Financial instruments in the capital markets generally fall under what category in the Balance Sheet? ?

Question

A) Short-term liabilities and equities.

B) Long-term liabilities and equities.

C) Near cash assets.

D) None of the above.

Answer 1

We can be categorized financial instruments but it will depend that whether they are cash instruments or derivative instruments, for instance cash instruments are those financial instruments whose value is determined directly by markets. They can be divided into securities, which are readily transferable, and other cash instruments such as loans and deposits, where both borrower and lender have to agree on a transfer. While derivative instruments are those financial instruments which derive their value from the value and characteristics of one or more underlying assets. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives. Moreover financial instruments can be categorized by "asset class" depending on whether they are equity based or debt based. If it is debt, it can be further categorized into short term (or long term. But foreign Exchange instruments and transactions are neither debt nor equity based and belong in their own category.