Commercial paper, Managerial Accounting

The CP introduced in the Indian financial market, for the recommendations of the Vaghul Committee has turn into a well-liked debt instrument of the corporate world. Commercial Paper is a debt instrument for short-term borrowing that enables highly rated corporate borrowers to vary their sources of short-term borrowings and gives an additional financial instrument to investors along with a freely negotiable interest rate. The maturity period ranges from three months to less than a year. As this is a short-term debt, the issuing company is needed to meet dealers' fees, rating agency fees and another relevant charge. CP is short-term unsecured promissory note issued through corporations along with high credit ratings.

Salient Features:

Eligibility Criteria: A company can concern CP only whether:

1) CPs tangible net worth is not less than Rs. 4 crore according to the latest audited balance sheet;

2) CPs fund based working capital limit is not less than Rs. 4 crore;

3) This has acquired the identified minimum credit rating for issuance of commercial paper from an approved credit rating agency. That credit rating must not be more than 2 months old at the time of issue of the commercial paper;

4) CPs borrowal account is classified by 'standard' through the financing bank; and

5) This has a minimum current ratio of 1.33:1 according to the latest audited balance sheet and the classification of current liabilities and assets are in conformity along with the Reserve Bank guidelines issued by time to time.

Posted Date: 4/9/2013 3:11:50 AM | Location : United States

Related Discussions:- Commercial paper, Assignment Help, Ask Question on Commercial paper, Get Answer, Expert's Help, Commercial paper Discussions

Write discussion on Commercial paper
Your posts are moderated
Related Questions
Compute the value of share of a company? A company paid dividend amounting to Rs. 0.75 each share during the last year. The company is supposed to pay Rs. 2.00 per share throug

Selective Inventory Management The inventory of an industrial firm generally comprises thousands of items with diverse prices, usage and lead time, as well as procurement and/o

What is Direct material cost variance It can be defined as the difference between the standard costs of direct material specified and the actual cost of direct material used.

Salialailai Ltd manufactures water tanks for different sizes for use by industrial customers. The company uses a job costing system, in which manufacturing overhead is applied on t

Case study of Orion Financial Management - Portfolio Management? Maria Gilbert is a principal in the company of Orion Financial Management. For 20 years she was chief investm

Yuma foods acquire Aldo's tortillas several years ago. Aldo's continued to operate as an independent company, except that Yuma foods has exclusive authority over capital investment

Transient Analysis A state is said to be transient if it is impossible to move to that state from any other state except itself. This state is temporary and eventually a stead

State the Penetration pricing As opposed to the skimming pricing the objective of penetration pricing is to gain a foothold in a highly competitive market. The objective of thi

Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the