Chapter 4: Financial Environment

Financial Environment
Businesses interact continually with the
financial markets.

Financial Markets are composed of all

institutions and procedures for bringing
buyers and sellers of financial
instruments together.

The purpose of financial markets is to

efficiently allocate savings to ultimate
users.

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Financial Environment

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1. Investment Sector

•Businesses
Investment sector •Government
is also called
deficit economic •Households
unit (DEU)

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2. Saving Sector

Savings sector is also

called surplus economic
unit (SEU).
• Households
• Businesses
• Government
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3. Financial Brokers

Mortgage
Bankers

Investment
Bankers

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4. Financial Intermediaries

Commercial Savings Insurance Pension Finance Mutual

Banks Institutions Companies. Funds Companies Funds

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5. Secondary Market

Security OTC
Exchanges Market

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Financial Markets
Financial markets facilitate the movement of
funds from those who save money to those
who invest money in capital assets
Based Upon Primary Market
Issuance of
the
Securities Secondary Market
Based Upon Money Market
Maturity of
the
Securities Capital Market
Based Upon Over-The-Counter market (OTC) –
Listing of
the National Association of Securities Dealers
Securities Automated Quotations (NASDAQ)

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Financial Institutions
Financial institutions facilitate and improve the
distribution of funds, money, and capital in several
respects: Payments mechanism etc.
Types of Central Banks.
Financial
Institutions Retail and Commercial Banks.
Internet Banks.
Credit Unions.
Savings and Loan Associations.
Investment Banks and Companies.
Brokerage Firms.
Insurance Companies.

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