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FINMAN 101 Monetary Standard is the unit of account by which we measure the

MONEY, CREDIT AND BANKING value of all kinds of goods and services
Week 1 - Can be gold, silver, paper
Importance of Money If the unit of account is gold then it is gold standard
1. Money facilitates trade Classification:
2. Money stimulates production 1. Commodity Standard one which uses gold or any metal as the
3. Money accelerates economic growth basis of value
History of Money Types:
- The Phoenicians the peddlers of the sea during the ancient a. Monometallism based on one metal
times, conducted their trade by means of barter b. Bimetallism based on two metals which are standard
- Slave girls were exchanged with cattle, iron, bronze money at a fixed value in terms of one another
- Grain, cattle, salt, tobacco, shells and various metals were c. Symmetallism based on a simple metallic unit which is a
used as money mixture of different metals legally proportioned
- Greeks innovated the coined money
- Coined money were made of a natural mixture of good and
silver
- Used of coins stimulated trade
- Used of money made the rulers of the powerful Roman
Empire corrupt and immoral
- The government could no longer support the high expenses
of the large Roman Armies
- That resulted to stagnant trade and agriculture was neglected
- Attila the Hun, took advantage of the decaying economy and
plundered Roman Empire currencies circulated
Pre Spanish Era
- Barter rings, gold ornaments and beads
- Piloncitos 1 st recognized form of coinage
Spanish Era
- Cobs or Macuquinas odd-shaped silver coins
- Dos mundos or pillar dollars silver
- Barillas copper coins
- Counter stamped coins
Portrait series
- Peso fuertes 1 st banknotes issued
st
1 gold coins were also called Isabelinas and Alfonsinos
stamped Filipinas
American Regime
Silver Certificates
Treasury Certificates
Japanese Occupation
- Japanese Invasion Money
- Guerilla Notes or Resistance Currencies
Week 2
Money is anything that is generally acceptable in exchange for goods
and services
Functions of money:
1. Medium of exchange or means of payments
2. Unit of account or value
3. Store of value
4. Standard of deferred payment
Features/Characteristics of Money:
1. Generally acceptable
2. Divisible
3. Uniform/homogenous
4. Malleable applies only to coins
5. Cognizable
6. Portable
7. Durable
Kinds of money:
1. Commodity money
2. Fiat money
Fiat means order or sanction
Managed Currency any currency that can have its exchange rate
affected by the intervention of a Central Bank 2. Paper Standard one which does not use gold or any metal as the
basis of value
- called as credit or Fiduciary Standard because it is dependent on the - Value or price of goods and services can be determined by
peoples trust in the government. means of money
Monetary System includes in its scope designation of the unit of - To make the payment system more efficient, aside from using
account plus the whole government mechanism established to regulate paper money and coins and checks, electronic money has
the creation of money and to control its quality in circulation been developed.
Central Bank Security Printing Plant, Mint and Gold
Refining Complex
- Located in East Avenue, Diliman, Quezon City
- Five building complex which houses the Central Bank
Security Printing Plant, Mint and Gold Refinery
- Considered as first of its kind in Southeast Asia
- It is likened to that of the United Sates renowned gold
depository in Fort Knox
- The complex is being managed as two separate departments
a. the Security Printing Plant
b. The Mint and Gold Refinery
- The set up is mainly for functional and administrative
purposes
- Before the establishment of the Complex, CBP is depended
on foreign contractors for its notes and coins
- Thomas de la Rue and Co. Ltd a well known and highly
respected security printer in England where Philippine bank
notes had been printed since 1949
- Coins were minted in the United States, Germany and other
foreign countries
The Security Printing Plant
- In a span of 200 working days, the Plant has the capability of
producing 384 million bank notes
- Can accept printing other related security instruments such as
MICR-encoded checks of the banking and financial systems,
deposit passbooks, Torren titles, internal revenue stamps,
postage stamps
The Mint
- Annually, the Mint has the capability of producing 120 million
coins of different denominations
- Has the equipment to reproduce the working dies used for
stamping the coins on imported master dies

- There are ten coining presses installed in the Mint with a


maximum capacity of 250 strokes a minute
- There are three counter bagging machines in the mint with
a maximum capacity of 5000 coins a minute
The Gold Refinery
- Also a silver refinery
- Electrolysis the process of converting the raw gold bullion
produced by the Philippines mining companies into refined
gold of 99.5 to 99.9 fineness
- Silver may be refined to 99.9 purity
- Has the capability of producing 600,000 troy ounces of gold
and 450,000 ounces of silver annually within the acceptable
standard in the international market
Week 3
Payment System
- Started during barter system
- Barter System the direct exchange of goods and services
Disadvantages:
1. Burdensome
2. Inconvenient due to difficulty in finding goods which one
directly needs
3. Does not have proper measures for the goods being
exchanged
- To eliminate the shortcomings of the barter system, man Payment System is the set of institutional arrangements for the transfer
invented money of money from person to person frequently among people who are widely
- Accelerated the exchange of goods and services not only separated geographically often in different countries using different
within countries but among nations money.
