This category covers all kinds of topics in finance including corporate finance and financial management. The topics on financial institution and stock exchange will also be included.
An indenture is a legal contract. A bond indenture is a contract attached with a bond between the issuer and the bondholder. It typically involves a third-party guarantor such as a financial institute or bank that acts as a trustee. A bond indenture specifies the terms and conditions of the bond. It legally binds both […]
Bond Indenture – Definition and Working Mechanism Read More »
Inventory represents any goods or stock that companies sell or produce. Usually, inventories go through a conversion process before coming to their finished form. In some cases, however, companies may sell products as acquired from suppliers. Either way, inventories represent the primary income source for companies that deal in physical stock. Inventories are a part
What is Economic Order Quantity (EOQ) and How to Calculate It? Read More »
Promissory notes and bills of exchange are both negotiable instruments. Both instruments are used as a means of payment. They are used in trade deals for transferring payments according to the specified terms and conditions. Bills of exchange and promissory notes are both formal written agreements. Bills of exchange are primarily used in international trade
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Parties involved in a trade deal can choose a letter of credit as a payment option. Buyers can often choose to make the payment using a delayed LC. Payments to the sellers can be delayed for other reasons as well. Banks can help the sellers with early payments through a letter of credit discounting. It
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Letters of credit and escrow services work similarly in facilitating the trade deals. Both instruments offer a financial guarantee to both parties in a trade deal. Transactions with large financial values are a riskier option and often require third-party guarantors. Two parties in a domestic or international trade deal can seek expertise from third-party institutes.
Letter of Credit vs Escrow Read More »
A promissory note is a debt instrument. It is used to borrow money from private lenders usually. It works similarly to a bank loan with both parties agreeing on the repayment terms. Additionally, it can take the form of a secured or unsecured debt instrument. It is a written agreement for the borrowed money. It
What is a Promissory Note? Read More »
An escrow is a financial agreement controlled by a third-party to manage the trade deal payments. The trade deal can be for products or services. The third-party is often called an escrow agent or company. The third-party in such contracts is the financial guarantor for both parties. What is Escrow? In an escrow financial arrangement,
Letters of credit are a source of financial security for the trade parties. A letter of credit enables payments and offers financial security in international transactions. There are two banks involved in completing the process. An issuing bank from the buyer side and a nominated bank from the seller side. A recourse attached to any
Letter of Credit – With Recourse and Without Recourse Read More »
A bank guarantee and a letter of credit, are financial instrument for mitigation of financial risks in trade contracts. Both instruments act as financial security to both parties in certain ways. Financial institutions and banks become facilitators of financial assurance to both parties in trade contracts. A bank guarantee comes with more legal binding to
Bank Guarantee Vs Letter of Credit Read More »
There are various payment instruments in international trade. From formal bank cheques to bank guarantees, parties in trade contracts can use several payment methods. A bill of exchange is essentially a payment instrument. A letter of credit can work as a payment instrument but is largely used as means of financial guarantee. Both instruments are
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