Limit In Finance
There are several possible ways to understand the term ‘limit’. Limit in finance points towards two possibilities. First, the limit in finance means a certain monetary limit. This means the amount of money being invested in a business is ‘limited’ or ‘absolute’. This means that after a certain amount, the monetary fuel will run out. This gives finance a certain limit. The monetary limit is one very important factor for investors. It helps them tally their money better. This also helps the investors extend their money to its full potential. It is important to set a limit in investment since it prevents the investor from becoming bankrupt. This helps establish the foundation of the investor. It gives the market a clear idea of his or her investment power.
The Highest Amount of Price Negotiation
Limit in finance could also mean the highest amount of price negotiation that a contract can undergo. This determines the highest price that future contracts can negotiate on any trading day. Any deal signed by that company or under that contract, cannot exceed the limit set. This is valuable to the company. This lowers the risk in the market and prevents
bankruptcy. Limits in finance are an integral part of any business. They also give clarity on the strength of the company and its financial capability.
The limit becomes important because it gives the market a clear idea of the company’s monetary status. In any deal, this limit acts as a budget. Hence two companies with two different budgets, may at times not sign a deal. This limit sets a budget value that establishes the company’s position in the market. This financial limit also ensures that the company does not sell all assets off impulsively. Several times, this limit helps the company think about their investment. This has helped save several businesses.
The Maximum Number of Transactions
Another implication of the term ‘limit in finance’ is the maximum number of transactions. Here, limit means the maximum time that an individual can do transactions, in one day. Under this limit, a said investor can not trade several commodities at once. This to reduce the risks of corruption and bankruptcy. This limit also helps determine that the investor does not make several mistakes.
Also, this is important for the company since having huge transactions suggest foul play. This limit can be set by either the Trading Commissions or by private companies themselves. This limit is set to neglect most possibilities of foul play or corruption. Governments or unions may set this limit to keep a check on different companies and their finances. In some countries the limit is called the trading limit. This limit to ensure a balance in the flow of currency. Overall also, here prevent companies from going bankrupt.
Uses
Limit in finance is an integral part of business deals and understanding. Without establishing limits, it is not possible for a company to stay in the market. The establishment of limits prevents impulsive wrong decisions. This limit also helps in keeping companies out of foul play and corruption.
