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Summary Chapter 2 B&F
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Chapter 2 of B&F (1st year Ibm)
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Chapter 2: Financial markets &institutions
1. The importance of financial markets and institutions
Two main sources of financing Where to get
- financial markets our money?
- financial institutions
Financing decisions
- equity VS debt
- short term (~ sale of financial assets) VS long term (~raising capital)
Examples of financing decisions by Apple Computer p.34
, 2. The flow of savings to corporations
p.37
Channeling
funds from households, firms and governments with a budget surplus (by spending less than
Financial intermediaries
their income) to those with a shortage of funds (because they spend more)
Structure of financial markets
Overview (more detailed explanation than the book)
2 ways to obtain funds for firms / individuals
1) Insurance of debt instruments (= fixed-income
Primary & securities/fixed-income market)
Debt & Equity
Secondary Contractual agreement (mortgage, bond,
Markets …)
Markets Borrower pays the holder of the
instrument fixed (interest and/or capital)
amounts
Money &
Exchange & Repayment schedule & maturity date
Capital
OTC Markets
Markets
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