SHARETIPSINFO >> Articles Directory >>Cash settlement – a phenomenon in stock market trading


Cash settlements can happen in two cases. The first case is in relation to the payments in connection with the futures contracts. It can also happen when the settlement has to be done with a legal dispute. The simplest definition of cash settlement is using cash for any outstanding obligation. This will allow fulfilling the conditions of the transaction. Thus the dispute will be settled and the resolution of the problem is found out. Once the cash settlement is over the originator and the receiver of the payment can continue with other works.

In futures trading, cash settlement is a common phenomenon. This is mainly used to make the payment as a mode of transaction. The settlement will be made on the trade date without having to choose the settlement date. This is focused at security.

When it is a legal case, the settlement using cash is used as a means of resolution. Here the court will make the declaration to the payer to make the sash settlement. For this the suit should win the case and the cash has to be paid within a specific time period. If the settlement is not made, then additional settlement can be demanded. In such cases, the assets of the party will be seized and the party will have to be put in jail.

There are vendors who will claim to pay a cash settlement to another party to get a debt discharged. This often happens in cases where the customer is in bankrupt. To avoid being in the list of the bankruptcy, the vendor can pay the cash and get things settled. The amount he will be paying will be half that is owed by him.

Here the vendor’s expenses will be met with this cash. But the profit on the invoice will be comparatively low. Customers in such situations might be in financial problems and have to depend on the cash settlement to get things done. He will be facing a bankruptcy and hence a threat from bank.

Cash settlement on a large scale is being used as a method to settle disputes. This is often the mode chosen by court in cases of legal dispute between two parties. The parties can file suits. The court after hearing their suits will claim one to be winning suit based on correct evaluation. Thus the court will ask for a cash settlement.

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