Finance and Financial Services Overview

Study Notes

Finance and Financial Services

Finance encompasses the science and art of managing money.
Financial services encompass various services supplied by institutions like banks, insurance companies, and investment firms.
Managerial finance focuses on how businesses manage their financial resources.
Financial managers handle a business or organization's financial health.
Commercial banks offer services to individuals and businesses, including checking and savings accounts, loans, and credit cards.
Investment banks assist businesses and governments in raising capital by issuing stocks and bonds, facilitating mergers and acquisitions, and providing financial transaction advice.
Credit unions are member-owned, non-profit institutions that compete with banks, offering similar services.

Financial Markets

Primary market involves the initial sale of new shares or bonds.
Secondary market allows investors to buy and sell existing securities.
Money market is focused on trading short-term, low-risk investments, like Treasury bills and commercial paper.
Capital market is where long-term securities, such as stocks and bonds, are traded.

Securities

Bond represents a loan from an investor to a company or government.
Commercial paper refers to short-term, unsecured debt issued by large companies to finance short-term liabilities.
Preferred stock gives investors a priority claim on the company’s earnings and assets compared to common stock.
Common stock signifies ownership in a company.

Finance

Finance is the science and art of managing money, encompassing personal, business, and public finances.
Financial services are provided by institutions like banks, insurance companies, and investment firms to individuals and businesses.

Managerial Finance

Managerial finance focuses on how businesses manage their finances to achieve their goals.
A financial manager is responsible for ensuring a company's financial health.

Financial Institutions

Commercial banks offer a wide array of services such as checking and savings accounts, loans, credit cards, and mortgages.
Investment banks support companies and governments in raising capital by issuing stocks and bonds.
Credit unions are member-owned cooperatives offering similar services to banks, focusing on a community or specific group.

Financial Markets

The primary market is where financial instruments like stocks and bonds are initially sold to investors.
The secondary market facilitates the trading of existing securities between investors.

Money & Capital Markets

The money market trades short-term financial instruments with low risk, such as Treasury bills and commercial paper.
The capital market deals with the buying and selling of long-term securities like stocks and bonds.

Financial Instruments

Bonds represent loans made to companies or governments by investors.
Commercial paper is short-term, unsecured debt issued by corporations to finance short-term liabilities.
Preferred stock offers shareholders priority over common stock holders in receiving dividends and assets in case of liquidation.
Common stock grants ownership in a company, with voting rights and potential for capital appreciation.

Description

Explore the key concepts of finance and financial services in this quiz. Understand the roles of financial managers, the different types of banks, and the dynamics of financial markets including primary and secondary markets. Test your knowledge on how businesses manage their financial resources effectively.