Self liquidating paper theory

10-Apr-2019 00:46

The repayment schedule and maturity of a self-liquidating loan are designed to coincide with the timing of the assets' income generation.

These loans are intended to finance purchases that will quickly and reliably generate cash.

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Self liquidating (real bills doctrine) theory is a traditional and conservative banking theory.There are also a number of scams that call themselves "self-liquidating loans".There are probable contradictions between the objectives of liquidity, safety and profitability when linked to a commercial bank.Efforts have been made by economists to resolve these contradictions by laying down some theories from time to time.

In fact, these theories monitor the distribution of assets considering these objectives.This principle assures that the appropriate degree of liquidity for each bank and appropriate money supply for the whole economy.