Question

Briefly explain one function of financial instruments that can make them very different from money.

Answer 1

Here we will discuss one of the functions of financial instruments that can make them very different from money.

First, we need to get insight into the financial instruments to know what they are. Financial instruments can get described as those intangible assets that can get converted into the money anytime, as they are the assets that are near future cash. They are also known as the near money, which means they can convert anytime into the cash/money we want. Therefore we can say that financial instruments play a significant role, and they are very different from the actual money/cash. One of the most critical functions of business tools that can make the very different from money is that they provide liquidation anytime we want because, with the help of settlement, we can make the changes in our organization. We become more flexible towards the adaptation of the changes. One of the most crucial functions of financial instruments is that they act as a store of value. If we do not want to have hard cash in our organization, we can convert them into financial instruments or as in the form of a store of value.