07.19.

2014

FINANCIAL MANAGEMENT

FINANCIAL – pertains to those engage in dealing with money and credit

MARKET – people who are engage in money and credit and place where the money and credit transact

SECURITIES – these are investment instruments are bonds, stocks and both sold in a financial market

INSTITUTIONS – are the place where the transactions are being held

FINANCIAL MARKET – it is a market in which people and entities trade their financial securities (stocks and bonds)
and both commodities (precious metals and agricultural and other items of value) at a lower costs at a price that
reflects demand and supply

- Also attracts funds from investors and channel to corporations which allows these corporations to finance
their operations and achieve growth

LENDERS
FINANCIAL INSTITUTIONS
FINANCIAL MARKET – Interban, FX, Stock Market and Money Market (overnight borrowing of money (bank
to bank only)
BORROWERS

TYPES OF FINANCIAL MARKET

1. CAPITAL MARKET – stock market and bond market. It mobilizes long term debt and equity to finance for
investment in long term assets.
 The PRIMARY MARKET – these are newly form securities or issues are bought and sold during the
initial public offering.
 The SECONDARY MARKET – it allows now the investors to buy and sell the existing securities
 KEY PLAYERS in CAPITAL MARKET – stock brokers, issuing house, mutual fund managers, SEC,
Central Security Clearing and Settlement, Registrars, Accountants and Solicitors, Investing Public,
Stocks Exclusive
2. COMMODITY MARKET – GENERAL MARKET – many commodities are traded. SPECIALIZED MARKET – only
one commodity is being traded
3. MONEY MARKET – it facilitates trading in short term debt instruments to meet short term needs of large
users of funds such as government treasury bills and company bills
 KEY PLAYERS - traders
4. DERIVATIVE MARKET – these provide instruments for the management of financial risk
5. FUTURE AND FORWARD MARKET – they are forward contracts for trading products at some future dates
6. INSURANCE – Risk Transfer
7. FOREIGN EXCHANGE MARKET

ROLE OF FINANCIAL MARKET

1. Mobilization of financial resources for long-term investment through FI (financial intermediaries)
2. Promotes economic growth
 3. Channels for saving to a more productive uses by collecting and analyzing information about investment
opportunities.

FINANCIAL SECURITIES – essentially a contract is assigned a value and traded.

FINANCIAL INSTITUTIONS – Private of Public organizations which acts as a channel between savers and borrowers.

2TYPES of FINANCIAL INSTITUTIONS

1. Depository Banks – you pay interest on deposits from the savers/ investors
2. Non-depository Insurance Companies and Mutual Funds – Collect funds by selling securities / policies to
the public and provide rates in the form periodic benefits and profit payments