Evaluation of Investment Instruments

Overview of Evaluation of Investment Instruments
It is always necessary for a business enterprise to make a proper evaluation of investment instruments, as it is crucial for the steady existence and performance of the company. Evaluation of investment instruments is perhaps one of the most important factors of consideration of the company.

Important Factors of Evaluation of Investment Instruments
The most important factors that are used for the evaluation of investment instruments are:
Maturity of the Investment Instrument
Safety of the Investment Instrument
Yield of the Investment Instrument
Liquidity of the Investment Instrument

Maturity of the Investment Instrument
The maturity of the investment instrument means the term period of the particular investment instrument. There are basically two types of investment instruments with respect to the term periods – the short-term investment instruments and the long-term investment instruments.
It has been observed that the yields provided by an investment instrument are directly proportional to the term period of the same. In most of the investment instruments the term periods are fixed. However, there are also certain investment instruments where the term period can be adjusted to meet the demands of the investors.
Safety of the Investment Instrument
The safety of the investment instrument is of utmost importance for the companies. This term normally relates to the possibilities of recovering the investment made and getting some profits as well. The safety of the investment instruments normally depends on factors like the issuer of the instrument as well as the kind of the investment vehicle.
Yield of Investment Instrument
The term, yield of investment instrument, normally refers to the returns that could be obtained from the particular investment instrument. The yields of the investment instruments should be considered after calculating the taxes that need to be paid on them.
Liquidity of the Investment Instrument
The term liquidity of the investment instrument means the capacity of the particular investment instrument to be changed into cash at any time through trading. This condition is of extreme importance for the present day companies.

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Last Updated on : 27th June 2013

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