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FINANCIAL ENVIRONMENT

2018, Financial Environment

AI-generated Abstract

The financial environment consists of three primary components: financial managers, financial markets, and investors, including creditors. Financial managers play a critical role in managing a company’s funds, aiming to maximize wealth rather than mere profits. Financial markets facilitate the flow of funds among various participants, including individual and institutional investors, while adhering to regulations set by authorities. Overall, the financial environment encompasses various institutions that influence the financing and investment activities within markets.

FINANCIAL ENVIRONMENT The financial environment has a number of factors. It includes the financial institutions, government, individuals and firms around the business. Firms use their financial markets to keep their savings as property. This is extremely important for the money markets. Financial environment of a company refers to all the financial institutions and financial market around the company that affects the working of the company as a whole. Components of Financial Environment The three key components of financial environment are financial managers, financial markets and investors (including creditors). Financial managers are responsible for deciding how to invest a company’s funds to expand its business and how to obtain funds (financing). The actions taken by financial managers to make financial decisions for their respective firms are referred to as financial management (or managerial finance).The main objective of financial management today is wealth maximization and this counters the traditional objective of profit maximization. Financial markets represent forums that facilitate the flow of funds among investors, firms, and government units and agencies. Each financial market is served by financial institutions that act as intermediaries. Some financial institutions serve as intermediaries by executing transactions between willing buyers and sellers of stock at agreed-upon prices. The capital market facilitates the sale of equity by firms to investors or between investors. Other financial markets are Money Market, Bond market, Forex market, Commodity market, Cash market, Derivatives market, Over the counter market and Real estate market. These markets act as a platform for the buyers and the sellers to interact in the financial environment. The buyers and sellers of the financial markets are known as Market participants. These participants include investors, speculators and institutional investors. There are certain regulatory authorities (both private and government) who determine some policies and rules which are applicable in a financial environment. They include, CBN, NDIC, SEC ,AMCON ,FIRS etc. Investors are individuals or financial institutions that provide funds to firms, government agencies, or individuals who need funds. Individual investors commonly provide funds to firms by purchasing their securities (stocks and debt securities). The financial institutions that provide funds are referred to as institutional investors. Some of these institutions focus on providing loans, whereas others commonly purchase securities that are issued by firms. Financial environment basically comprises of the public sector enterprises, legal authorities, fiscal authorities which are directly or indirectly impact the financial system, monetary institutions, financial institutions, and corporate organizations. All these organizations have a direct impact on the finances of the companies including private and public Therefore, in order to make the money available to those that need it and to allow those who want to invest to achieve some level of earnings, financial markets play an important role in this regard.