Financial intermediaries persons or entities whose principal function Philippine National Bank (1916) was established to extend
includes the lending, investing or placement of funds as evidence of long term loans to agriculture and industry
indebtedness or equity deposited with them acquired by them or otherwise The organization of rural banks and agricultural credit
coursed through them either for their own account or for the account of associations were encouraged by the government
others The credit programs of the government failed in the rural
Classifications: areas because farmers did not pay their financial obligations.
a. Bank
b. Non-bank financial institution
Checks representing deposit money used in transaction which involves
huge amount of money
Clearing of checks:
- The Clearing of Check is a Central Bank responsibility
Philippine Clearing House Corporation a private firm which holds
offices at the ground floor of the Central Bank of the Philippines
- The checks are cleared by computer machine
Manila clearing checks cleared in Manila and nearby provinces
Regional Unit clearing of checks has longer days of clearing
- clearing of checks are done or held everyday at 4:00PM
Bouncing Check making or drawing issuance of a check without
sufficient funds
- Under Batas Pambansa Blg. 22
- Be punished by imprisonment of not less than 30 days but not
more than 1 yr. or fine of not less than but not
more than double the amount of the check which fine shall in
no case exceed 200,000 pesos or both
Week 4
Development of Credit
Pre Spanish Time
The barter system was used in the conduct of trade with the
foreigners
Native products such as cotton, pearls, sinamay fiber with the
goods of the foreigners the porcelain, silk, ivory
Filipino traders were famous for their honesty and excellent
credit record
Dishonesty and the non payment of debts were greatly
discouraged by punishments which are considered primitive
under present culture
Spanish Time
Free trade was encouraged
Spain adopted a policy of trade restrictions
Galleon trade Manila Acapulco Trade
A government monopoly
The privilege of doing business in the galleon trade went to
the governor general, religious officials, royal officials, soldiers
and there relatives and friends
Secured their loans from the Obras Pias
Obras Pias forerunners of the banking institutions in the
Philippines
The funds were donated by rich citizens for religious projects
and were managed by the religious order
The credit system during the Spanish time favored only a
chosen few
Served only the economic interests of the ranking official and
their relatives and friends
American Era
Agriculture remained undeveloped under the Spanish regime
American government gave priority to its development
Introduced a better banking and credit system to promote
economic development especially in the rural areas
Organized the 1st agricultural bank in 1908 for the benefit of
Factors that attributed to the failure of the credit program:
the farmers
1. Farmers did not have steady income due to destruction of
1915, the Rural Credit Law was enacted to complement the
their crops by natural calamities
agricultural bank through agricultural cooperatives particularly
credit associations
2. They were exploited by the landlords by giving them unfair Users of Credit
share in the harvest 1. Consumer
3. The negative attitudes of the borrowers toward the debts 2. Businessmen
influenced their referral to settle their financial obligations 3. government
4. They considered their loans as another form of dole outs Suppliers of Credit
and therefore they did not feel the responsibility of paying the 1. Banks
government lending institutions 2. Credit cooperative
Under the Republic 3. Pawnshop
Rehabilitation Finance Corporation was established on Oct. 4. Unlicensed money lender
29, 1946 to provide credit facilities for the rehabilitation of 5. Other institutions investment and financing companies,
agriculture, commerce and industry savings and loan association, insurance companies, GSIS
Assisted in the reconstruction of war damaged properties and SSS
Became the Development Bank of the Philippines Functions of Credit:
Central Bank of the Philippines was established in 1949 1. Economic
In 1952, Agricultural Credit and Cooperative Financing 2. Social
Administration (Agricultural Credit Administration was taken Classification of credit:
over by the Land Bank in 1982) established for the benefit of 1. Public and Private based on the nature of the recipients of
the farmers and other low income groups in the several credit
areas Public Credit - includes all grants of credit to governments
The government encouraged the organization of savings and Private Credit refers to all grants of credit to non
loan association governments individuals, partnerships, corporations and other
Cooperative rural banks were organized under the private institutions.
