Question

1. Explain Shipment Finanace

2. Explain Financial Instument and few of it types

3. what are types of EURO ISSUES.

Answer 1

Shipment Finance

There are two types of Shipment Finance - Pre shipment finance & post shipment finance.

Pre-Shipment Finance: It refers to be credit extended to the exporters prior to the shipment of goods for the execution of the export order. Finance amount does not exceed the FOB value of the goods to be exported or their domestic value whichever is less.

Post-Shipment Finance: It refers to be credit extended to the exporters after the shipment of goods for meeting working capital requirement. It can be given to be extent of 100% of the invoice value of goods to be exported.

Financial Instruments

Financial instruments can be real or virtual documents representing a legal agreement involving any kind of monetary value. They are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver. Most types of financial instruments provide efficient flow and transfer of capital all throughout the world's investors.

Types of Financial Instruments:

Cash Instruments: The value of cash instruments are directly influenced by the markets. These are the securities that are easily transferable. It can also be deposits and loans agreed upon by borrowers and lenders.

Derivative Instruments: These can be over-the-counter derivatives or exchange traded derivatives. It is based on the underlying assets, interest rates or indices.

Debt based financial instruments: It comes in the form of treasury bills, commercial paper, certificate of deposits. The maturity of same may be one year or less.

Equity based financial instruments: Securities under equity based financial instruments are stocks. Exchange traded derivatives in this category include stock options and equity futures.

Types of Euro Issues

This term is used to raise money outside home country in foreign currency. The most commonly used source of funds that fall under Euro issues are American Depository Receipts (ADR), Global Depository Receipts (GDR) and Foreign Currency Convertible Bonds (FCCB).