1. Financial Asset

2. Module I Financial Assets Tangible and Intangible Assets
Debt Vs Equity
Properties of Financial assets –
Financial markets
Classification of Financial Markets
Financial System and Economic Development
Weakness of Indian Financial System. 

4. Assets are generally brought in business to benefit from them and to increase the value of a business.
In simple language, it means anything that a person “owns” say a house or equipment.
In the accounting context, an asset is a resource that can generate cash flows.
The assets are recorded on the balance sheet. They are found on the right-hand side of the balance sheet and can also be referred to as “Application of Funds”.
The assets include furniture, machinery, accounts receivable, cash, investments, etc

5. One way of classification of assets is based on their easy convertibility into cash.
According to this classification, total assets are classified either into
 Current Assets or Fixed Assets.

6. FIXED ASSETS CURRENT ASSETS
Fixed assets are of a fixed nature in the context that they are not readily convertible into cash.
They require elaborate procedure and time for their sale and converted into cash. Land, building, plant, machinery, equipment, and furniture are some examples of fixed assets.
Other names used for fixed assets are non-current assets, long-term assets or hard assets.
Generally, the value of fixed assets generally reduces over a period of time (known as depreciation).
Assets which are easily convertible into cash like stock, inventory, marketable securities, short-term investments, fixed deposits, accrued incomes, bank balances, debtors, bills receivable, prepaid expenses etc. are classified as current assets.
Current assets are generally of a shorter lifespan as compared to fixed assets which last for a longer period.
Current assets can also be termed as liquid assets.

8. ON THE BASIS OF PHYSICAL EXISTENCE
Tangible assets
Tangible assets are those assets which we can touch, see and feel.
All fixed assets are tangible.
Moreover, some current assets like inventory and cash fall under the category of tangible assets too.
INTANGIBLE ASSETS
We can not see, feel or touch Intangible assets physically. Some examples of intangible assets are goodwill, franchise agreements, patents, copyrights, brands, trademarks etc.
These are also classified under assets because the business owners reap monetary gains with the help of these intangible assets.
A company’s trademark, brand, and goodwill contribute to its marketing and sale of its products.
Many buyers purchase goods only by seeing its trademark and brand in the market.

9. Current Asset
Fixed Asset
Tangible Asset
Intangible Asset
Operating Asset
Non-operating Asset
Cash
Land
Goodwill
Bank Balance
Road
Patents
Investments
Building
Brand
Inventory
Furniture
Trademark
Stocks
Stock
Plant
Copyright
Prepaid Exp
Receivables
Machinery
Prepaid Exp.
Equipment
Bills Receivable

10. The financial assets can be defined as an investment asset whose value is derived from a contractual claim of what they represent.
These are liquid assets as the economic resources or ownership can be converted into something of value such as cash.
These are also referred to as financial instruments or securities.
They are widely used to finance real estate and ownership of tangible assets.
These are basically legal claims and these legal contracts are subject to future cash at a predefined maturity value and predetermined time frame

13. Types of Financial Assets
These all can be classified in different categories according to the features of the cash flow associated with them.
Certificate of Deposit (CD)
This type of financial asset is an agreement between an investor (here, company) and a bank institution in which the customer (Company) keep a set amount of money deposited in the bank for the agreed term in exchange for a guaranteed rate of interest.
Bonds
This type of financial asset is usually a debt instrument sold by companies or government in order to raise fund for short-term projects.
 A bond is a legal document that states money the investor has lent the borrower and the amount when it needs to be paid back (plus interest) and the bond’s maturity date.
Stocks
Stocks do not have any maturity date. Investing in stocks of a company means participating in the ownership of the company and sharing its profits and losses. Stocks belong to shareholders until and unless they sell them.

14. Cash or Cash Equivalent
This type of financial asset is the cash orequivalent reserved with the organization.
Bank Deposits
These are the cash reserve of the organization with Banks in saving and checking accounts.
Loans & Receivables
Loans and Receivables are those assets with fixed or determinable payments. For banks, loans are such assets as they sell them to other parties as their business.
Derivatives
Derivatives are financial assets whose value is derived from other underlying assets. These are basically contracts.
All the above assets are liquid assets as they can be converted into their respective values as per the contractual claims of what they represent. They do not necessarily have inherent physical worth like land, property, commodities, etc.