2. Secured and Unsecured according to the presence or
supervision of the Bureau of Agricultural Cooperatives
absence of pledges
Development and Department of agricultural and Food and
owned by the farmers themselves
Week 6
Credit came from the Latin creditum which means trust
- Refers to the ability to acquire something of value such as
goods, services, securities or money at the present time in
return for promise to pay at some future time.
Parties involved:
a. Creditor provides the thing borrowed
b. Debtor receives it and assumes the obligation to pay
Credit Instrument the paper which contains in writing the obligation of
the debtor and the right of the creditor
Credit Contracts based on oral arguments and these are legally
binding on both parties as a matter of trust.
Credit System includes credit, credit instruments, credit institutions,
laws and customs or credit lending and collection
Elements of Credit:
1. Trust
2. Time of payment
3. Risk
Bases of Credit:
1. Character refers to the personal integrity of the borrower
2. Capacity can be measured by the managerial ability of the
borrower
3. Capital refers to the resources owned by the borrower
such as properties
4. Collateral used as a security for a loan
5. Condition other factors which affect the ability of borrower
to pay their financial obligations
Sources of credit Information:
1. Internal records are the data which are in the file of the
bank
2. Applicants information through personal interview, direct
investigations, mailed questionnaires and analysis of financial
statement of the business of the applicant

3. Business Reference
4. CB credit information system to ensure confidentiality, the According to Purpose:
CB assigns a reference number of each inquiry a. Commercial credit includes the promise to pay of
5. Other sources business magazines, trade journal, businessmen for the funds they borrowed in the purchased of
government business reports and the business sections of goods for productive or profitable ventures. These are the
newspaper merchants, distributors and manufacturers
b. Agricultural Credit includes the promises to pay of farmers on demand or at a specified future date a certain
and farm organizations for the funds they borrowed in the sum of money to order or bearer.
acquisition of farm inputs such as fertilizers, chemicals, seeds b. Bank Acceptance similar to a trade acceptance
and the facilities for production and other agricultural except that the order to pay is drawn upon a
operations bank by the seller of goods
c. Investment credit is the promise to pay of individuals or 2. Trust Receipt Transaction any transaction by and
business firms for the loans they obtain in buying capital between an entruster (bank) and an entrustee (importer)
goods such as machineries, lands and construction of plants whereby the entruster (bank) who owns or holds absolute title
and factories. This is also called industrial credit. or security interests over certain specified goods, documents
d. Consumer Credit constitutes all the obligations to pay or instruments releases them to the possession of the
people for the money they borrowed for consumption entrustee (importer). The importer signs a document called
purposes such as medical care, tuition fees, goods and other trust receipt wherein he promises to hold the designated
things for personal needs. goods, documents or instruments in trust for the bank and to
5. Speculative Credit used for dealing in securities or goods sell or dispose them with the obligation to turn over to the
with the intention of making a profit through favorable price bank the proceeds
changes
According to time period:
a. Short term credit - a loan which is payable in less than one
year
b. Long term credit a loan whose maturity is from 5 yrs. or
more

c. Intermediate Credit a loan which matures only in one year


and less than 5 years
Week 7
Classification of credit instruments:
1. Promise to pay
Charge accounts an arrangement between the sellers and
the buyers. The latter receives credit upon purchased of
goods without giving a promissory note or other form of credit
instrument
- sometimes called book credit and is usually not secured
Promissory notes a written promise to pay a sum of money
on demand or on a definite future date to a designated person
or bearer
Maker person who makes the promise to pay
Payer the one to whom the promise is diverted
- it can be secured or unsecured, interest bearing or non-
interest bearing, negotiable or non-negotiable
Bonds a written or printed acknowledgement of debt
- a certificate of indebtedness
- usually long term notes issued by the government and
private corporations for the purpose of financing their
respective projects
- to acquire funds
- the principal is paid upon maturity of the bond and the
interests may be paid at certain regular period
Order to Pay
1 check a written and signed order of a depositor upon
a bank to pay on demand the order of a bearer or
designated person a specified sum of money.
