Credit instruments can be categorized based on their form, acceptability, purpose, and negotiability. Instruments with general acceptability, like bank notes and treasury bills, can be exchanged between parties without concern for their origin or use. Instruments with limited acceptability, such as promissory notes and commercial credit products, have acceptance dependent on the issuer's creditworthiness. These include investment instruments that generate revenue through interest or dividends, like bonds and stocks, as well as commercial instruments used in transactions, like checks. A negotiable instrument is a signed paper that promises payment to a person or assignee, and the Negotiable Instruments Law governs their negotiability, negotiation, and endorsement.
Credit instruments can be categorized based on their form, acceptability, purpose, and negotiability. Instruments with general acceptability, like bank notes and treasury bills, can be exchanged between parties without concern for their origin or use. Instruments with limited acceptability, such as promissory notes and commercial credit products, have acceptance dependent on the issuer's creditworthiness. These include investment instruments that generate revenue through interest or dividends, like bonds and stocks, as well as commercial instruments used in transactions, like checks. A negotiable instrument is a signed paper that promises payment to a person or assignee, and the Negotiable Instruments Law governs their negotiability, negotiation, and endorsement.
Credit instruments can be categorized based on their form, acceptability, purpose, and negotiability. Instruments with general acceptability, like bank notes and treasury bills, can be exchanged between parties without concern for their origin or use. Instruments with limited acceptability, such as promissory notes and commercial credit products, have acceptance dependent on the issuer's creditworthiness. These include investment instruments that generate revenue through interest or dividends, like bonds and stocks, as well as commercial instruments used in transactions, like checks. A negotiable instrument is a signed paper that promises payment to a person or assignee, and the Negotiable Instruments Law governs their negotiability, negotiation, and endorsement.
credit instruments: definition, classes, and kinds
a. Credit Instruments with General Acceptability
A written or verbal agreement that acknowledges the responsibility to pay money on demand or at any point in the future is referred to as a credit instrument. Credit instruments can be categorized in a variety of ways, including according to their form, acceptability, purpose, and negotiability. Credit instruments that are generally accepted are ones that can be exchanged from one party to another without raising any concerns about where they came from or how they can be used. A promisor must issue this kind of credit instrument to a reliable party. Credit money is the term for these kinds of instruments, which can take the form of bank notes, treasury bills, or fiduciary paper money. b. Credit Instruments with Limited Acceptability The use of credit instruments has replaced the use of money. Limited acceptability credit instruments are those whose acceptance is based on the issuer's or maker's credit status. Promissory notes, bills of trade, and various kinds of bank credit are some examples of these instruments. Investment and commercial credit instruments fall under the category of limited acceptability of credit since acceptance is dependent on a specific range of factors, such as the issuer's credit standing. Without raising further concerns regarding their origins and exchangeability, these instruments cannot be transferred from one another. i. investment credit instruments Investment credit instruments are within the category of credit products with limited acceptance. These are financial instruments that generate revenue through interest or dividend payments. Bonds and stocks are both examples of investment credit instruments. While bonds are loans issued by a firm or the government, stocks are given as a portion of ownership in a corporation. While most bonds yield fixed income over time, stocks must increase in value and be sold on the stock market at a price higher than the purchase price to generate profit.
Lozano, Kaila Mae M. fin 3104-4
credit instruments: definition, classes, and kinds ii. commercial credit instruments On the other hand, commercial credit instruments operate as cash alternatives in commercial transactions. Checks, bills of exchange, promissory notes, bills of exchange, bank drafts, and bank deposits are some examples of this. Commercial credit instruments are categorized into promises to pay and orders to pay and have limited acceptability. Instruments that contain a written promise from the issuer or maker to pay the payee a certain amount of money, either immediately or at a specific future date, are referred to as promises to pay instruments. Order-to-pay instruments are credit instruments that are drawn against the money that has been deposited to pay the beneficiary a certain sum of money on demand. c. Negotiable Instruments Law: Negotiability; Negotiation; Indorsement A signed paper that promises to pay a certain amount to a particular person or the assignee is referred to as a negotiable instrument. The provisions of the law on negotiable instruments are covered by Act No. 2013, sometimes referred to as the Negotiable Instruments Law. An instrument is negotiated, according to the law, when it is given from one person to another in a way that makes the recipient the holder of the instrument. It included topics like the building of ambiguous instruments, the purposes and types of instruments, and many other topics relevant to negotiable instruments. The Act's objectives include promoting the free flow of credit and simplifying transaction agreements and contracts involving commercial paper.