Self-liquidating is a term used in finance to describe a process where an asset or financial instrument is converted into cash over time, typically to repay a debt or fund itself, without the need for external financing or additional capital. In the context of energy commodities trading, self-liquidating often refers to transactions where the revenue generated from selling the commodity is used to cover the cost of the trading activity, including procurement, transportation, and any financing costs incurred.
For instance, a self-liquidating trade in the energy sector might involve a trader purchasing a quantity of oil using a short-term loan. The trader then sells the oil to a buyer, and the sales proceeds are used to pay back the loan and any associated interest, making the trade self-financing. This concept is particularly important in trading activities where margins can be thin and carrying costs (such as storage and interest on borrowed capital) must be minimized.
One key characteristic of a self-liquidating transaction is that the asset being traded has sufficient liquidity and market demand to ensure it can be sold at a predictable price, allowing for the planning necessary to ensure that the transaction will indeed self-liquidate.
For more information about self-liquidating and related financial concepts, you may visit the following websites:
1. Investopedia – Investopedia offers reliable explanations of financial terms and practices, including self-liquidating transactions:
2. Corporate Finance Institute (CFI) – CFI provides educational materials and courses on finance, including explanations of various financial instruments and terms within the energy sector:
Please note that the availability of the web pages might change over time, and it’s always a good practice to check the sites regularly for the most current information.
This A.I.-generated glossary is intended to provide a convenient means to understand terminology used on this website in the context of physical commodities trading. Some terms may have alternative and/or expanded definitions that may not be relevant here and thus not included. Sources provided are for reference and not intended to be an endorsement of the broader content on that website. Suggestions, questions, or corrections can be provided in the comment box on definition pages.