Module 2 Flashcards
SAVERS
Households
-Individuals
-Corporations/Companies -Government Agencies
Financial Intermediaries
-Banks
-Insurance Companies
-Stock Exchange
-Stock brokerage firms
-Mutual Funds
Users of Funds (Borrowers/Investors)
-Households
-Individuals
-Corporations/Companies -Government Agencies
links the savers and the users of funds.
financial system
are companies in the financial sector that provide a broad range of business and services including banking, insurance, and investment management.
Financial institutions
which use the deposited funds to provide commercial loans to firms and personal loans to individuals,
Commercial Banks
- Individuals purchase insurance (life, property and casualty, and health) protection with insurance premiums.
Insurance Companies
examples of financial institutions/Intermediaries
Commercial banks
Insurance banks
Mutual funds
Pension Funds
owned by investment companies that enable small investors to enjoy the benefits of investing in a diversified portfolio of securities purchased on their behalf by professional investment managers.
Mutual funds
Financial institutions that receive payments from employees and invest the proceeds on their behalf.
Pension Funds
-is a real or a virtual document representing a legal agreement involving some sort of monetary value.
Financial Instruments
is any asset that is:
• Cash
Financial Asset
is any liability that is a contractual obligation:
Financial Liability
is any contract that evidences a residual interest in the assets of an entity after deducting all liabilities.
Equity Instrument
generally have fixed returns due to fixed interest rates.
Debt Instruments
These bonds and bills have usually low interest rates and have very low risk of default since the government assures that these has been paid.
Treasury bonds and treasury bills
Financial instruments
Financial asset
Financial liability
Equity Instrument
Debt Instruments
issued by publicly listed companies.
Corporate Bonds
generally have varied returns based on the performance of the issuing company.
Equity Instruments
has priority over a common stock in terms of claims over the assets of a company.
Preferred Stock
on the other hand are the real owners of the company.
Holders of Common Stock
- refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place.
Financial Market
. To raise money, users of funds will go to a primary market to issue new securities (either debt or equity) through a public offering or a private placement.
Primary vs. Secondary Markets
sale of new securities to the public referred to as a public offering and the first offering of stock named an
initial public offering.
sale of new securities to one investor or a group of investors (institutional investors) is referred to as a
private placement.
The sale of previously owned securities takes place in
secondary markets.
are a venue wherein securities with short-term maturities (1 year or less) are sold.
Money markets
are bonds (long-term debt) and both common stock and preferred stock (equity, or ownership).
capital market securities
