Golden rule of financing

Principle requiring matching maturities between – capital procurement and repayment on the one hand and – capital utilization on the other. In other words, capital may not be tied up in assets for longer than the respective capital transfer period. – See balance reporting, bank rule, golden, cash management, financial planning, liquidity, optimal, liquidity risk, matching, prenumeration proviso, repayment, early, underliquidity, prepayment risk, prepayment indemnity.

Federal Treasury financing papers: In Germany, permanent issues by the Federal Government with maturities of around twelve to twenty-four months covering the short end of the maturity range; they can be purchased by anyone. They are – issued as discount securities; when they are issued, the nominal value is discounted at the respective selling interest rate. – The difference between the discounted issue amount and the repaid nominal value thus represents the interest income. The return on the investment is always higher than the selling interest rate due to the reduced capital employed in relation to the nominal value. – Financing treasuries are not introduced to stock exchange trading due to their short maturity. They also cannot be redeemed early. – See discounting, discount paper.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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