Cash Flow Characteristics | Debt Instrument Test

If you ever need to figure out whether a specific instrument is a debt instrument or not, you have to do a cash flow characteristics test So, what exactly is that? Well, it looks at the cash flow that is going to be generated from that instrument For example, let's say you invest some money—imagine you put in ₹100 crores and you buy something Now, the return you are going to get from that ₹100 crores must be solely the payment of principal and interest It doesn't mean your returns are based on the company's profits, or that if the company performs differently, your payments will fluctuate It doesn't work like that. The money you actually receive will either be just the interest, just the principal amount, or both Only that specific type of instrument is considered to be a debt instrument Okay? That is what we call the cash flow characteristics test " #DebtInstrument #CashFlowTest #Finance #Investing #Accounting #FinancialEducation #PrincipalAndInterest #CashFlow