2 Drawer the person who draws a check
3 Drawee the bank where the check is drawn
4 Payee the person to whom payment is made
Kind of Checks:
Cashiers check (Managers Check) drawn upon a bank by
the cashier of a business organization
Personal check in which the drawer is an individual Requirements of Negotiable Instruments:
Bank draft drawn by a bank upon another bank where it 1. It is in writing and signed by the drawer or maker
maintains an account 2. It contains an unconditional promise or order to pay a certain
- used for international cash payment drafts sum of money
- international drafts are called bankers demand drafts 3. It is payable on demand or as a definite future time
a. Bill of exchange an unconditional signed written 4. It is payable to bearer or to order
order addressed by one person to another to pay 5. It names the drawer with reasonable certainty.
ENDORSEMENT an act wherein a person signs his name with or improve the exchange to improve the exchange system
without qualifications to a credit instrument for the purpose of transferring e.g. ATM card, debit card
it to another.
Types:
1. Special endorsement specifies the name of the person to
be paid.
2. Endorsement in blank indicates no name or endorsee
3. Restricted endorsement- confines the endorsement to a
specific purpose
4. Conditional endorsement- requires payment of the check
under specific conditions
PRESENTMENT- an act where holder of credit instrument hand them to
the banks or drawers for payments or acceptance.
-made at the place and time indicated in the credit instrument.

Week 8 - 9
Philippine Financial System
Financial System a network of various institutions which generate,
circulate and control money and credit
- Provides intermediation between the suppliers and users of
credit
- The idle funds of some people who have excess money are
made available for profitable projects or production that may
result to more employment and income
Elements:
1. Financial claims are the money and the rights to receive
money under specific circumstances
Categories:
a. Debts financial obligations which are to be paid
b. Equities claims of ownership like shares of
stocks
2. Financial institutions are private or government organization
whose assets consist primarily of claims or income primarily
derived from dealing in and/or performing services in
connection with claims.
E.g. banks, finance companies
3. Financial Markets institutions which expedite transactions in
financial claims
e.g. Philippine Stock Exchange
4. Government agencies The Central bank supervises and
regulates the banking institutions and other financial
institutions
5. Laws and Policies are legislated by Congress and
implemented the Central Bank of the Philippines
Functions of Financial Institutions
General Function: to facilitate the transfer of funds from the savers to the
users.
Specific Functions:
1. Investigation and credit analysis
- Loan applications are properly evaluated to ensure the
efficient use of credit and to protect the savings of individuals
as well as to minimize the risk of non payment of loans
2. Matching the supply and demand for funds
- They bring together the lenders and borrowers by providing
conveniently located offices
3. Provisions for liquidity Structure of the Philippine Financial System
- through the brokerage functions of the financial institution 1. Central Bank of the Philippines
which accept savings from individuals who in return, acquire 2. Banking Institutions
claims against the assets of the financial institutions Private banking institutions
4. Provides payments system a. Commercial banking institutions
- checks and credit cards are being used for convenience and - Ordinary commercial banks
safety - Expanded commercial banking/universal banking
- Central Bank is responsible for the operation of the payment b. Thrift Banks
system - Savings and mortgages banks
- monetary specialists have envisioned a cashless society to - Private development banks
- Stock savings and loan association Usual Conditionalities whenever a member country applies for loan from
c. Rural Bank the WB-IMF:
Government banking institutions a. Adoption of floating rate system
d. Land Bank of the Philippines b. Devaluation of the peso
e. Development Bank of the Philippine c. Import liberalization
f. Philippine Amanah Bank d. Export promotion
3. Non Bank Financial Institutions e. Encouragement of foreign investment
a. Private non bank financial institutions f. Raising of specific tax on oil products
1. Investment companies g. Removal of price control over essential goods for domestic
2. Financing companies use
3. Securities dealers/brokers h. Limiting of growth of money supply and domestic credit
4. Pawnshops i. Reduction or elimination of consumption subsidies like rice
5. Trust Companies/departments subsidy
6. Insurance companies j. Limiting of budget deficit of the national government
7. Credit cooperatives
b. Government non bank financial institutions
1. Government Service Insurance System
2. Social Security System
Multinational Banks operate in our country through their branches or
equity investments in both financial and non financial institutions
e.g. Maybank Malaysia
Deutsche Bank Germany
Citibank and Bank of America US
Standard Chartered Bank and Hong Kong
Shanghai Banking Corporation (HSBC) Great Britain

Week 11
Role of World Bank International Monetary Fund and Asian
Development in the Philippine Financial System
- United States is the biggest stockholder of all the three
international financial institutions
- The president of the World Bank is always an American
- The managing director of International Monetary Fund is
always European who is acceptable to the Americans
- The president of the Asian Development Bank is always a
Japanese
- United States has a strong influence in all three institutions
because of its large voting power
- World Bank and IMF were created in 1945 and occupy the
same headquarters at Washington D.C
- Both hold their annual meetings together
- Objectives of International Monetary Fund
a. To assist in the reconstruction of Western Europe
which has been devastated by World War II
b. To finance the development programs/projects of
the developing countries.
