans, borrowings, preference shares, bank balances, etc.
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What are Hybrid Instruments?
Hybrid Instruments are types Financial Instruments that includes instruments like warrants, dual currency bonds, exchangeable debt, equity-linked notes, and convertible debentures, etc.
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Hybrid Instruments are types Financial Instruments that includes instruments like warrants, dual currency bonds, exchangeable debt, equity-linked notes, and convertible debentures, etc.
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What is Initial Public Offering (IPO)?
Initial Public Offering (IPO) is the process in which the shares of the private companies are listed for the first time in the stock exchange for allowing trading of its shares to the public and this allows the private company to raise the capital for different investments.
Read How Initial Public Offering Works?
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Initial Public Offering (IPO) is the process in which the shares of the private companies are listed for the first time in the stock exchange for allowing trading of its shares to the public and this allows the private company to raise the capital for different investments.
Read How Initial Public Offering Works?
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How Initial Public Offering Works?
An Initial Public Offering is not only an indication that a private company needs more capital to fuel its growth; it’s also a symbol that the business has made its mark on the world map.
Not all businesses go for capital raising. Only a few who feel that they are competitive enough to go big only go for initial public offering. But IPO is not all a bed of roses.
IPO has become an arduous process that not only costs the business more money; but also more regulatory requirements, which very few companies can crack.
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An Initial Public Offering is not only an indication that a private company needs more capital to fuel its growth; it’s also a symbol that the business has made its mark on the world map.
Not all businesses go for capital raising. Only a few who feel that they are competitive enough to go big only go for initial public offering. But IPO is not all a bed of roses.
IPO has become an arduous process that not only costs the business more money; but also more regulatory requirements, which very few companies can crack.
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What is a Financial Crisis?
Financial Crisis describes a situation when the key financials assets of the market see a steep decline in market value in a relatively very short interval of time, or when the leading businesses are unable to pay their huge debts, or when financing institutions face a liquidity crunch and are unable to give the money back to the depositors, which lead to panic in the capital markets and investors.
The panic created in the market due to this crisis can lead to several other events that can further deteriorate the market sentiments. For example, investors can go on selling their stakes or can withdraw the money from their savings accounts with banks out of fear of bank failures.
Read Types of Financial Crisis
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Financial Crisis describes a situation when the key financials assets of the market see a steep decline in market value in a relatively very short interval of time, or when the leading businesses are unable to pay their huge debts, or when financing institutions face a liquidity crunch and are unable to give the money back to the depositors, which lead to panic in the capital markets and investors.
The panic created in the market due to this crisis can lead to several other events that can further deteriorate the market sentiments. For example, investors can go on selling their stakes or can withdraw the money from their savings accounts with banks out of fear of bank failures.
Read Types of Financial Crisis
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Types of Financial Crisis
There are several key events as well that can be classified as Financial Crisis:-
1 - Financial Bubble
2 - Stock Market Crash
3 - Sovereign Default
4 - Currency Crisis
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There are several key events as well that can be classified as Financial Crisis:-
1 - Financial Bubble
2 - Stock Market Crash
3 - Sovereign Default
4 - Currency Crisis
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What is Financial Bubble?
A financial bubble is a part of the economic cycle in which the prices of the assets increase very rapidly and suddenly crash. In this case, assets are generally overvalued and are not supported by the fundamentals of the asset, generally due to the exuberant behaviour of the market. When none of the investors is interested in investing further, the price crashes, and it is called “bubble burst.”
There have been many such events in the past, such as the Dot Com Bubble Burst, the US Housing Bubble burst, etc.
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A financial bubble is a part of the economic cycle in which the prices of the assets increase very rapidly and suddenly crash. In this case, assets are generally overvalued and are not supported by the fundamentals of the asset, generally due to the exuberant behaviour of the market. When none of the investors is interested in investing further, the price crashes, and it is called “bubble burst.”
There have been many such events in the past, such as the Dot Com Bubble Burst, the US Housing Bubble burst, etc.
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What is Stock Market Crash?
Similar to the financial bubble, there are situations when instead of one asset alone, the whole markets suffer the burn and crashes after making huge gains over the period of time. It can be due to the regulation changes by the government or eco-political situation of the country, or other similar reasons that impact the whole market.
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Similar to the financial bubble, there are situations when instead of one asset alone, the whole markets suffer the burn and crashes after making huge gains over the period of time. It can be due to the regulation changes by the government or eco-political situation of the country, or other similar reasons that impact the whole market.
