1. Trade creditIt is an arrangement between businesses to buy goods or services on account, that is, without making immediate cash payment. The supplier typically provides the customer with an agreement to bill them later, stipulating a fixed number of days or other date by which the customer should pay. It can be viewed as an essential element of capitalization in an operating business because it can reduce the required capital investment required to operate the business if it is managed properly. Trade credit is the largest use of capital for a majority of business to business (B2B) sellers in the United States and is a critical source of capital for a majority of all businesses. For example, Wal-Mart, the largest retailer in the world, has used trade credit as a larger source of capital than bank borrowings; trade credit for Wal-Mart is 8 times the amount of capital invested by shareholders.

ExampleThe operator of an ice cream stand may sign a franchising agreement, under which the distributor agrees to provide ice cream stock under the terms “Net 60” with a ten percent discount on payment within 30 days, and a 20% discount on payment within 10 days. This means that the operator has 60 days to pay the invoice in full. If sales are good within the first week, the operator may be able to send a cheque for all or part of the invoice, and make an extra 20% on the ice cream sold. However, if sales are slow, leading to a month of low cash flow, then the operator may decide to pay within 30 days, obtaining a 10% discount, or use the money another 30 days and pay the full invoice amount within 60 days.The ice cream distributor can do the same thing. Receiving trade credit from milk and sugar suppliers on terms of Net 30, 2% discount if paid within ten days, means they are apparently taking a loss or disadvantageous position in this web of trade credit balances. Why would they do this? First, they have a substantial markup on the ingredients and other costs of production of the ice cream they sell to the operator. There are many reasons and ways to manage trade credit terms for the benefit of a business. The ice cream distributor may be well-capitalized either from the owners’ investment or from accumulated profits, and may be looking to expand his markets. They may be aggressive in attempting to locate new customers or to help them get established. It is not on their interests for customers to go out of business from cash flow instabilities, so their financial terms aim to accomplish two things:

Allow startup ice cream parlors the ability to mismanage their investment in inventory for a while, while learning their markets, without having a dramatic negative balance in their bank account which could put them out of business. This is in effect, a short term business loan made to help expand the distributor’s market and customer base.By tracking who pays, and when, the distributor can see potential problems developing and take steps to reduce or increase the allowed amount of trade credit he extends to prospering or faltering businesses. This limits the exposure

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to losses from customers going bankrupt who would never pay for the ice cream delivered.

Advantages of Trade creditReduced capital requirements, this means that if a new business setting up has trade credit, they will obviously require less money in capital to start up the business. This is a major advantage to someone who has very little money but has a good idea about starting a new business.

Trade credit with improve the cash flows and therefore provide smoother operation for the business

Businesses can buy now and pay later which means even if they don’t have the money at first they can purchase items, sell them as a business and then make the payments at the end of the month when the products have been sold and a profit has been made.

Businesses can look to grow without having to worry of needing to make immediate payments which may set them back.

With trade credit, the business can focus on other areas such as sales, marketing and research rather than worrying about meeting targets just to have enough money to pay the bills.

Disadvantages of Trade creditIf repayments are not made by certain deadlines, the business will receive a poor credit history which will be a big blow to any business as they will not trusted in the future if they require any loans, trade credit, credit cards or leasing.

Only companies with a good credit history will get trade credit and these can often be hard to build up, especially for new businesses

2. Deferred income

It is income received during an accounting period, but for which the company has not yet supplied the goods and services as at the end of the period, so which cannot be recognised as income. These amounts should not be included in the P & L for the period.An item that gives rise to deferred income is the other side of a prepayment. Where a buyer has a prepayment, its supplier will have deferred income.

For example, a company receives an annual software license fee paid out by a customer upfront on January 1. However the company's fiscal year ends on May 31. So, the company using accrual accounting adds only five months worth (5/12) of the fee to its revenues in profit and loss for the fiscal year the fee was

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received. The rest is added to deferred income (liability) on the balance sheet for that year.

3. Accrued Expenses

Accrued expenses are expenses that have occurred but are not yet recorded through the normal processing of transactions. Since these expenses are not yet in the accountant’s general ledger, they will not appear on the financial statements unless an adjusting entry is entered prior to the preparation of the financial statements.For example A company borrowed $200,000 on December 1. The agreement requires that the $200,000 be repaid on February 28 along with $6,000 of interest for the three months of December through February. As of December 31 the company will not have an invoice or payment for the interest that the company is incurring. (The reason is that all of the interest will be due on February 28.)Without an adjusting entry to accrue the interest expense that the company has incurred in December, the company’s financial statements as of December 31 will not be reporting the $2,000 of interest (one-third of the $6,000) that the company has incurred in December. In order for the financial statements to be correct on the accrual basis of accounting, the accountant needs to record an adjusting entry dated as of December 31. The adjusting entry will consist of a debit of $2,000 to Interest Expense (an income statement account) and a credit of $2,000 to Interest Payable (a balance sheet account).

