B: Financial System

Shahid Musthafa
Mind Map by , created over 5 years ago

Master ACCA F9: Financial Management (B: Financial Management Environment ) Mind Map on B: Financial System, created by Shahid Musthafa on 04/01/2014.

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Shahid Musthafa
Created by Shahid Musthafa over 5 years ago
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B: Financial System
1 Global
1.1 The global financial system is basically a broader regional system that encompasses all financial institutions, borrowers and lenders within the global economy.
1.2 include the International Monetary Fund, central banks, World Bank and major banks that practice overseas lending.
2 Regional
2.1 Financial Markets
2.1.1 Stock Exchanges / Capital Markets
2.1.1.1 Primary
2.1.1.2 Secondary
2.1.2 Money Markets
2.1.2.1 Primary
2.1.2.2 Secondary
2.1.2.3 Provide shortterm (< 1 year) debt financing and investment.
2.1.3 Commodities Market
2.1.3.1 Which facilitate the trading of commodities (e.g. oil, metals and agricultural produce).
2.1.4 Derivatives markets
2.1.4.1 which provide instruments for the management of financial risk, such as options and futures contracts (see later for an explanation of derivatives).
2.1.5 Foreign exchange markets
2.1.6 Insurance markets
2.2 Financial Institutions
2.2.1 Commercial Banks
2.2.2 Insurance Companies
2.2.3 Pension Funds
2.2.4 Building Societies
2.3 Financial Securities
2.3.1 Mortgages
2.3.2 Equity Shares
2.3.3 Bonds
2.3.4 Preference Shares
2.4 On a regional scale, the financial system is the system that enables lenders and borrowers to exchange funds.
3 Firm Specific Level
3.1 The firm's financial system is the set of implemented procedures that track the financial activities of the company.
4 FUNCTIONS OF FINANCIAL SYSTEM
4.1 Creates liquidity and money – e.g. banks create money through increasing their lending.
4.2 Provides a mechanism for payments – e.g. direct debits, cheque clearing system.
4.3 Provides financial services such as insurance and pensions.
4.4 Offers facilities to manage investment portfolios – e.g. to hedge risk.
4.5 Channels funds from lenders to borrowers.

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