Page 115 - Accountancy_F5
P. 115
(a) Participating in deliberations of the maturity time is less than a year.
firm’s operations through voting rights. The yield of the treasury bill is the
The number of shares an investor owns difference between the price paid and
determines the power of the voting face value. In Tanzania, for instance,
rights when it comes to deliberations the government through the Bank
of a firm’s operations. of Tanzania (BoT) has been issuing
FOR ONLINE READING ONLY
(b) Investment in ordinary shares attracts treasury bills with maturity days of
a return in the form of either dividends thirty-five (35), ninety-one (91), one
or capital gain or both. A dividend hundred eighty-two (182) and three
refers to the distribution of the profit hundred sixty-four (364).
LANGUAGE EDITING
generated to shareholders while capital (c) Government bonds are the financial
gain refers to an increase in the value assets issued by the government which
of ordinary shares. has maturity duration of more than
(c) Also, an investor of ordinary shares one year carrying a promise to pay
has a chance to benefit from the bonus interest periodically. In Tanzania,
shares and rights issue. for instance, the BoT issues treasury
bonds on behalf of the government
Fixed income-bearing investment with maturities of two (2) years, five
A fixed income-bearing investment refers to (5) years, seven (7) years, ten (10)
financial assets which attract a fixed amount years, fifteen (15) years, and twenty
of interest or dividend after every specific (20) years. The interest in investment
interval of time. The return is the interest is paid on semi-annual basis.
amount attached to the asset. Fixed income
securities include certificate of deposits (d) Corporate bonds are the long-term
(CDs), treasury bills, government bonds, financial assets issued by companies.
corporate bonds, and preference shares. They carry a promise to pay interest
The details of these financial instruments periodically. Companies can issue
are as follows: bonds as a way of borrowing funds to
(a) Certificate of deposits is the financial finance their operations.
asset that is issued by financial (e) Preference shares are the financial
institutions including banks requiring assets issued by companies as a means
a minimum amount to be deposited for of raising capital. They carry a promise
a specified fixed duration. In return, to make an annual payment to an
they offer higher interest rates than investor, either as a coupon percentage
savings accounts. or a specified amount of money, but
they do not have a maturity period.
(b) Treasury bills are the short-term
financial assets that are issued by the Generally, investment in fixed income
government at a discount and their financial assets is a loan provided by an
Student’s Book Form Five
102
23/06/2024 17:35
ACCOUNTANCY_DUMMY_23 JUNE.indd 102
ACCOUNTANCY_DUMMY_23 JUNE.indd 102 23/06/2024 17:35
