What is Financial System? A “financial system” is a system that allows the exchange of funds between lenders, investors, and borrowers. Financial systems operate at national and global levels. They consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors. Money, credit, and finance
What are Financial Instruments? Financial instruments are financial contracts of different natures made between institutional units. These comprise the full range of financial claims and liabilities between institutional units, including contingent liabilities like guarantees, commitments, etc. A financial asset is defined as any contract from which a financial claim may derive for one party and
What is Financial Innovation? Financial innovation can be defined as the act of creating and then popularising new financial instruments as well as new financial technologies, institutions, and markets. It includes institutional, product, and process innovation. Financial Innovation is something that is seen by an individual as a new way by which finance can generate
Scope of Financial Services The scope of financial services is very wide. This is because it covers a wide range of services. Financial services can be broadly classified into two: Fund Based Services Equipment Leasing or Lease Financing A lease is an agreement under which a firm acquires a right to make use of a
Importance of Financial Services The successful functioning of any financial system depends upon the range of financial services offered by financial service organizations. The importance of financial services may be understood from the following points: Economic Growth The financial service industry mobilizes the savings of the people and channels them into productive investments by providing
Characteristics of Financial Services Generally, financial services have several important characteristics that distinguish them from physical products. The characteristics of financial services are as follows: Intangibility Financial services are intangible in nature, unlike physical commodities. The institutions providing these services should build a good brand image in the public sphere and create confidence amongst their
What is Financial Services? Financial Services may simply be defined as services offered by different financial intermediaries such as Banks, Financial Institutions, Insurance Companies, Brokerage Firms, Consumer Finance companies, etc. In simple words, financial services are basically the services provided by the financial market to individuals and organizations. It is concerned with the design and
Factors Determining Working Capital Requirements The working capital requirement of a concern depends upon a large number of factors, Here are the factors determining working capital requirements as follows: Nature or Character of Business Public utility undertakings like Electricity, Water supply, and Railways need very limited working capital because they offer cash sales only and
The cost of capital is a critical concept in finance and investment. It refers to the cost that a company incurs to obtain capital from different sources such as debt, equity, or retained earnings. In other words, it’s the rate of return that a company must provide to its investors to attract capital. Significance of
What is Leasing? Leasing is a contractual arrangement whereby one party (lessor) grants the right to another party (called lessee) to use an asset in return for periodical payments. The owner (lessor) keeps the title of ownership of an asset and the user (lessee) uses it on payment of lease rentals over a specified period
