Sherya Ltd. is a large credit-worthy company manufacturing automobiles for the Indian market It now wants to cater to the other market and decided to invest in new machines. For this, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost the company decides to tap the money market.
(i) Name and discuss the money market instrument the company can use for the above purpose.
(ii) What is the duration for which the company can get funds through this instrument?
(iii) State any other purpose for which this instrument can be used.

Explanation

(i) Commercial paper -it is a short term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period.
(ii) 15 days to one year.
(iii) It is used to provide short term funds for seasonal and working capital needs of the business.