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What is Sovereign Default?
The bonds issued by the government are generally considered as risk-free, and they always have very high credit ratings because the probability of governments defaulting on their debts is very low. But there have been incidents in the past when the governments have defaulted, and it is called a sovereign default. For example, Greece faced a sovereign default crisis after the recession period of 2007-08.
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The bonds issued by the government are generally considered as risk-free, and they always have very high credit ratings because the probability of governments defaulting on their debts is very low. But there have been incidents in the past when the governments have defaulted, and it is called a sovereign default. For example, Greece faced a sovereign default crisis after the recession period of 2007-08.
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What is Currency Crisis?
At times, the currency of a country gets devalued suddenly by a huge amount against other currencies; it is called the currency crisis. It often leads foreign investors to pull out their money from the market because, in the local currency, the value of their investment gets decreased. Also, sometimes governments themselves try to devalue their currencies in order to increase the exports. But this measure is not a part of the currency crisis as that involves non-purposeful events only.
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At times, the currency of a country gets devalued suddenly by a huge amount against other currencies; it is called the currency crisis. It often leads foreign investors to pull out their money from the market because, in the local currency, the value of their investment gets decreased. Also, sometimes governments themselves try to devalue their currencies in order to increase the exports. But this measure is not a part of the currency crisis as that involves non-purposeful events only.
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What is Asset Financing?
Asset Financing refers to a ailment of loan based on the financial strength of the organization by mortgage or hypothecation of balance sheet assets which includes land & building, Vehicles, Machinery, Trade Receivables as well as short term investments where assets amount is decided into regular payment intervals of the unpaid portion of the asset along with interest.
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Asset Financing refers to a ailment of loan based on the financial strength of the organization by mortgage or hypothecation of balance sheet assets which includes land & building, Vehicles, Machinery, Trade Receivables as well as short term investments where assets amount is decided into regular payment intervals of the unpaid portion of the asset along with interest.
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Types of Asset Financing
Below given are the 5 different types that you should know.
1 – Financial Lease
2 – Hire Purchase
3 – Operating Lease
4 – Equipment Lease
5 – Asset Refinance
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Below given are the 5 different types that you should know.
1 – Financial Lease
2 – Hire Purchase
3 – Operating Lease
4 – Equipment Lease
5 – Asset Refinance
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What is Financial Lease?
In Financial Lease, all rights and the obligations of the ownership is transferred to (the business) Lessee and for any duration. The value of the asset is shown on the balance sheet of the lessee as a liability or an asset during the agreement period, whereas the rent is treated as an expense and debited to the Profit and loss account. Lessee is wholly responsible for the maintenance of the asset during the agreement period.
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In Financial Lease, all rights and the obligations of the ownership is transferred to (the business) Lessee and for any duration. The value of the asset is shown on the balance sheet of the lessee as a liability or an asset during the agreement period, whereas the rent is treated as an expense and debited to the Profit and loss account. Lessee is wholly responsible for the maintenance of the asset during the agreement period.
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What is Hire Purchase?
In Hire Purchase, a finance company here called lessor purchases the asset on behalf of Lessee (the business). In this option, the asset is owned by the lessor till the last payment is made and during the final payment, the lessee is given the option of purchasing the equipment at a nominal rate. The value of the asset is shown on the balance sheet of the lessee as a liability or an asset during the agreement period, whereas the rent is treated as an expense and debited to the Profit and loss account.
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In Hire Purchase, a finance company here called lessor purchases the asset on behalf of Lessee (the business). In this option, the asset is owned by the lessor till the last payment is made and during the final payment, the lessee is given the option of purchasing the equipment at a nominal rate. The value of the asset is shown on the balance sheet of the lessee as a liability or an asset during the agreement period, whereas the rent is treated as an expense and debited to the Profit and loss account.
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What is Operating Lease?
Under this lease, the asset is taken for a short period and not for the entire working life. Here, the lessor will take back the asset at the end of the agreement and maintenance responsibility in some cases lies with the lessor or otherwise, the lessee is responsible. The asset is not shown on a balance sheet as it is for a nominated period and the payment is charged in the profit and loss account.
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Under this lease, the asset is taken for a short period and not for the entire working life. Here, the lessor will take back the asset at the end of the agreement and maintenance responsibility in some cases lies with the lessor or otherwise, the lessee is responsible. The asset is not shown on a balance sheet as it is for a nominated period and the payment is charged in the profit and loss account.
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