BUSINESS FINANCE:

INTRODUCTION
DEFINITION

 Finance describes the management, creation and study of

money, banking, credit, investments, assets and liabilities that
make up financial systems, as well as the study of those financial
instruments.
FINANCIAL RESOURCES, INVESTMENTS,
EXPENDITURES
 Financial resources: the funds of a business
 Intended to handle current operating activities that have long-term effects

 Financial investments: resources expected to provide income

 Financial expenditures: operating and capital expenditures

WHAT IS THE DIFFERENCE BETWEEN
FINANCE AND ACCOUNTING?
 At a high level, Finance is the science of planning the
distribution of a business' assets.

 Accounting is the art of the recording and

reporting financial transactions.
FINANCIAL INSTITUTION, INSTRUMENT AND
MARKET
FINANCIAL INSTITUTIONS
FINANCIAL INSTITUTION

WHAT: • An intermediary between

consumers and capital
markets

commercial banks, investment

banks, brokerage firms, insurance
WHO: companies, and asset management
funds
WHY: Supply money to the market

transfer of funds from

HOW: investors to the companies in
the form of loans, deposits, and
investments
EXAMPLES:
FINANCIAL INSTRUMENTS
 A document that has a monetary value
WHAT:
or represents a legally enforceable
(binding) agreement between two or
more parties regarding a right to
payment of money.

"any contract that gives rise to a financial asset of one

entity and a financial liability or equity instrument of
another entity."
EXAMPLES:
FINANCIAL MARKET
WHAT: • a marketplace, where creation and trading of
financial assets, such as shares, debentures,
bonds, derivatives, currencies, etc. take place.

WHO:
Buyers and Sellers of financial instruments
WHY: • important to the general health of an
economy to facilitate capital formation and
liquidity for entrepreneurs and businesses

HOW: • Face-to-face transactions at the market place

• Through internet
EXAMPLES:

Money Markets
• For very short-term Mortgage Markets
• making long-term loans for the
debts purpose of buying property.
• Bank loans, overdrafts,
treasury bills FINANCIAL
MARKETS

Capital Markets
Insurance Markets
• long-term debt, private • insurance companies are
sector stocks important players in other
and shares, and private financial markets

and public
sector bonds.
 CLASSIFICATIONS OF FINANCIAL INSTITUTIONS

DEPOSITORY NON DEPOSITORY

 Basically, BANKS  Non-depository institutions are

 a financial institution that
accepts deposits and channels
the money into lending
activities
Activity
not banks in real sense.
 They make contractual
arrangement and investment in
securities to satisfy the needs
and preferences of investors.