Institutions Flashcards
What are the seven financial institutions?
Banks
Investment banks
Finance companies
Superannuation funds
Unit trusts
Life insurance companies
Australian Securities Exchange
How do banks influence financial management?
They hold people’s savings and use them to provide loans to businesses
How do investment banks influence financial management?
They provide financial services and advice. They also purchase shares and provide loans.
What kinds of services do investment banks provide?
- Helping to issue new shares
- Arranging overseas finance
- Advice on mergers and acquisitions
How do finance companies influence financial management?
Provide factoring
Provide leasing
Provide short-term loans
How do life insurance companies influence financial management?
They purchase shares and bonds (debentures, unsecured notes)
Where do life insurance companies get their funds from?
People pay premiums every month (which the company invests), and then has to pay a lump sum if someone dies to their family
How do superannuation funds influence financial management?
They purchase shares (in fact they own 50% of shares on the ASX) and bonds (debentures, unsecured notes).
They also often have ethical requirements, so businesses may need to improve CSR in order to attract superannuation funds to buy their shares.
Where do superannuation funds get their funds from?
Businesses pay 10.5% of employee’s wages into an account with a superannuation fund, that is invested until the person retires
How do unit trusts influence financial management?
They purchase shares and bonds (debentures, unsecured notes)
Where do unit trusts get their funds from?
People deposit their savings with a unit trust to be invested on their behalf
What is the ASX?
The main market for shares and derivatives in Australia
How does the ASX influence financial management?
It provides a market where businesses can sell their shares to raise equity
What are key features of the ASX?
It provides a place where shares can be bought and sold quickly and accurately;
It sets rules for public companies to release information to the public to ensure fairness;
It provides a computerised system for transferring ownership of securities.
