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A snapshot of the summary - 1 intro
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1 Why Study Money CH1
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What is financial flow?It is the financial
transfer from economic players withexcess funds to players with financialneeds -
What is fund transfer?Capital that doesn't have productive use is now invested in useful projects
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When do financial transfers occur?When there is creation of financial assets other than money.
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What is a security?It is a tradable investment instrument such as stocks, bonds, financial derivatives,...
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What happens when the firm creates value through making profit?The equity (value of the stocks) will increase
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What happens when there are losses?The value of the equity decreases.
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2 An overview of the financial system CH2
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2.1 Function of financial markets
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What is the function of financial markets?
Channeling funds from agents that havesurplus funds (lender-saver) to those that have shortage funds (borrower- spender). -
What is the difference between indirect finance and direct finance?With direct finance the borrowers borrow funds directly from the lenders. With indirect finance a financial intermediary borrows funds from lender-savers and uses these funds to make loans to borrower-spenders.
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what is so important about financial markets?It is critical for producing an efficient allocation of capital, it directly improves the well-being of consumers.
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2.2 Structure of financial market
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What are the two ways to
fund in afinancial market?-issuance of a debt instrument: a bond or a mortgage
- Raising funds trough theissuance ofequities (common stocks)
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