Aasim Bin Bakr

Roll :12
Batch 28th

Financial System

Financial instruments are tradable assets of any kind.

They can be of two types:

1. Primary (direct) - used in direct finances

2. Secondary (indirect) - used in indirect finances

Assets- First criteria: future benefits, second criteria: you have to possess it, third criteria: you
have to own it. third criteria has been removed because some assets we dont own but we put it
in out balance sheet. When lease, the ownership factor is not present here. but first two criteria
are met. This is called leasehold assets.

Subsidiary Company: Parent company if possesses more than 50% of their share the other
company is called a subsidiary company. Not owning but possessing and getting benefits are
present. So, the subsidiary company can be qualified as an asset.

1. Real Assets: physical assets (things we can see)

2. Financial Assets: a financial asset must be backed by a real asset.

Beximco shares real asset is Beximco pharmaceuticals. So, if the business performs well the
share value will increase.

Land, labor, capital, entrepreneurship

Bengal meat - land - (land means the stuff we get from nature)—— cow

Financial instruments are tools which help to mobilize funds

If Foodpanda issues a bond and I buy it, it is an asset for me, but on the other hand it is a
liability of foodpanda. So, the financial instruments can be both asset and liability.

Money can be anything that is widely accepted and can be used as a medium of exchange.

If I have a pencil, and if people would widely accept it as a currency than it would be money.

Chinese dynasty first started paper based money.

When they started to print money and got bankrupt and there comes the concept of inflation.
Britain learned from the chinese dynasty and they were aware of inflation. Then came plastic
money and now electronic money is widespread.
 1. Widespread medium of exchange - Note currencies, coins, and cheques.
2. Money represents claim to the government
3. backed by real asset

Primary market fund flow goes to the production.

If i buy foodpanda share and for some reason im feeling like it will not perform good or if i want
to liquidate my position. i can sell it in the secondary market.

Dhaka stock exchange is a secondary market.

Every financial asset cannot be traded. Loan Contract cannot be sold (not tradable), but it is an
asset.

ABS= Asset back securities, CB

Those financial assets which are tradable are called marketable securities.

Share issue = equity market

bond issue= debt market

capital = long term fund that is invested in the business.

owner’s equity + long term fund

long term fund can be in the form of equity or debt

if equity then equity capital

and if debt then it is called debt capital.

Bonds are secure debentures are less secure.