This website uses cookies to ensure you have the best experience. Learn more

Financial Institutions And Financial Markets Essay

1111 words - 5 pages

Financial Institutions and Financial Markets

FIN/370

Financial Institutions and Financial Markets

The state of the economy in the United States is very crucial to businesses and society. The success of the economy is reliant on financial institutions and financial markets. “The market for the creation and exchange of financial assets such as money, stocks, and bonds, plays a central role in organizing and coordinating our economy” (Colander, 2013, p. 643). Financial institutions are essential in providing funding for activities that take place within the financial markets. This paper will describe the roles of financial institutions and financial markets in our economy, as ...view middle of the document...

Making money this way allow financial institutions to be able to loan additional funds to the others creating a circle of lending and earning money.
The Roles of Financial Markets
“Financial markets exist to manage the flow of funds from investors to borrowers as well as from one investor to another” (Cornett, Adair, & Nofsinger, 2016, p. 131). Financial markets provide the exchange of stocks, derivatives, and commodities. These exchanges provide capital for individuals, companies, and even the government to finance projects and other activities. Financial markets play a major role in the moving and creation of capital within an economy. The economy could experience difficulties without a financial market which would impact the necessary funding of business activities which provides jobs and wages for the members of society.
The most well-known financial market is the stock market. When a buyer purchases stock, this means they become part owner of a company as they now own a claim on the company. “Derivatives are a security formalizing an agreement between two parties to exchange a standard quantity of an asset at a predetermined price on a specified date in the future” (Cornett, Adair, & Nofsinger, 2016, p. 137). Commodities are goods that are exchanged for other goods. Financial markets are responsible for funding by channeling funds between suppliers and demanders of funds. Financial markets are categorized into two markets, primary and secondary markets.
Primary and Secondary Markets
Primary markets are made up of investments banks that manage transactions for businesses and government agencies. “Primary markets provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds” (Cornett, Adair, & Nofsinger, 2016, p. 130). The sale of securities begins in the primary market. The sales of securities provide companies or the government the ability to collect funds for activities such as projects and expansions. Investment bankers work as the go-between for the companies selling and those that are buying, typically large investors. Companies selling bonds or stocks for the first time do so on the primary market. Typically this behavior happens through public offerings which are an IPO. Once companies issue their assets, the assets are the sold in secondary markets.
Secondary markets are where the securities sold through the primary market, are traded. Examples of such secondary markets are the New York Stock Exchange and NASDAQ. “The secondary market delivers liquidity to shareholders through a controlled environment that enforces specified transaction parameters” (“Secondmarket”, 2016). Brokers purchase securities on behalf of the...

Other assignments on Financial Institutions And Financial Markets

Accounting Processes' And Financial Statements Essay

1362 words - 6 pages Accounting Processes’ and Financial Statements The purpose of this paper is to provide a foundation of knowledge for accounting and financial bookkeeping. To accomplish this, I will focus on two areas. First, I will provide some general definitions for common accounting processes and ideas; namely, generally accepted accounting principles, double entry accounting, historical cost

Financial Analysis Proctor And Gamble

1813 words - 8 pages and development • High visibility due to marketing and advertising • Strong financial position WEAKNESS • Competition from domestic and international brands • Slowdown in global economic condition • No private label products for customers • Majority of health and beauty products are for women OPPORTUNITIES • New markets in third world countries • More Green Eco friendly products • Additional

Managing Financial Resource And Development

2713 words - 11 pages The purpose and nature of the budgeting process A budget is a financial document used to project future income and expenses. For manufacturing, budget show the predict finance about the number and the estimate cost of all items which related in production such as: overhead cost, material, labor, revenue, expenses, assets, liabilities, etc. From these predictions, it can help company picturing out the future cost and profit. The

Saving, Investment, And The Financial System

1223 words - 5 pages productivity and the living standard. Financial institutions allow for the economy's scarce resources to move from savers to borrowers. Savers only provide their money to financial institutions for one reason and that is to gain interest. Interest allows savers to ultimately make money by storing their money in financial markets. Financial markets allow savers to be able to directly supply funds to borrowers. The two main financial markets are the stock