15. Questions Are These Financial Asset? OR its a physical asset? CAR BOND
GOLD
RENTED HOME

16. Like commodities, gold is a tangible asset, but it is a unique tangible asset.
Gold has attributes that set it apart from commodities, and therefore cannot be considered as a commodity.
Is gold a tangible asset?

17. Properties of Financial assets
(1) Moneyness, (2) Divisibility & denomination, (3) Reversibility, (4) Cash flow, (5) Term to maturity, (6) Convertibility, (7) Currency, (8) Liquidity, (9) Return predictability, (10) complexity, (11) Tax status

18. 2. Divisibility:
is related to the minimum size in which a financial asset can be liquidated and exchanged for money.
3. Reversibility (round-trip cost):
refers to the cost of investing in a financial asset and then getting out of it and back into cash again.
1.Moneyness
some financial asset used as a medium of exchange or in settlement of transactions.
Could be cash or near money, such as time & savings deposits and Treasury Bills.
the ability to transfer a financial asset into money at little cost, delays or
risk.
Some examples are cash and checking accounts.

19. 6. Convertibility: refers to the notion that some financial assets can be converted into other assets, e.g., a convertible bond 7. Currency: this refers to the foreign exchange value or foreign exchange currency denomination of the financial asset.
4. Term to maturity: this is the length of the interval until the date at which the instrument is scheduled to make its final payment, or the time until the owner is entitled to demand liquidation.
5. Liquidity: how much the seller stands to lose if he wishes to sell immediately rather than allowing some time to pass.

20. 8. Cash flow and return predictability:
this is the cash yield of a financial asset per unit of time and consists of all the cash distributions that the financial asset will pay to its owners. 9. Complexity: this involves combinations of two or more simple assets. For instance, a callable bond can be valued as a straight bond plus the value of the put option to the issuer.
10.Tax status:
refers to the taxability of interest income generated from a financial asset.

21. various forms of equity:
Meaning of Equity
The value of an asset less the value of all liabilities on that asset is called as Equity.
Generally speaking, the definition of equity can be represented with the accounting
equation: Equity = Assets - Liabilities
various forms of equity:
A stock or any other security representing an ownership interest. This may be in a private company (not publicly traded), in which case it is called private equity;
In a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). It is also referred to as shareholders‘ equity;
In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage;
In the context of real estate, the difference between the current fair market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage. It is referred to as “real property value.”

22. Debt Financing
When a firm raises money for capital by selling debt instruments to investors, it is known as debt financing. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid on a regular schedule.
Equity Financing
Equity financing is the process of raising capital through the sale of shares in a company. With equity financing comes an ownership interest for shareholders. Equity financing may range from a few thousand dollars raised by an entrepreneur from a private investor to an initial public offering (IPO) on a stock exchange running into the billions.

23. DEBT VS EQUITY Financial markets are split into debt and equity markets.
Debt titles are the most commonly traded security.
In these arrangements, the issuer of the title (borrower) earns some initial amount of money (such as the price of a bond) and the holder (lender) subsequently receives a fixed amount of payments over a specified period of time, known as the maturity of a debt title.
Debt titles can be issued on short term (maturity < 1 yr.), long term (maturity >10 yrs.) and intermediate terms (1 yr. < maturity < 10 yrs.).
The holder of a debt title does not achieve ownership of the borrower’s enterprise.
Common debt titles are bonds or mortgages.
Reward-interest
Risk-high(bankrcpcy)
Cost-lowest
The most common equity title is (common) stock.
First and foremost, an equity instruments makes its buyer (lender) an owner of the borrower’s enterprise.
Formally this entitles the holder of an equity instrument to earn a share of the borrower’s enterprise’s income, but only some firms actually pay (more or less) periodic payments to their equity holders known as dividends. Often these titles, thus, are held primarily to be sold and resold.
Equity titles do not expire and their maturity is, thus, infinite. Hence they are considered long term securities.
Reward- dividend
Risk-low
Cost-highest

