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Presentation On Financial Instrument: Presented by Nishanth H Mba, Rymec Ballari
Presentation On Financial Instrument: Presented by Nishanth H Mba, Rymec Ballari
FINANCIAL INSTRUMENT
PRESENTED BY NISHANTH H
MBA, RYMEC BALLARI
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FINANCIAL INSTRUMENTS
By 2
Tatwamasi
TYPES:
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CAPITAL MARKET INSTRUMENTS
EQUITY SHARES:
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CLASSIFICATION OF PREFERENCE SHARES:
CONVERTIBLE AND NON CONVERTIBLE PREFERENCE SHARES:
CONVERTIBLE PREFERENCE SHARES CAN BE CONVERTED INTO AN ORDINARY EQUITY SHARE AT SOME
AGREED TERMS AND CONDITIONS.
NON CONVERTIBLE SIMPLY DO NOT HAVE THIS OPTION BUT HAS ALL OTHER NORMAL CHARACTERISTIC
OF A PREFERENCE SHARE.
REDEEMABLE PREFERENCE SHARES CAN BE REDEEMED OR REPAID AFTER THE EXPIRY OF A FIXED
PERIOD OR AFTER GIVING THE PRESCRIBED NOTICE AS DESIRED BY THE COMPANY.
IRREDEEMABLE PREFERENCE SHARES CAN NOT BE REDEEMED DURING THE LIFE TIME OF THE COMPANY
PARTICIPATING PREFERENCE SHARES HAVE THE RIGHT TO PARTICIPATE IN PROFITS OF THE COMPANY
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APART FROM THE FIXED DIVIDEND.
CUMULATIVE AND NON CUMULATIVE PREFERENCE SHARES:
DIVIDEND OF CUMULATIVE PREFERENCE SHARES WILL HAVE TO
BE PAID AS LONG AS THE COMPANY EARNS PROFIT IN ANY YEAR.
WHEREAS, FOR NON CUMULATIVE PREFERENCE SHARES, A COMPANY
CAN SKIP THE DIVIDEND IN THE YEAR, THE COMPANY HAS INCURRED
LOSSES.
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DEBENTURES
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TENURE:
REDEEMABLE DEBENTURES: DEBENTURES WHICH HAVE TO BE REPAID WITHIN A
CERTAIN SPECIFIED PERIOD.
IRREDEEMABLE/PERPETUAL DEBENTURES: THESE CAN BE PAID BACK AT ANY
TIME DURING THE LIFE OF THE COMPANY .I.E. THERE IS NO SPECIFIED PERIOD FOR
REDEMPTION. THEY ARE ALSO CALLED PERPETUAL DEBENTURES.
REGISTRATION:
REGISTERED DEBENTURES: THESE ARE DEBENTURES THAT ARE REGISTERED
WITH THE COMPANY. IT RECORDS ALL DETAILS OF DEBENTURE HOLDINGS SUCH
AS NAME, ADDRESS, PARTICULARS OF HOLDING ETC.
BEARER DEBENTURE: THESE ARE THE DEBENTURES WHICH ARE NOT RECORDED
IN A REGISTER OF THE COMPANY. SUCH DEBENTURES ARE TRANSFERABLE
MERELY BY DELIVERY. 12
BOND
A DEBT INSTRUMENT ISSUED FOR A PERIOD OF MORE THAN ONE YEAR WITH
THE PURPOSE OF RAISING CAPITAL BY BORROWING.
GENERALLY, A BOND IS A PROMISE TO REPAY THE PRINCIPAL ALONG WITH
INTEREST (COUPONS) ON A SPECIFIED DATE (MATURITY). SOME BONDS DO NOT
PAY INTEREST, BUT ALL BONDS REQUIRE A REPAYMENT OF PRINCIPAL.
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DERIVATIVE INSTRUMENTS
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MONEY MARKET INSTRUMENTS
TREASURY BILLS:
TREASURY BILLS ARE SHORT TERM MATURITY PROMISSORY NOTE ISSUED BY
GOVERNMENT.
THEY ARE ISSUED WITH THREE-MONTH, SIX-MONTH AND ONE-YEAR
MATURITIES.
THEY ARE PURCHASED FOR A PRICE THAT IS LESS THAN THEIR PAR (FACE)
VALUE; WHEN THEY MATURE, THE GOVERNMENT PAYS THE HOLDER THE
FULL PAR VALUE.
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CERTIFICATES OF DEPOSITS:
A CD IS A TIME DEPOSIT WITH A BANK.
CDS HAVE SPECIFIC MATURITY DATE, INTEREST RATE AND IT CAN BE ISSUED IN ANY
DENOMINATION.
COMMERCIAL PAPERS:
IT IS A NEGOTIABLE SHORT TERM UNSECURED PROMISSORY NOTE WITH FIXED MATURITY.
ONLY COMPANY WITH HIGH CREDIT RATING ISSUES CPS
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REPURCHASE AGREEMENTS:
REPO IS A FORM OF OVERNIGHT BORROWING AND IS USED BY THOSE WHO DEAL IN GOVERNMENT
SECURITIES.
THEY ARE USUALLY VERY SHORT TERM REPURCHASES AGREEMENT, FROM OVERNIGHT TO 30 DAYS
OF MORE.
BANKERS ACCEPTANCE:
ACCEPTANCES ARE TRADED AT DISCOUNTS FROM FACE VALUE IN THE SECONDARY MARKET.
THIS IS ESPECIALLY USEFUL WHEN THE CREDIT WORTHINESS OF A FOREIGN TRADE PARTNER IS
UNKNOWN. 18
THANK YOU
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