What is Secured Loans Explanation, Definition and Meaning

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Secured loans Most short-term business loans are unsecured, which means that an established company’s credit rating qualifies it for a loan. It is ordinarily better to borrow on an unsecured basis, but frequently a borrower’s credit rating is not strong enough to justify an unsecured loan. The most common types of collateral used for short-term…

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What is Commercial Paper Explanation, Definition and Meaning

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Commercial paper Commercial paper, a third source of short-term credit, consists of well-established firms’ promissory notes sold primarily to other businesses, insurance companies, pension funds, and banks. Commercial paper is issued for periods varying from two to six months. The rates on prime commercial paper vary, but they are generally slightly below the rates paid…

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What is Commercial Bank Loans Explanation, Definition, Meaning

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Commercial bank loans Commercial bank lending appears on the balance sheet as notes payable and is second in importance to trade credit as a source of short-term financing. Banks occupy a pivotal position in the short-term and intermediate-term money markets. As a firm’s financing needs grow, banks are called upon to provide additional funds. A…

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What is Trade Credits or Cash Discount Explanation,Definition,Meaning

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Trade credit A firm customarily buys its supplies and materials on credit from other firms, recording the debt as an account payable. This trade credit, as it is commonly called, is the largest single category of short-term credit. Credit terms are usually expressed with a discount for prompt payment. Thus, the seller may state that…

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What is Convertible Bonds and Stock Warrants Explanation and Meaning

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Convertible bonds and stock warrants Companies sometimes issue bonds or preferred stock that give holders the option of converting them into common stock or of purchasing stock at favourable prices. Convertible bonds carry the option of conversion into common stock at a specified price during a particular period. Stock purchase warrants are given with bonds…

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What is Stock Option Explanation, Definition and Meaning

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Contractual agreement enabling the holder to buy or sell a security at a designated price for a specified period of time, unaffected by movements in its market price during the period. Put and call options, purchased both for speculative and hedging reasons, are made by persons anticipating changes in stock prices. A put gives its…

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What is Liquidation in Bankruptcy Explanation, Definition and Meaning

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Discharge of a debt or the determination by agreement or litigation of the amount of a previously unliquidated claim. One important legal meaning is the distribution of the assets of an enterprise among its creditors and proprietors. At the dissolution of a solvent corporation or unincorporated association, the assets are usually liquidated (turned into money)…

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What is Receivership in Liquidation Explanation,Definition and Meaning

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In law, the judicial appointment of a person, a receiver, to collect and conserve certain assets and to make distributions in accordance with judicial authorization. A receivership is properly an intermediate or incidental step toward some other principal objective and not generally the object of litigation. The principal objective may be the preservation of the…

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What is Lease financing, Leasing Explanation, Definition and Meaning

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It is not necessary to purchase assets in order to use them. Railroad and airline companies in the United States, for instance, have acquired much of their equipment by leasing it. Whether leasing is advantageous depends—aside from tax advantages—on the firm’s access to funds. Leasing provides an alternative method of financing. A lease contract, however,…

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