25. classification of Financial Markets

26. Financial Market refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place.
It plays a crucial role in allocating limited resources, in the country’s economy.
It acts as an intermediary between the savers and investors by mobilising funds between them

27. Functions of Financial Market
It facilitates mobilisation of savings and puts it to the most productive uses.
It helps in determining the price of the securities. The frequent interaction between investors helps in fixing the price of securities, on the basis of their demand and supply in the market.
It provides liquidity to tradable assets, by facilitating the exchange, as the investors can readily sell their securities and convert assets into cash.
It saves the time, money and efforts of the parties, as they don’t have to waste resources to find probable buyers or sellers of securities. Further, it reduces cost by providing valuable information, regarding the securities traded in the financial market.
The financial market may or may not have a physical location, i.e. the exchange of asset between the parties can also take place over the internet or phone also.

28. Financial Markets Financial markets consist of
sellers (fund suppliers-lenders)
buyers (fund demanders-borrowers)
financial instruments (fin assets, securities)
financial institutions (intermediaries)

29. Classification of Financial Markets

30. By Nature of Claim
Debt Market: The market where fixed claims or debt instruments, such as debentures or bonds are bought and sold between investors.
Equity Market: Equity market is a market wherein the investors deal in equity instruments. It is the market for residual claims

31. By Maturity of Claim
Money Market: The market where monetary assets such as commercial paper, certificate of deposits, treasury bills, etc. which mature within a year, are traded is called money market. It is the market for short-term funds. No such market exist physically; the transactions are performed over a virtual network, i.e. fax, internet or phone.
Capital Market: The market where medium and long term financial assets are traded in the capital market.
It is divided into two types:
Primary Market: A financial market, wherein the company listed on an exchange, for the first time, issues new security or already listed company brings the fresh issue.
Secondary Market: Alternately known as the Stock market, a secondary market is an organised marketplace, wherein already issued securities are traded between investors, such as individuals, merchant bankers, stockbrokers and mutual funds.

32. By Organizational Structure Exchange-Traded Market
By Timing of Delivery
Cash Market: The market where the transaction between buyers and sellers are settled in real-time.
Futures Market: Futures market is one where the delivery or settlement of commodities takes place at a future specified date.
Exchange-Traded Market: A financial market, which has a centralised organisation with the standardised procedure.
Over-the-Counter Market: An OTC is characterised by a decentralised organisation, having customised procedures.
Since last few years, the role of the financial market has taken a drastic change, due to a number of factors such as low cost of transactions, high liquidity, investor protection, transparency in pricing information, adequate legal procedures for settling disputes, etc.
Cash Market
Futures Market
By Organizational Structure
Exchange-Traded Market
Over-the-Counter Market

34. FINANCIAL SYSTEM AND ECONOMIC DEVELOPMENT
Relationship between financial system and economic development
Role of financial system in economic development of a country
Savings-investment relationship
Financial systems help in growth of capital market
Government Securities market
Financial system helps in Infrastructure and Growth
Financial system helps in development of Trade
Employment Growth is boosted by financial system
Venture Capital
Financial system ensures Balanced growth
Financial system helps in fiscal discipline and control of economy
Financial system’s role in Balanced regional development
Role of financial system in attracting foreign capital
Financial system’s role in Economic Integration
Role of financial system in Political stability
Financial system helps in Uniform interest rates
Financial system role in Electronic development:

35. Relationship between financial system and economic development
The development of any country depends on the economic growth the country achieves over a period of time. Economic growth deals about investment and production and also the extent of Gross Domestic Product in a country. Only when this grows, the people will experience growth in the form of improved standard of living, namely economic development.
Role of financial system in economic development of a country
Following are the roles of financial system in the economic development of a country. 
1.Savings-investment relationship
To attain economic development, a country needs more investment and production. This can happen only when there is a facility for savings. As, such savings are channelized to productive resources in the form of investment. Here, the role of financial institutions is important, since they induce the public to save by offering attractive interest rates. These savings are channelized by lending to various business concerns which are involved in production and distribution.

