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Chapter 1 Summary

This chapter discusses the nature of financial assets. A financial instrument is any contract that gives one entity a financial asset and another entity a financial liability or equity. Financial assets include cash, equity in another entity, contractual rights to receive cash or assets from another entity, debt investments classified as liabilities by the issuing entity, and derivatives whose value is tied to interest rates.

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Mildred Angela Dingal
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51 views1 page

Chapter 1 Summary

This chapter discusses the nature of financial assets. A financial instrument is any contract that gives one entity a financial asset and another entity a financial liability or equity. Financial assets include cash, equity in another entity, contractual rights to receive cash or assets from another entity, debt investments classified as liabilities by the issuing entity, and derivatives whose value is tied to interest rates.

Uploaded by

Mildred Angela Dingal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 1

Nature of Financial Assets

Financial Instrument – any contract that gives rise to a financial


asset of one entity (point of view of the holder) and a financial liability
or equity instrument of another entity (point of view of the issuer)

 Financial Asset – cash and cash equivalents, equity


instrument of another entity, contractual right to receive from
another entity cash or another financial asset, and
investments in debt instruments of another entity classified
by the latter entity as financial liabilities

- includes derivatives—a financial instrument that


meets:

a. its value changes in response to change in


specified interest rate

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