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The economic development of any country depend upon the existence of well organized financial system. It is the financial system which supplies the necessary financial inputs for production of goods and services which in turn promotes the well being and standard of living. The responsibility of financial system is to mobilize the saving in form of money and invest them to productive
ventures.
Financial
system functions as an intermediary and facilitate the flow of fund from surplus area to deficit area.
A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities
FUNDS
SUPPLIERS OF FUND
Individual Business
FUNDS
DEMANDERS OF FUND
Individual Business Govt
FUNDS
FINANCIAL MARKET
Money market Capital market
FUNDS
Provision of liquidity Mobilization of saving Liquidity function Payment function Risk function Policy function
FINANCIAL MARKET
FINANCIAL INSTITUTIONS
FINANCIAL INSTRUMENTS
FINANCIAL SERVICES
FINANCIAL MARKET
Are centres or arrangement that provide facilities for buying and selling of financial claim and services. FIs,Govt., Individuals trade in financial products in these markets either directly or through dealers on organized exchange or off-exchange.
MONEY MARKET
CAPITAL MARKET
FOREX MARKET
Primary Markets
When companies need financial resources for its expansion, they borrow money from investors through issue of securities. Securities issued a)Preference Shares b)Equity Shares
Secondary Markets
The place where such securities are traded by these investors is known as the secondary market. Securities like Preference Shares and Debentures cannot be traded in the secondary market.
c)Debentures
Equity shares is issued by the under writers and merchant bankers on behalf of the company. Equity shares are tradable through a private broker or a brokerage house.
MONEY MARKET
Money market deals in short term financial claim generally. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions
CAPITAL MARKET
The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year
FOREX MARKET
Foreign exchange refers to the process of converting the home currencies into foreign currencies & vice-versa. Where foreign exchange transaction takes place is called forex market. There are no of brokers engaged in buying & selling of foreign currencies.
FINANCIAL INSTITUTIONS
BANKING
FINANCIAL INSTRUMENTS
In financial transaction there is creation or transfer of
financial assets/instruments. These financial assets instruments should have certain characteristics i.e. marketability, liquidity, convertibility, transferability and transaction costs. Financial asset can be of various types:-
FINANCIAL INSTRUMENTS/ASSET
3. Certificate of Deposit
4. Commercial Papers
Economic Development
Income(Consumption + Invest.)
Income(Consumption + Invest.)
Surplus or Saving
Deficit or ve saving
Financial System
Creation of credit