36. Financial systems help in growth of capital market
Any business requires two types of capital namely, fixed capital and working capital. Fixed capital is used for investment in fixed assets, like plant and machinery. While working capital is used for the day-to-day running of business. It is also used for purchase of raw materials and converting them into finished products. 
Fixed capital is raised through capital market by the issue of debentures and shares. Public and other financial institutions invest in them in order to get a good return with minimized risks.
For working capital, we have money market, where short-term loans could be raised by the businessmen through the issue of various credit instruments such as bills, promissory notes, etc.
Foreign exchange market enables exporters and importers to receive and raise funds for settling transactions. It also enables banks to borrow from and lend to different types of customers in various foreign currencies. The market also provides opportunities for the banks to invest their short term idle funds to earn profits. Even governments are benefited as they can meet their foreign exchange requirements through this market.

37. Financial system helps in Infrastructure and Growth
Economic development of any country depends on the infrastructure facility available in the country.
In the absence of key industries like coal, power and oil, development of other industries will be hampered.
It is here that the financial services play a crucial role by providing funds for the growth of infrastructure industries.
Private sector will find it difficult to raise the huge capital needed for setting up infrastructure industries.
For a long time, infrastructure industries were started only by the government in India.
But now, with the policy of economic liberalization, more private sector industries have come forward to start infrastructure industry.
The Development Banks and the Merchant banks help in raising capital for these industries.

38. Financial system helps in development of Trade
The financial system helps in the promotion of both domestic and foreign trade. The financial institutions finance traders and the financial market helps in discounting financial instruments such as bills.
Foreign trade is promoted due to per-shipment and post-shipment finance by commercial banks. They also issue Letter of Credit in favor of the importer.
Thus, the precious foreign exchange is earned by the country because of the presence of financial system.
The best part of the financial system is that the seller or the buyer do not meet each other and the documents are negotiated through the bank.
In this manner, the financial system not only helps the traders but also various financial institutions.
Some of the capital goods are sold through hire purchase and installment system, both in the domestic and foreign trade.
As a result of all these, the growth of the country is speeded up.

39. Government Securities market
Financial system enables the state and central governments to raise both short-term and long-term funds through the issue of bills and bonds which carry attractive rates of interest along with tax concessions.
The budgetary gap is filled only with the help of government securities market.
Thus, the capital market, money market along with foreign exchange market and government securities market enable businessmen, industrialists as well as governments to meet their credit requirements. In this way, the development of the economy is ensured by the financial system.
Government Securities market

40. Employment Growth is boosted by financial system
The presence of financial system will generate more employment opportunities in the country. The money market which is a part of financial system, provides working capital to the businessmen and manufacturers due to which production increases, resulting in generating more employment opportunities. With competition picking up in various sectors, the service sector such as sales, marketing, advertisement, etc., also pick up, leading to more employment opportunities. Various financial services such as leasing, factoring, merchant banking, etc., will also generate more employment. The growth of trade in the country also induces employment opportunities. Financing by Venture capital provides additional opportunities for techno-based industries and employment.
Venture Capital
There are various reasons for lack of growth of venture capital companies in India. The economic development of a country will be rapid when more ventures are promoted which require modern technology and venture capital. Venture capital cannot be provided by individual companies as it involves more risks. It is only through financial system, more financial institutions will contribute a part of their investable funds for the promotion of new ventures. Thus, financial system enables the creation of venture capital.

41. Financial system ensures Balanced growth
Economic development requires a balanced growth which means growth in all the sectors simultaneously.
Primary sector, secondary sector and tertiary sector require adequate funds for their growth.
The financial system in the country will be geared up by the authorities in such a way that the available funds will be distributed to all the sectors in such a manner, that there will be a balanced growth in industries, agriculture and service sectors.

