The document provides an overview of financing types, categorizing them into direct and indirect financing methods, personal, corporate, and public finance. It explains how different entities, including governments and businesses, acquire funds through various means like taxes, grants, and securities. Additionally, it describes the role of financial intermediaries in the financing process and highlights the emergence of venture capitalists as significant players in equity financing for new firms.

1. Direct and Indirect
Financing
Presenters

2. Finance Definitions
"Finance" is the study of how money is
managed and the actual process of
acquiring needed funds. Because
individuals, businesses and
government entities all need funding to
operate, the field is often separated
into three sub-categories: personal
finance, corporate finance and public
finance.

3. Public Finance
The government helps prevent market failure by
overseeing allocation of resources, distribution of
income and stabilization of the economy.
To stabilize the economy Govt gets taxes borrow
from banks it receives grants and earning
dividends from its companies also help finance the
government.
In addition, user charges from ports, airport
services and other facilities; fines resulting from
breaking laws; revenues from licenses and fees,
such as for driving; and sales of government
securities are also sources of public finance.

4. Corporate Finance
Businesses bring in financing through equity
investments and credit arrangements, and
by purchasing securities, and established
companies may sell stocks or bonds.
Businesses may purchase dividend-paying
stocks, blue-chip bonds or interest-bearing
bank deposits. Acquiring and managing debt
properly can help a company expand and
become more profitable.

5. Personal Finance
 Earning more money and spending less
money is the basis of personal finance.
Individuals may earn more money by
starting a business, taking on additional jobs
or investing. Spending less money can be
done by deciding whether what is being
purchased is truly worth the price being
paid. For example, instead of purchasing
coffee every day from a cafe, a person can
buy bags of coffee at a grocery store and
make the coffee at home for much less
money.

6. Direct Financing
Borrowing money from friends;
borrowing money directly from
investors by selling stocks or
bonds in this financing method
a company or entity didn’t pay
interest rate.

7. Indirect Finance
Borrowing money from a bank. The
bank lends out depositors money
to borrowers at a profit.
Indirect finance is where
borrowers borrow funds from the
financial market through indirect
means, such as through a
financial intermediary.

8. What is 'Financing'
Financing is the act of providing funds
for business activities, making
purchases or investing. Financial
institutions and banks are in the
business of financing as they provide
capital to businesses, consumers and
investors to help them achieve their
goals.

9. The Financial Sector: An
Overview
All economic units can be classified into one of the
following groups: households, business firms,
and governments. Each economic unit must
operate within a budget constraint imposed by its
total income for the period, and can have one of
three possible budget positions: a balanced
budget position, a surplus position, and a deficit
position. The mismatch between income and
spending for individuals and organizations
creates an opportunity to trade.

10. Direct Financing
You engage in direct financing when you
borrow money from a friend, or when you
purchase stocks or bonds directly from the
corporate issuing them. These direct
financial arrangements take place through
financial markets, markets in which lenders
(investors) lend their savings directly to
borrowers. Brokers, dealers and investment
bankers play important roles in direct
financing.

11. Indirect Financing
 Financial intermediaries purchase direct claims with
one set of characteristics from borrowers and
transform them into direct claims with a different set
of characteristics, which they sell to the lenders.
In producing financial commodities, intermediaries
perform the following asset transformation services:
(1) Denomination Divisibility
(2) Maturity Flexibility
(3) Diversification
(4) Liquidity.

12. Financial Intermediaries
is an institution or
individual that serves as a
middleman for different
parties in a financial
transaction

13. Types of Financial Intermediaries
1. Commercial Banks
2. Investment Banks
3. Insurance Companies
4. Brokerages
5. Investment Companies
6. NBFI

14. Types of Financial Intermediaries
7. Credit Unions
8. Capital Market
9. Money Market
10. Venture Capitalists

15. 10. Venture Capitalists
A new financial intermediary, venture
capitalist firms, emerged in 1970s. These
are institutional investors that provide
equity financing to young firms and play
an active role in advising their
management. These funds have been a
major source of equity capital for new
businesses, especially in technology-based
industries.