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Markets - the place where the exchange of goods and services takes place at a mutually agreed price or value

- affected by internal and external factors - a price discovery mechanism and intermediation process Financial Markets - venue for exchange between suppliers of capital and users of capital. Users may be suppliers and suppliers may be users of capital. - financial intermediary (banks, stock market, insurance companies, investment banks, etc.) - capital formation process - reduces cost of information and research - users (spenders) and providers (savers) of capital congregate Savers: (you help in capital formation) - putting money to banks - individuals, businesses Spenders: - individuals, businesses, governments, other entities Financial intermediation has costs (interest payments) Structures Capital Market - where long-term capital funds in debt and equity are transacted ex. Debt Capital (Bond payables), Stock market (public offerings of corporations) Money Market - where short-term capital is obtained (over-the-counter) ex. Consumer loans, credit cards, micro-finance Debt Market (domestic and foreign), Equities market (stocks), Derivatives Market (Futures, Forwards and Options) Futures - contract by which you can fix with a provider funds based from future deliveries at an agreed price (commodity futures)

Derivative instruments are for hedging - take a position now (buying or selling now to anticipate price differences in the future) for speculation of future prices for arbitrage - taking advantage of price differences in different markets Sell short - sell something you don't have right now Options - exercising an option by paying a percentage of the total price right now, having the right but not the obligation to exercise the option (not the same as down payment) External factors that drive the behavior of financial markets - environmental factors e.g. political/regulatory environment, economic, social, technological (PREST) -Global issues (geopolitics), International finance & trade (capital & fund transfers, international trade), Government intervention (government fiscal policy e.g. taxation & government spending, government monetary policy e.g. interest managed by central bank, FX, inflation) ---> BSP manage bank reserve requirements to affect interest rates Industry factors - rivalry among firms, threat of new entrants, threat of substitutes, bargaining power of buyers, and bargaining power of the suppliers Impact of Factors on Financial markets - risks. returns and cash flows, liquidity, etc. Financial management objective - minimize risk and maximize return Tangibles and Intangibles Components of Goodwill (future earning power) - Brand equity, future earning potential, market dominance, location, track record, organizational capital, human/intellectual capital