A very Brief Presentation, covering almost all aspects of "Financial Markets"

3. GROUP MEMBERS

4. AGENDA

5. FINANCIAL MARKET

6. FUNCTIONS OF FINANCIAL
MARKETS

7. FLOW OF FUNDS

8. FLOW OF FUNDS
1. Direct Transfer
• Business sells its assets directly to investors

9. CONT’D
2. Indirect Transfer through Investment Bankers
 Investment banker acts as middleman and facilitates
issuance of securities by reselling the securities to savers

10. CONT’D
3. Indirect Transfer through financial intermediary
 Bank or mutual fund obtains funds from savers and uses the
money to lend or purchase securities

11. FINANCIAL ASSETS

12. CLASSIFICATION OF FINANCIAL
ASSETS
Equity
Debt
hybrid

13. EQUITY
 Represents the portion of ownership in the assets of company.
 Equity is the residual(at last) interest (dividend) in the assets of the
entity after deducting all the liabilities.
 Examples: Ordinary Share Capital, Retained Earnings

14. DEBT
 When a firm raises money for working capital or capital
expenditures by selling bonds, bills, or notes to individual
and/or institutional investors.
 For example : Bonds

15. DEBT CONT.…
oTypes of Bonds
1. Corporate Bonds
2. Municipal Bonds
3. Treasury Bonds

16. HYBRID
 An investment product that combines the attributes of an
equity security with a debt security.
 Examples of hybrid instruments are preferred stocks.
 Also called Hybrid Financing Instruments

17. HYBRID CONT.…
oPreferred Shares have two types;
1) Redeemable Preferred Shares
• No voting rights, have maturity (just like bonds),fix
dividends
2) Irredeemable Preferred Shares
• Have voting rights, no maturity, fixed dividends

18. CLASSIFICATION OF FINANCIAL
MARKETS
Maturity
Claim
Issue
Structure

19. MATURITY
Money Market:
 Financial assets with maturity one or less then one year.
Capital Market:
 Financial assets with maturity more then one year.

20. CLAIM
Debt Market
 Financial assets with fixed claim
Equity Market
 Financial assets having residual claim

21. ISSUE
Primary Market
 Financial markets in which financial assets first time offer for
sale.
Secondary Market
 Financial markets in which share are offer for sale ones they
are issued.

22. STRUCTURE
Exchange Market:
 Financial markets that operates from a central location.
Over The Counter Market:
 Financial markets which does not operates from a specific
central locations, transactions are made via
telephones, computers etc.

23. FINANCIAL INTERMEDIARIES

24. TYPES OF FINANCIAL
INTERMEDIARIES
Depositary Institutions:
 Accepts deposits from individuals and institution and make loans.
Contractual Savings Institutions:
 Acquire funds at periodic intervals on a contractual basis.
Investment Intermediaries:
 Raise funds by issuing shares, bonds and others financial
instruments.

25. DEPOSITARY INSTITUTIONS
Commercial Banks:
 Raise funds by issuing checkable deposits, saving deposits and
time deposits then make commercial, consumer and mortgage
loans.
Savings And Loan Associations
 Obtain funds from deposits and make mortgage loans for
residential housings.
Credit Unions:
 Created for and by its members who are depositors, borrowers,
& shareholders.

26. CONTRACTUAL SAVINGS INSTITUTIONS
Life Insurance Companies:
 Share financial risk of untimely death of policyholder against
premiums and invest funds in bonds, shares and mortgage.
Fire And Casualty Insurance Companies:
 Insure against loss by fire, theft and accidents, risk of loss
funds, liquid investment.
Pension And Government Retirement Funds:
 Funds acquired by contribution of employers and
employees, invest in stocks & bonds.

27. INVESTMENT INTERMEDIARIES
Finance Companies:
 Raise funds by selling commercial papers, shares, bonds and lend
funds to consumers.
Mutual Funds:
 Acquire funds from selling shares and use to purchase diversified
portfolios of stocks and bonds.
Money Market Mutual Funds:
 Acquire funds by issuing shares and invest in money market.
Investment Banks:
 Helps corporation to issue securities, advices, underwrites.