Objective of World Bank
a. To ensure an international monetary system that
will promote the international free trade free trade
dominated by the US and other industrialized
nations
- Objective of ADB which is based in Manila
a. To help promote the economic and social
development of its member countries especially
the less developed ones.
The bank has 15 non regional member countries which are Week 12
highly developed countries like the United States, France, Banks are entities duty authorized by the Monetary Board of the Central
Canada, West Germany among others. Bank that may engage in the lending of funds obtained from the public
Very rigid requirements have been imposed on borrowing through the receipt of deposits of any kind
member countries with very low credit ratings like the Attributes/Characteristics:
Philippine 1. It must be authorized by the monetary board of the Central
e.g. for the approval of loans a country should implement Bank
political, fiscal and monetary reforms 2. It must engage in the lending of funds
They decide the specific type of project they want to finance 3. It must obtain the funds from the public through the receipt of
deposits of any kind
4. It must regularly conduct such operations
Principal Functions:
a. Deposit
b. Loan
Classification:
1. Commercial Bank
a. Universal Bank/expanded commercial bank
b. Ordinary commercial bank
2. Thrift Banks
a. Savings and mortgages banks
b. Private development banks
c. Stock savings and loan association
3. Rural Banks
4. Government Specialized Banks
Deposit is constituted from the moment of a person receives a thing
belonging to another with the obligation of safety keeping it and of return
the same.
Deposit Substitutes an alternative form of obtaining funds from the
public other than deposits through the issuance, endorsement or
acceptance of debt instruments for the borrowers own account, for the
purpose of relending or purchasing of receivables and other obligations
e.g. promissory notes, repurchase agreements
Deposit Insurance handled by Philippine Deposit Insurance
Corporation
- Amount insured Php 500,000.00
Members:
- The Governor of the Central Bank
- 2 Citizens of the Philippines appointed by the
President
Loan a sum of money lent at interest
Classification:
1. Secured and unsecured
2. According to maturities
a. Demand
b. Time
1. Short - term
2. Medium/intermediate
term
3. Long term
Quasi Banking Functions mean borrowing funds for the borrowers
own account through the issuance, endorsement or acceptance of debt
instrument of any kind other than deposits or through the issuance of
participation, certificates of assignment or similar instruments for the
purpose of relending or purchasing of receivables and other obligations
Regulation the issuance of rules of conduct or the establishment of
modes or standards of operation for uniform application to all institutions
or functions covered.
Supervision includes not only the issuance of rules but also the
overseeing to ascertain the regulations are complied with.