Ustralian And New Zealand Schemes During Global Financial Crisis

303 words - 2 pages 1.0 Introduction The global financial crisis of 2007 transmitted shock waves worldwide urging international governments to prepare defensive measures to combat this economic turmoil. Hence, on 12th October 2008, the Australian and New Zealand governments introduced analogous schemes to guarantee liabilities issued by a wide range of financial institutions whereby prior to this phenomenon, neither nation had deposit insurance arrangements in

The Global Financial Crisis: Assessing Vulnerability For Women And Children, Identifying Policy Responses

1801 words - 8 pages lending, and/or drop in remittances. Second round impacts are part of households coping strategies and result in women joining the work force to help poor families weather drops in family income. While some women in developing countries may be ‘protected’ from the short term impacts of the financial crisis because they do not have access to global markets (and are solely involved in subsistence or home production), other women who dominate

Pricing And Financial Management Of Contracts

982 words - 4 pages Hugo Corporation - Maximize Price Competition 1. You are concerned about the clarity of the purchase description in light of the lack of competition on the current purchase. As a buyer, what can you do? a. You can elect to rewrite the purchase description in more detail and have it reviewed in house for feedback. b. Or if circumstances permit, invite interested offerors who reply to the initial solicitation, to an oral presentation of the

The Following Lyrics Discuss Whether The Government Stimulus Efforts In Response To The Recent Financial Crisis Worked And Also Argue Points About Government Policy During The Great Depression And The...

387 words - 2 pages * List three significant events that have happened in your life (these should be things that have changed you in one way or another).  * Going back to school * Separation of me and my husband * The loss of a good friend The first event I listed is important to me is because going back to school has had a big impact on me. It made me realize that having an education is very important to me it will provide a stable life for me and

Financial Regulatory Reform

1721 words - 7 pages is to “establish comprehensive supervision of financial markets.” The purpose of the objective is that the major financial markets must be strong enough to withstand both system wide crisis and the failure of one or more large institutions. To achieve the goal enhanced regulations must be imposed on the securitization markets. The requirements will include market transparency, stronger regulation of credit ranking agencies, and, that issuers and

Auditing

958 words - 4 pages necessary. It may impose more costs upon the financial/banking industry, but there is always a cost associated with regulation. These large financial institutions cannot continue to operate without any accountability or system of checks and balances. Since investors are risk-adverse by nature, you would think that they would take comfort in the fact that the financial markets are answering to a higher authority. Taxpayers should also hope for more

Finance 370 Week 2

1077 words - 5 pages Fin 370 Week 2 Individual Assignment Chap. 14 Questions 14-1, 14-3, 14-4 Chap. 15 Questions 15-12A, 15-13A Question 14-1 What are financial markets? What function do they perform? How would an economy be worse off without them? Financial markets report price for each good; they are institutions and procedures that facilitate transactions in all types of financial claims (securities). Each financial market performs a different

Similar Documents

Financial Markets Essay

2443 words - 10 pages to the Case-Schiller Home Price Index from 2006 peak to mid-2009. Securities with risk exposure to housing market plummeted, causing great damage to financial institutions across the globe. Stock markets all over the world suffered large drops in 2008 and early 2009 as questions arose regarding the solvency of major financial institutions and liquidity in the credit markets dried up. Worldwide growth slowed with the tightened credit markets

Financial Crisis And Emerging Markets Essay

1730 words - 7 pages Table of Contents Introduction …………………………………………………………………….....1 Analysis of the Financial Crisis and Emerging Markets………………………….1 Conclusions………………………………………………………………………..8 List of Tables and Figures…………………………………………………….......9 References……………………………………………………………………......10 Introduction In the last years we all heard about financial crisis, economic crisis or even strong

Financial Terms And Roles Essay

487 words - 2 pages markets are another component of the financial marketplace. Stock – Stock prices can react to information, good decisions will result in higher stock prices, and bad decisions will result in lower stock prices. Bond – If the debt has a maturity longer than 10 years it is called a bond and is sold in the capital market. Bonds are generally described using fairly exotic terminology. Capital – Decision-making process of planning and managing a

Ratio And Financial Statement Analysis

2513 words - 11 pages FINANCIAL DECISION MAKING FOR MANAGERS: Ratio And Financial Statement Analysis NAME: JAMES B. TAYLOR DATE: 04/09/2015 Table of Content I. Executive Summary.....................................................................................3 II. Introduction..................................................................................................4 III. Financial statements tools and techniques