42. Financial system helps in fiscal discipline and control of economy
It is through the financial system, that the government can create a congenial business atmosphere so that neither too much of inflation nor depression is experienced.
The industries should be given suitable protection through the financial system so that their credit requirements will be met even during the difficult period.
The government on its part, can raise adequate resources to meet its financial commitments so that economic development is not hampered.
The government can also regulate the financial system through suitable legislation so that unwanted or speculative transactions could be avoided.
The growth of black money could also be minimized.

43. Financial system’s role in Balanced regional development
Through the financial system, backward areas could be developed by providing various concessions or sops. This ensures a balanced development throughout the country and this will mitigate political or any other kind of disturbances in the country. It will also check migration of rural population towards towns and cities. 
Role of financial system in attracting foreign capital
Financial system promotes capital market. A dynamic capital market is capable of attracting funds both from domestic and abroad. With more capital, investment will expand and this will speed up the economic development of a country.
Financial system’s role in Economic Integration
Financial systems of different countries are capable of promoting economic integration. This means that in all those countries, there will be common economic policies, such as common investment, trade, commerce, commercial law, employment legislation, old age pension, transport co-ordination, etc. We have a standing example of European Common Market which has gone to the extent of creating a common currency, representing several countries in Western Europe.

44. Role of financial system in Political stability
The political conditions in all the countries with a developed financial system will be stable. Unstable political environment will not only affect their financial system but also their economic development.
Financial system helps in Uniform interest rates
The financial system is capable of bringing an uniform interest rate throughout the country by which there will be balanced movement of funds between centres which will ensure availability of capital for all kinds of industries.
Financial system role in Electronic development:
Due to the development of technology and the introduction of computers in the financial system, the transactions have increased manifold bringing in changes for the all round development of the country. The promotion of World Trade Organization (WTO) has further improved international trade and the financial system in all its member countries.

45. WEAKNESS OF INDIAN FINANCIAL SYSTEM
Lack of co-ordination among financial institutions: There are a large number of financial intermediaries. Most of the financial institutions are owned by the government. At the same time, the government is also the controlling authority of these institutions. As there is multiplicity of institutions in the Indian financial system, there is lack of co-ordination in the working of these institutions.
Lack of co-ordination
Dominance of development banks in industrial finance
Inactive and erratic capital market
Unhealthy financial practices
Monopolistic market structures
Other factors

46. 2. Dominance of development banks in industrial finance:
The industrial financing in India today is largely through the financial institutions set up by the government.
They get most of their funds from their sponsors.
They act as distributive agencies only. Hence, they fail to mobilise the savings of the public.
This stands in the way of growth of an efficient financial system in the country.
In India, the corporate customers are able to raise finance through development banks. So, they need not go to capital market.
Moreover, they do not resort to capital market because it is erratic and enactive. Investors too prefer investments in physical assets to investments in financial assets.
3. Inactive and erratic capital market:

47. 4. Unhealthy financial practices
The dominance of development banks has developed unhealthy financial practices among corporate customers.
The development banks provide most of the funds in the form of term loans.
So there is a predominance of debt in the financial structure of corporate enterprises.
This predominance of debt capital has made the capital structure of the borrowing enterprises uneven and lopsided.
When these enterprises face financial crisis, the financial institutions permit a greater use of debt than is warranted. This will make matters worse.
5. Monopolistic market structures:
In India some financial institutions are so large that they have created a monopolistic market structures in the financial system.
For instance, the entire life insurance business is in the hands of LIC.
The weakness of this large structure is that it could lead to inefficiency in their working or mismanagement.
Ultimately, it would retard the development of the financial system of the country itself.

48. 6. Other factors: There are some other factors which put obstacles to the growth of Indian financial system.
Examples are:
a. Banks and Financial Institutions have high level of NPA.
b. Government burdened with high level of domestic debt. c. Cooperative banks are labelled with scams.
d. Investors confidence reduced in the public sector undertaking etc.,
e. Financial illiteracy. In the recent past, the most notable aspect of Indian economy is its financial system.
Perhaps no system in the world has changed so much as that of our financial system. Indian financial system undergoing fast development and hence not matured like that of developed countries. The government should take reasonable reforms to mould our financial system as healthy one.

49. Thank you for listening
Questions paper(2017,18,19)
Refer