Q:
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What is a financial instrument to a company?
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A:
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Basically, financial instrument is a monetary contract between parties that belongs to the company created in the transaction of daily business. Such as bonds contract, futures, investment in equities and etc. These contract will provide obligated future economic inflows or outflow to the company.
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Q:
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Are financial instruments debts to the Company？
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A:
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No, not all financial instruments are debts to the Company. To determine the Financial instrument to a Company is whether an asset or a debt is by the nature of the obligation towards the other signing parties involved to the contract. If the product that have the company to be paying money in the future, it would be considered as a financial liability, and vise versa.
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Q:
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What is financial asset?
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A:
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Financial asset is an intangible asset that the Company purchased over and will be generating a form of benefits obligation to the company. Their value are derived from a contractual claim, normally will be in a form of cash when the company realise it’s obligation.
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Q:
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What is financial liability?
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A:
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Think this in the other way around from Financial asset that had been purchased by the Company. A financial liability would be the obligation that the Company will have to repay the product holder in return of current service or goods received by the Company. The repayment will not only be limited by cash, it will be also be in form of Equity.
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Q:
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What are products purchased or given classified as financial instrument?
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A:
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As we discussed in front, the financial contract that had been signed by the company to obtain an advantage to gain benefits to the company, it would be financial asset, example would be investment in shares, securities, bonds or even buy over other parties debts. And for financial liability could be any contracts that had been signed to other parties to gain service or goods receive by now, such as options shares issued, employee benefits in return of shares, and bonds.
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FAQ
