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Financial Markets and Instruments - Assignment Example
Finance & Accounting
Pages 6 (1506 words)
FINANCIAL MARKETS AND INSTRUMENTS 1. In the Kingdom Saudi Arabia, the use of money market is very active as a means of provision of liquidity funding for most transactions that take place on short term basis with asset maturity period of less than a year (Hargroves, and Smith, 2005)…
Under the regulatory instrument, emphasis is on the use f commercial paper by larger corporations or companies who have had the backing of an issuing bank, promising to make settlement for the quotation on the face of the commercial before or on the date specified. Like in most other financial jurisdictions, the issuance of commercial paper is not guaranteed by a collateral and so the need for strict regulations that ensure that such instruments on the money market are used only by corporations that have been rated with excellent credit rating status (Fombrun, 2012). 2. At different times in the economic management of the country, the government of the Kingdom has had the need to generate both long term and short term financing. As far as short term financing is concerned, emphasis has always been on the use of short term financing to take care of short term debt financing. One of the commonest instruments used in this case is overdraft, whereby it transmits cash that are beyond available funds (Greenley and Foxall, 2011). On the long term also, the use of equity investment ranks as the commonest form of financing that the government undertakes. Often, this is done by targeting local industries and buying and holding shares of the stocks of such businesses for projected capital gains and dividend growth. ...
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