The Building Blocks of a

Financial System

Presented By: Group 2

Bondoc, John Kenneth

Pulido, Atreo

Sy, Jacqueline

Avis, Adrian

Table of Contents

Title Page………………………………………………….1

Financial Management………………………………….4

The Building Blocks of Financial Management……5-6

Financial Market…………………………………………7

Purpose of a Financial Market………………………..8

Types of Financial Market……………………………9-11

Table of Contents

Financial Intermediaries…………………….12-18

Reference……………………………………….19

Financial Management

Is a concerned with the acquisition, financing, an management of assets with some overall goal in mind

The Building Blocks of Financial Management

Accounting Records

Every organization must keep an accurate record of financial transaction that takes place to show how funds have been used.

Financial Planning

Linked to the organization’s strategic and operational plans, the budget is the cornerstone of any financial management system.

The Building Blocks of Financial Management

Financial Monitoring

The organization has a set of budget and has kept and reconciled its accounting records in a clear and timely manner.

Internal Controls

A system of controls, checks and balances – collectively referred to as internal controls.

Financial Market

All Institution and procedures for bringing buyers and sellers of financial instruments together.

Purpose of Financial Market

Allocate savings efficiently to ultimate users.

Efficiency entails bringing the ultimate investor in real assets and the ultimate saver together at the least possible cost and inconvenience.

Real Assets for example are Houses, buildings, equipment, inventories, and durable goods

Types of Financial Market

Financial Market

Money Market

Primary Markets

Secondary Markets

Capital Market

Primary Markets

Secondary Markets

Money and Capital Markets

Money Market

Concerned with buying and selling of short-term (less than one year original maturity) government and corporate debt securities.

Includes government securities originally issued with maturities of more than one year but that now have a year or less until maturity.

Capital Market

deals with relatively long-term (more than one year original maturity) debt and equity instruments (e.g., bonds and stocks)

Primary and Secondary Markets

Primary Market

A market where new securities are bought and sold for the first time (a “new issues” market)

Secondary Market

A market for existing (used) securities rather than new issues

FINANCIAL INTERMEDIARIES

Financial institutions that accept money from savers and use those funds to make loans and other financial investments in their own name.

Process of savers depositing funds with financial intermediaries and letting the intermediaries do the lending to the ultimate investors.

FINANCIAL INTERMEDIARIES

Deposit Institutions - Primarily involved with individuals acquiring their savings and making home and consumer loans

Ex.: Commercial banks, savings and loan associations, mutual savings banks, credit unions

Insurance Companies - Property and Casualty companies –insure against fires, thefts, car accidents, similar unpleasantness.

because insurance companies pay taxes at full corporate income tax rate, they invest heavily in municipal bonds, which offer tax-exempt interest income. To a lesser extent, they invest in corporate stocks and bonds.

FINANCIAL INTERMEDIARIES

Insurance Companies - Life insurance companies –insure against loss of life.

invest in long-term securities; income of institution is partially exempt from taxes owing to the buildup of reserves over time

Others - Pension Funds and other retirement funds - invest in longer-term securities, corporate stocks and bonds; monies paid into a fund are not taxed, when benefits are taken out in the retirement, taxes are paid by the recipient.

FINANCIAL INTERMEDIARIES

Others - Mutual Investment Fund – invest heavily in corporate stocks and bonds; individual obtains a diversified portfolio managed by professionals

Others - Finance Companies – make consumer instalment loans, personal loans, and secured loans to business enterprises; raise capital through stock issues as well as through borrowings .

FINANCIAL INTERMEDIARIES

Financial Brokers – Investment Banker - Financial institution that underwrites (purchases at a fixed price on a fixed date) new securities for resale.

“Buys stocks and bonds at wholesale and sells them at retail.”

Financial Brokers – Mortgage Banker - A financial institution that originates (buys) mortgages primarily for resale.

FINANCIAL INTERMEDIARIES

Secondary Market - Purchases and sales of existing financial assets occur in the secondary market

Secondary Market – Organized Exchange - Provide a means by which buy and sell orders can be efficiently matched

Ex. New York Stock Exchange, American Stock Exchange, Philippine Stock Exchange

FINANCIAL INTERMEDIARIES

Secondary Market – Over-the Counter Market - Serves as part of the secondary market for stocks and bonds not listed on an exchange as well as for certain listed securities

Ex. NASDAQ, Brokers and dealers who stand ready to buy and sell securities at quoted prices

Reference

http://www.businessdictionary.com/definition/financial-system.html#ixzz2BvDRu9xU

www.adrasouthpacific.org

Finance.mapsofworld.com/finance-market

Fundamentals of financial management. Van horne, J. and Wachowicz, john m. 2010 13th ed.

Thank You!