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    Unit # 1 Introduction To Financial Institutions

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    Zaheer Ahmed Swati
    This document provides an introduction to financial markets and institutions. It defines finance and explains why its study is important. It outlines the key areas of financial management, investment, and financial markets. It describes different types of financial markets including money markets, capital markets, equity markets, and debt markets. It also distinguishes between primary and secondary markets. Finally, it defines financial institutions and explains how they act as intermediaries between savers and borrowers in both direct and indirect finance.

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    Download as PDF, TXT or read online from Scribd

    Unit # 1 Introduction To Financial Institutions

    Uploaded by

    Zaheer Ahmed Swati
    973 views4 pages
    This document provides an introduction to financial markets and institutions. It defines finance and explains why its study is important. It outlines the key areas of financial management, investment, and financial markets. It describes different types of financial markets including money markets, capital markets, equity markets, and debt markets. It also distinguishes between primary and secondary markets. Finally, it defines financial institutions and explains how they act as intermediaries between savers and borrowers in both direct and indirect finance.

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    Intro to FI

    Original Title

    2. Unit # 1 Introduction to Financial Institutions

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    This document provides an introduction to financial markets and institutions. It defines finance and explains why its study is important. It outlines the key areas of financial management, investment, and financial markets. It describes different types of financial markets including money markets, capital markets, equity markets, and debt markets. It also distinguishes between primary and secondary markets. Finally, it defines financial institutions and explains how they act as intermediaries between savers and borrowers in both direct and indirect finance.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    973 views4 pages

    Unit # 1 Introduction To Financial Institutions

    Uploaded by

    Zaheer Ahmed Swati
    This document provides an introduction to financial markets and institutions. It defines finance and explains why its study is important. It outlines the key areas of financial management, investment, and financial markets. It describes different types of financial markets including money markets, capital markets, equity markets, and debt markets. It also distinguishes between primary and secondary markets. Finally, it defines financial institutions and explains how they act as intermediaries between savers and borrowers in both direct and indirect finance.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    At a glance
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    The key takeaways are that finance involves financial management, investment and financial markets & institutions. It also discusses why studying finance is important.

    The different types of financial markets discussed are equity market, debt market, money market and capital market.

    The main functions of financial institutions are to channel finance from savers to borrowers, act as intermediaries between savers and borrowers, accept deposits and provide loans.

    Financial Institution

    Work Book Foundation Level 1 Introduction to Financial Market & Institutions



    Unit 1

    INTRODUCTION TO FINANCIAL MARKETS & INSTITUTION

    1.1 Why Study Finance?
    Finance may be defined as the art and science of managing money
    Finance is the study of how individuals, institutions, government and businesses acquire, spend and manage money
    and other financial resources
    Finance is the science of managing financial resources in an optimal pattern i.e. the best use of available resources
    Finance consists of three interrelated areas:






    1.1.1 Financial Management
    Financial Management involves the arrangement of unarranged financial resources of the firms
    Financial management is concerned with the duties of the financial managers in the business firm
    Financial managers actively manage the financial affairs of any type of business, namely, financial and non-
    financial, private and public, large and small, profit-seeking and not-for-profit
    They performsuch variety of tasks as budgeting, financial forecasting, cash management, credit administration,
    investment analysis, funds management and so on

    1.1.2 Investment
    Investment focuses on the decisions of both individual and institutional investors as they choose assets for their
    Investment Portfolios
    Use money to make or gain more money
    Commitment to fund assets
    Purchase of Capital Goods



    1.1.3.1 Financial Markets
    Financial market is a market for creation and exchange of financial assets
    A financial market is a market in which people and entities can trade financial securities
    These markets channel funds from savers to investors, thereby promoting economic efficiency
    Market activity affects personal wealth, the behavior of business firms, and economy as a whole
    There are different ways of classifying financial market
    Finance
    Financial
    Management

    Investment
    Financial
    Market &
    Institutions
    Financial Institution


    Work Book Foundation Level 2 Introduction to Financial Market & Institutions

    Unit 1





    o Equity market is a market for internal or floating claimlike common share and preference shares
    o The stock market is the market where stocks representing ownership in a company, are traded
    o Debt market is a market for external or fixed claims like bonds
    o Debt markets, or bond markets, allow governments, corporations, and individuals to borrow to finance
    activities
    o In this market, borrowers issue a security, called a bond, that promises the timely payment of interest and
    principal over some specific time horizon





    Money market is market for short termfinancial claims of debts (within one year)
    Capital market is market for long term financial claims of debts and equity (beyond one year)





    A market that involves the issue of new securities by the borrower in return for cash frominvestors
    (Capital formation occurs) is called primary market
    Secondary Market deals of buying and selling of existing securities. Funds flow frombuyer to seller.
    Seller becomes the new owner of the security (Capital formation is not occur)






    A Cash or Spot Market is one where delivery occurs immediately
    Forward and Future Market is one where delivery occurs at a pre-determined time in future

    Another type of financial market is foreign exchange market where international currencies trade and exchange
    rates are set
    Well functioning financial markets, such as the bond market, stock market, and foreign exchange market, are
    key factors in producing high economic growth.

    Nature of Claim
    Equity Market Debt Market
    Maturity of Claim
    Money Market Capital Market
    Issuance of Claim
    Primary Market Secondary Market
    Timing of Claim
    Cash or Spot Market Forward or Future Market
    Financial Institution


    Work Book Foundation Level 3 Introduction to Financial Market & Institutions

    Unit 1

    1.1.3.2 Financial Institutions
    Financial institutions are what make financial markets work
    Channeling finance fromsaving surplus to saving deficit unit of economy
    Financial institution acts as an agent that provides financial services for its clients. Financial institutions
    generally fall under financial regulation froma government authority
    They sit between savers and borrowers and so are known as financial intermediaries
    Concerned with financial instrument
    Accept deposit and Advance loan, difference is Spread
















    1.2. Financial Environment
    Financial environment contains financial intermediaries, financial markets and borrowers

    1.3. Flows of Fund through Financial System
    FINANCIAL INSTITUTIONS OF PAKISTAN
    P. Off.
    N. Sav.
    DFIs
    Inv. B
    Lea. C
    ModarabaCo.
    HBFC
    Mutual Fund
    Discount Houses
    Non LifeInsurance
    LifeInsurance
    Reinsurance
    StateOwned
    Domestic Private

    Foreign
    Specialized
    Microfinance
    Islamic
    Venture Capital
    Banks
    NBFIs CDNS
    Insurance
    Financial Institution


    Work Book Foundation Level 4 Introduction to Financial Market & Institutions

    Unit 1

    1.3.1 Direct Finance
    Borrowers borrow directly fromlenders in financial markets by selling financial instruments which are claims
    on the borrowers future income or assets

    1.3.2 Indirect Finance
    Borrowers borrow indirectly fromlenders via financial intermediaries by issuing financial instruments which
    are claims on the borrowers future income or assets

    1.4 Organizational Structure

    1.5 Real Assets and Financial Assets
    Real assets are tangible things owned by persons and businesses
    Residential structures and property
    Major appliances and automobiles
    Machinery and equipment

    Financial assets are what one individual has lent to another
    Consumer credit / Insurance Policy
    Loans / Mortgages
    Shares / Bonds

    1.6 Separation of Ownership and Control

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