Quick Answer: What Are The Characteristics Of Financial Instruments?

What are the different types of financial instruments?

Financial instruments may be divided into two types: cash instruments and derivative instruments.Cash Instruments.Derivative Instruments.Debt-Based Financial Instruments.Equity-Based Financial Instruments..

What are the main characteristics associated with a financial claim?

Financial claims are differentiated from one another by characteristics such as maturity, callability, marketability, taxability, type of yield, and risk. 3. The market price of a financial claim is equal to the present value of all future payments—dividends plus principal—due under that claim. 4.

Why financial instruments are important?

Financial Instruments are intangible assets, which are expected to provide future benefits in the form of a claim to future cash. It is a tradable asset representing a legal agreement or a contractual right to evidence monetary value / ownership interest of an entity.

What are the three types of financial assets?

Money, stocks and bonds are the main types of financial assets. Each is something you can own, and each has some amount of financial value.

What are the four characteristics of a financial instrument?

Four fundamental characteristics influence the value of a financial instrument:Size of the payment:Timing of payment:Likelihood payment is made:Conditions under with payment is made:

What are the characteristics of financial assets?

What are the characteristics of financial assets ? Moneyness. The moneyness of the financial assets implies that they are easily convertible to cash within a defined time and determinable value. … Divisibility & Denomination. … Reversibility. … Cash. … Maturity Period. … Convertibility. … Currency. … Liquidity.More items…•

What is the difference between financial institution and financial instrument?

Financial markets (such as those that trade stocks or bonds), instruments (from bank CDs to futures and derivatives), and institutions (from banks to insurance companies to mutual funds and pension funds) provide opportunities for investors to specialize in particular markets or services, diversify risks, or both.

What are the most common financial instruments?

There is no distinction between ‘basic’ or ‘other’ financial instruments. The most common basic financial instruments are cash, trade debtors, trade creditors and most bank loans. (3)a combination of a positive or a negative fixed rate and a positive variable rate.

What are basic financial instruments?

Basic financial instruments are defined as one of the following: cash. a debt instrument (such as accounts receivable and payable) commitment to receive a loan that satisfy certain criteria. investments in non-convertible preference shares, and non puttable ordinary shares.

Is gold a financial instrument?

Is monetary gold a financial instrument (like cash)? No. Similar to gold bullion, monetary gold is not a financial instrument as there is no contractual right to receive cash or another financial asset inherent in the item.

What are the two basic types of financial assets?

Types of Financial AssetsCash and the Cash Equivalents. … Fixed Deposits. … Equity Shares. … Preference Shares. … Debentures. … Accounts Receivable. … Mutual Funds. … Derivatives.More items…

What is the role of financial assets?

In general, financial assets serve two main economic functions: the first is to transfer funds from those who have surplus funds to invest to those who need a source of financing tangible assets. … Financial assets represent legal claims to future cash expected often at a defined maturity.