What is a cash transaction?

Cash transactions are any type of financial transaction where cash is used to settle the transaction at the same date as it occurs. Transactions of this type occur in retail settings and when investing. This method varies from credit transaction, where the payment process can be introduced to the actual date of transaction, but does not complete or compare it to a particular particular point in the future.

In the area of ​​investment, cash transaction allows you to settle or sell asset on the same day the transaction is started. With other forms of payment, the transaction may not be settled anywhere from a few days to a few months. The actual cash transaction requires all transaction -related matters, including payment and delivery, to be completed at the date of trade and not postponed at any future settlement date. For example, with a forward contract, they are purchased activated at some future point where the investor pays the agreed prices. With maleThe harvest of the transaction is delivered immediately, the payment is rendered and the buyer and the seller are considering the transaction completed.

One of the advantages of cash transaction is that the buyer and the seller do not have to devote time and energy to complete sales in the future. The transaction is settled on the day it is started and allows both parties to switch to other lucrative transactions. The buyer can freely use the asset obtained in any way he wants without having to settle any excellent duty to the seller. For the seller, cash transactions mean that there are no concerns about the default trade and he or she can freely use the sales revenues in any desired way.

While cash transactions are simple and straightforward this is not necessarily the most effective investment strategy in all situations. Forward contracts can be very lucrative investments as they allow KU toThe passing opportunity to buy securities at a rate that may be sufficiently lower than the market value that prevails at the agreed date of settlement. Assuming that the investor precisely assumed the movement of the ascending security, the purchase of the loan may be lower than the cost of purchasing shares and settling the debt obligation on the day the agreement was launched.