4. Commercial paper

It is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued (sold) by large banks and corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks' rates.

Who can issue?Corporates and primary dealers (PDs), and the all-India financial institutions (FIs) that have been permitted to raise short-term resources under the umbrella limit fixed by Reserve Bank of India are eligible to issue CP. A corporate would be eligible to issue CP provided: (a) the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore; (b) company has

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been sanctioned working capital limit by bank/s or all-India financial institution/s; and (c) the borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s.

Rating RequirementAll eligible participants shall obtain the credit rating for issuance of Commercial Paper from either the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt. Ltd. or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose. The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

MaturityCP can be issued for maturities between a minimum of 7 days and a maximum up to one year from the date of issue.

DenominationsCP can be issued in denominations of Rs.5 lakh or multiples thereof. Amount invested by a single investor should not be less than Rs.5 lakh (face value).

Limits and the Amount of Issue of CPCP can be issued as a "stand alone" product. The aggregate amount of CP from an issuer shall be within the limit as approved by its Board of Directors or the quantum indicated by the Credit Rating Agency for the specified rating, whichever is lower. Banks and FIs will, however, have the flexibility to fix working capital limits duly taking into account the resource pattern of companies' financing including CPs. An FI can issue CP within the overall umbrella limit fixed by the RBI i.e., issue of CP together with other instruments viz., term money borrowings, term deposits, certificates of deposit and inter-corporate deposits should not exceed 100 per cent of its net owned funds, as per the latest audited balance sheet.Every issue of CP, including renewal, should be treated as a fresh issue.

5. International money market

The international money market is the market that handles the international currency transactions between the various central banks of the nations. In the international money market, the transactions are carried out mainly in gold or in US dollar. International money market is governed by the international monetary transactions between various nations currency. The international money market mainly handles the currency trading between the countries. The trading of one country's currency for another one is also named as the foreign exchange

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currency trading or forex trading. The international money market has grown phenomenally over last few years and is expected to grow even more. It is the largest financial market in the world and the participants in this large market are large banks, central banks, governments, multinational corporations and currency speculators.

A money market is the safest financial market available and is commonly used by the big financial institutions, large corporations and governments. The investment made in a money market is generally for a very short period of time and hence they are often referred as cash investments. The basic performance of the international money market involves the money borrowing or lending by a government or some large financial institutions. Unlike share markets, the international money market deals with much larger fund and the players of the market are big financial institutes. The international money market allows investing in a less risk while the return that comes from that is also less. The best way to invest in the international money market is by money market mutual funds or treasury bills.

Everyday the international money market regulates a huge amount of international currency trading. According to the reports given by the Bank for International Settlements, the daily turnover in a traditional exchange market estimated is $1880 billion.

The major international money market participants are:CitigroupDeutsche BankHSBCBarclays CapitalUBS AGRoyal Bank of ScotlandBank of AmericaGoldman SachsMerrill LynchJP Morgan ChaseThe international money market takes care of the exchange rates on a regular basis. Currency band, exchange rate regime, fixed exchange rate, linked exchange rate and floating exchange rates are some of the other indices that govern the international money market in a huge way.

6. Long term vs Short term Debt

Operating a business oftentimes requires obtaining different types of financing. Businesses obtain loans for everything from capital investments to resolving temporary revenue shortfalls. The types of loans used by businesses

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include short-term and long-term debts as well as debits of both of these types that are secured or unsecured.

TypesTwo basic types of financing available for businesses are long-term and short-term debt. Long-term debt is defined as financial obligations that extend beyond one year. Short-term debt is a financial obligation that is scheduled to be fully satisfied or paid off within the course of 12 months.

FunctionThere is no hard and fast rule regarding how long-term and short-term debt are utilized. However, short-term debt tends to be used to deal with revenue shortfalls impacting day-to-day operations. For example, if a business experiences a slump in sales and is unable to meet payroll obligations, short-term financing is sought.Long-term debt tends to be utilized for capital investments. For example, this type of financing may be obtained for the purchase of equipment.

FeaturesBoth long-term and short-term debt can be secured or unsecured. Secured debt is a loan backed by collateral. For example, if a business obtains a loan for an equipment purchase, the lender takes a lien on the equipment itself. If the business defaults on the loan--be it short-term or long-term--the lender is entitled to take possession of the equipment and sell it to attempt to satisfy the balance on the loan.Unsecured debt is a loan that is not secured with collateral. In other words, if a business obtains an unsecured loan--short-term or long-term--the lender is not able to seize any collateral (property) to use to attempt to pay off the loan balance.

BenefitsThe benefits of short-term and long-term debts include ensuring the ongoing operations of a business enterprise as well as providing a business with the ability to purchase necessary equipment to expand operations and develop markets into the future

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