Capital expenditures are the funds used by the company to improve, purchase or maintain the company’s long term assets. With these funds, the company improves its efficiency or increases the capacity. Long term assets include property, equipment, infrastructure etc.Types of capital expenditures include the following −Expenses incurred in maintaining the ... Read More

Capital receipts are a receipt, which creates a liability or decreases the assets of an organization or any business. They increase the total capital of the company.These can be debt receipts and non-debt receipts. These are shown in the balance sheet rather than the income statement. This is done because; ... Read More

Free cash flows (FCF) is the cash that generated by company after cash flow to maintain their capital assets and its operations. In other words, FCF is the cash remaining after paying taxes, payrolls etc. FCF is the effective measurement to measure company’s performance and financial healthTypesFree cash flow to ... Read More

Before going for a swap contract, first let us know about SWAP. Swap is a derivative contract linking two parties which are involved in an exchange of cash flows of financial instruments at pre agreed rate. Applications of swap are risk hedging and to access new markets.A swap contract is ... Read More

According to the Section 2 (b) of Indian Contract Act 1872, an acceptance is defined as “when the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus, the proposal when accepted becomes a promise”.In other words, an offeree to ... Read More

The major differences between backwardation and contango are as follows −BackwardationIt refers to the prevailing conditions of the market, when future price of commodities (gold, silver etc.) trade lower than anticipated price.Usually takes place when value determined (spot price – futures price) is lower than cost of carrying.Spot price is ... Read More

It is an agreement in which the seller will sell a predetermined amount of commodities to the buyer on a particular date at a specific price. The main difference from future contract and option contracts is that holder in future contracts has obligation to act. Commodity contracts include assets like ... Read More

Total return swap (TRS) is an agreement between the two parties in which they exchange returns on financial assets. One party will pay on a set rate and the other will pay on the total return of the underlying asset (bond, loan, equity interest etc.). In this swap, the party ... Read More

Credit default swap acts as the insurance policies. It is a financial derivative which allows an investor to offset their credit risk with that of other investors. In this swap, the buyer will pay quarterly installments to the seller. It protects against high-risk corporate debts, municipal bonds and sovereign bonds.It ... Read More

Currency swap is an agreement between the parties to exchange principal amounts of different currencies at a predetermined rate on a future date.TypesThe two types of currency swaps are as follows −Fixed to fixed − Exchange of fixed interest payments in one currency on loan equivalent in other currency.Fixed to ... Read More