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Chapter 1 Role of Finance
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Chapter 1 Role of Finance

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  • 1. Chapter 1 Role of Finance © 2000 John Wiley & Sons, Inc.
  • 2. Chapter Outcomes
    • Define what is meant by finance
    • Explain why finance should be studied
    • Describe the basic requirements in a modern financial system
    • Identify the major financial intermediaries and their roles in the U.S. financial system
  • 3. Chapter Outcomes (Continued)
    • Identify and explain measures of wealth that are traded in U.S. financial markets
    • Describe the financial functions performed in the U.S. financial system
    • Identify and discuss some career opportunities in finance
  • 4. What Is Finance?
    • FINANCE:
    • Study of how individuals, institutions,and businesses acquire, spend, and manage financial resources
  • 5. Types Of Finance
    • MACRO FINANCE:
    • Study of how financial intermediaries, financial markets, and policy makers interact and operate within financial systems
    • BUSINESS FINANCE:
    • Study of financial planning, asset management, and fund raising by businesses and financial institutions
  • 6. Types Of Finance (Continued)
    • PERSONAL FINANCE:
    • Study of how individuals prepare for financial emergencies, protect against premature death and property losses, and accumulate wealth
  • 7. Why Study Finance?
    • As an individual you should want to make informed economic decisions
    • Knowledge of finance should help you better manage existing financial resources and accumulate wealth over time
    • To be successful in the business world, it is important to have an understanding of business finance
  • 8. Basic Requirements Of A Financial System
    • Monetary system
    • Savings-investment process
    • Financial markets
  • 9. Five Types Of Financial Intermediaries
    • Depository institutions
    • Contractual savings organizations
    • Investment organizations
    • Finance/credit organizations
    • Securities markets-related organizations
  • 10. Basic Types Of Securities Markets
    • PRIMARY SECURITIES MARKET: market involved in creating and issuing new securities, mortgages, and other claims to wealth
    • SECONDARY SECURITIES MARKET: market for transferring existing securities between investors
  • 11. Measures Of Wealth
    • MONEY: anything that is generally accepted as payment
    • REAL ASSETS: land, buildings, machinery, inventory, and precious metals
    • FINANCIAL ASSETS: claims against the income or assets of others
  • 12. Types Of Financial Markets
    • MONEY MARKETS: where debt instruments of one year or less are traded
    • CAPITAL MARKETS: markets for longer-term debt securities and corporate stocks
  • 13. Types Of Money Market Instruments
    • U.S. Treasury bills
    • Negotiable certificates of deposit
    • Bankers’ acceptances
    • Federal funds
    • Commercial paper
    • Repurchase agreements
  • 14. Types Of Capital Market Securities And Instruments
    • U.S. Treasury notes and bonds
    • U.S. Government agency bonds
    • State and local government bonds
    • Corporate bonds
    • Corporate stocks
    • Real estate mortgages
  • 15. Financial Functions In The U.S. Financial System
    • Creating money
    • Transferring money
    • Accumulating savings
    • Lending/investing savings
    • Marketing financial assets
    • Transferring financial assets
  • 16. Career Opportunity Areas In Finance
    • Business financial management
    • Financial intermediaries
    • Securities markets field
    • Government or non-for-profit organizations
    • Personal financial planning
  • 17. Plan Of Study
    • PART 1: THE FINANCIAL SYSTEM covers the environment of finance including the role of financial institutions in it
    • PART 2: INVESTMENTS covers financial markets and the process of investing in financial securities such as stocks and bonds
  • 18. Plan of Study (Continued)
    • PART 3: BUSINESS FINANCE covers financial management and how the business sector interacts with the financial system