Universal Banking an expanded commercial banking
- A mixture of combination or merges of two business entities
distinct, separate and oppose from one another
Offshore Banking the conduct of banking transactions in foreign
currency involving the receipt of funds from external sources and the General Monetary or Credit Controls:
utilization of such funds as provides in the Decree. 1. Open market operations
Central Bank a body corporate entrusted with the responsibility of 2. Discount rates
administering the monetary, banking and credit system of the country 3. Reserve requirement to control money supply
- Mother of all banks Functions:
Objectives: 1. As fiscal agent of the government
1. To maintain internal and external monetary stability in the 2. As caretaker of banks reserves
Philippines 3. As manager of international reserve of the country (consisting
2. To foster monetary, credit and exchange conditions conducive of gold and foreign exchange)
to a balanced and sustainable growth of the economy 4. As issuer of notes
5. As regulator or controller of credit
Features:
1. Except in isolated cases, the central bank is said not to be 7. Keeps reserves
directly dealing with any particular individual or individuals or 8. Clears checks
the public at large 9. Prints checks
2. Although the Central Bank may realize profits from its 10. Prints government securities
operation, it is definitely organized or created not for the 11. Grants loans and advances
purpose of profit making or profit seeking venture 12. Buys and sells government securities
3. As a body corporate owned by the government, it is expected 13. Collects revenues for the government
to fulfill its role as an agency of the government in
implementing public policy
4. Exercises supervision and regulation over monetary credit
and banking system of the country
5. Serves as the linkage or the connecting link between the
banking system of one country and that of another or the rest
of the world
Central Banks inaugurated last Jan. 3, 1949
- Has over 3000 employees
- Has more than a billion dollar international reserve as against
$420million in Jan 1949
- Adopted trade controls in 1950s
- Adopted credit controls in 1960s
- Unrestricted exchange rate or floating peso in 1970s
- restructuring of the banking system in 1980s like amending
banking laws to give way to the so called Universal
Banking
Role of the Central Bank
- To ensure a strong monetary foundation and adequate
resources inputs to the development process
Factors:
1. Bank Capital build up (increase capitalization of banking
institution)
2. Regional dispersal of credit and financial institutions
(availability of funds must not be limited or concentrated in
Metro Manila)
3. Rationalization of interest rate structure (upgrading of interest
on deposit)
4. Credit allocation to agro industrial development (such as
move will speed up the countrys industrialization process)
5. Careful international debt management ( using prompt
payments or otherwise of our maturity international
obligations)
Monetary Board the policy making body of the Central Bank
Members:
1. Governor
2. A cabinet member (Dept. Finance)
3. 5 members from the private sector appointed by the
president
Powers:
1. Prepare and issue rules and regulations for the effective
discharge of the responsibilities and exercise of the powers
vested in
2. Direct management, operation and administration of the
Central Bank and prepare the necessary rules and
regulations for the purpose Week 13
3. Appoint, fix the remuneration and other emoluments and Investment refers to an asset or property right acquired for profit motive
decide on the removal of Central Bank personnel except the Investor a person who makes investment and earn profit in return.
governor Speculator a person who expect big profits
4. Authorize such expenditures of the Central Bank in the Gamblers individuals who speculate on the basis of tips, rumors or
interest of its effective administration and operation engage in situations which they do not understand
Services of the Central Bank: Factors affecting the profitability of investments:
1. Supervises and regulates operations of banking institutions 1. Inflation rate
2. Regulates operations of non bank financial intermediaries 2. Taxes
3. Regulates foreign exchange 3. Technology
4. Regulates Credit 4. Tastes and preferences
5. Issues money 5. Peace and order
6. Mints coins and prints paper money 6. Attitudes
7. Interest rates
Types of risk of investment
1. Business risk due to competitive, change in demand, error
in management, inflation and change in technology
2. Market risk fluctuations in market prices, income and
preferences
3. Inflation risk a situation in which there is a general increase
in the level of prices
Causes:
a. Shortage of supply
b. Excessive money supply
c. High cost of production
d. Desire of capitalists for more profit
4. Social risk brought about by government laws and policies
Classes of Investments:
1. Savings deposits
2. Time deposits
3. Life insurance policies
4. Bonds
5. Money Market placement
Money Market refers to the buy and sell of short term funds
through a financial intermediary.
6. Houses, apartments and building ownership
7. Land ownership
8. Business ownership
9. Education and training
10. Foreign exchange Investment
11. Precious tangibles
e.g. gold and silver coins, jewelry, old paintings, rare books,
antiques
Planning Personal Investment
Suggestions:
1. Life Insurance
2. Readily availability funds
3. Investment for personal needs
e.g. house and lot provide personal satisfaction to the owner
Features of Good Investments:
1. Safety of the value of investment affected by inflation
2. Saleable instruments
3. Stability of income
e.g. interest from bank deposits and bonds rentals of
apartments and buildings
4. Taxes
if tax rate is high, it discourages investment our government
provides tax incentives to cooperatives and cottage industries
in order to promote their growth
Financial Markets a market whenever buyers and sellers agree to
exchange regardless of their location and how they transact their mutual
interests.
Types of financial transactions:
a. Loan transactions require face to face negotiations
between borrowers and lenders
b. Investment transaction involves the sale of financial on
an impersonal basis to any buyer through dealers or brokers
Classification on the basis of maturity:
a. Capital Market refers to the buying and selling of long
term financial instrument like bonds and stocks
b. Money Market is concerned with the buying and selling of
short term financial instruments such as Treasury bills,
bankers acceptance and commercial paper.