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Firms and the Financial Markets - Coggle Diagram
Firms and the Financial Markets
The Basic Structure of the US Financial Markets
Players in the Financial Markets
Savers
Financial Institutions
Borrowers
The Financial Marketplace - Financial Institutions
Financial institutions
are the financial intermediaries as they help bring together those who have money and those who need money.
Money Market vs Capital Market
Money market
refers to debt instruments with maturity of one year or less while the
capital market
refers to long-term debt and equity instruments.
Commercial banks
collect the savings of individuals as well as businesses and then lend those pooled savings to other individuals or businesses.
Financial services
corporation are in the lending or financing business, but they are not commercial banks.
Insurance companies
sell insurance to individuals or businesses to protect their investments.
Mutual Funds and Exchange Traded Funds
Mutual funds
are profesionally managed according to a stated investment objective.
An
exchange-traded fund (ETF)
is similar to a mutual fund except that the ownership shares in the ETF can be bought and sold on the stock exchange.
The Financial Marketplace - Securities Market
A
security
is a negotiable instrument that represents a financial claim and can take the form of ownership. 5 types of security;
Stocks, Bonds, Derivatives, ETFs, Mutual Fund
Primary vs Secondary Market
A primary marke
t is a market in which securities are bought and sold for the first time.
A secondary market
is where all subsequent trading of previously issued securities takes place.
Types of Securities
Debt securities
is when firms borrow money by selling debt securities in the debt market.
Equity securities
represent ownership of the corporation. There are two major types of equity securities
Common stock
is a security that represents equity ownership in a corporation.
Preferred stock
is an equity security. However, preferred stockholders have preference with regard to
dividends
and
claim on assets
.
Stock Market
A Stock Market is a public market in which the stocks of companies is traded.