Introduction to Financial Markets and Institutions

Extract

[...] Introduction to Financial Markets and Institutions Finance: art and science of managing wealth. Financial management: activities that create or preserve the economic value of the assets of an individual, small business or corporation Finances areas: Corporate finance: financial activities supporting acquisition, investment, repayment of capital. Investment: buying and selling financial assets. Financial Institutions and Markets: organization, functioning and activities of financial intermediaries. International finance: multinational dealings, country risk, exchange rate conversions. Working capital management: day-to-day operating needs of a company short-term financing activities Financial management: Capital budgeting: planning, evaluating, managing long-term operating projects. [...]

[...] Reduce transaction costs. Globalization of financial markets: Deregulation/liberalization of financial markets Technological advances Increased instutionalization Liquidity: how easy it is to convert asset to cash Saving: income not spent Financial asset: non physical asset that derives value because of a contractual claim Net borrower: spend more than they earn Net lender: spend less than they earn Direct finance: net lenders lend their funds directly to net borrowers Indirect finance: net borrowers borrow from financial intermediaries Security: financial asset bought/sold in a financial market Stock: financial security that represent partial ownership of a firm Dividends: payment from a corporation to its shareholders after keeping some of its profits. [...]

[...] Debt/Bond market allow governments and corporations to borrow to finance activities. Interest rate cost of borrowing and reward for saving. Money market: securities are short term with high liquidity Investors: place for warehousing surplus funds Borrowers: low-cost source of temporary funds Bond: debt investment in which an investor loans money to an entity which borrows the funds. Stock markets: trade of common stock Primary market: new shares of stock Secondary market: shares continue to trade after the initial transaction (New York Stock Exchange NYSE, American Stock Exchange AMEX) Currency: generally accepted form of money (coins, paper notes). [...]