Q1. What is Financial Institution?
Q2. What are the Different types of Financial Institutions?
Q3. What are the functions of financial institutions?
Q4. Explain the different types of services provided by a bank or Financial Institution
Q5. Why Financial Intermediary is necessary? Or, Importance of Financial Intermediary
Q4. Explain the different types of services provided by a bank or Financial Institution
Q5. Why Financial Intermediary is necessary? Or, Importance of Financial Intermediary
Q1. What is Financial Institution?
Financial institutions are institutions that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. FIs include commercial banks, savings and loan associations, investment companies, insurance companies and pension fund. Every modern economy has FIs, which perform key financial functions for individuals, households, corporations, small and new business, and government.
Q2. What are the Different types of Financial Institutions?
Different types of FIs are:
1. Depository Institutions: These are the FIs, those accepts deposits. These deposits represent the liabilities of the deposit-accepting institution. Their income is derived from two sources: a) the income generated from the loans they make and the securities they purchase, and b) fee income. The various types of depository institutions are:
a. Commercial Banks: It provides numerous services in financial system. The services can classify into i) individual banking, ii) institutional banking, and iii) global banking.
b. Credit unions: They are commonly known as cooperative societies. The purpose of credit union is to service their members’ saving and borrowing needs.
2. Insurance companies: it provides insurance policies, which are legally binding contracts for which the policy holder pays insurance premium and the company promise to pay to policy holder on the occurrence of future events.
3. Mutual Funds: These are the portfolios of securities, mainly stocks, bonds, and money market instruments. The investment manager actively manages the portfolio i.e. buy and sell securities.
4. Pension funds: It is a fund that is established for eventual payment of retirement benefits financed by contribution by the employer. A pension is a form of employee remuneration for which the employee is not taxed until funds are withdrawn.
Q3. What are the functions of financial institutions?
The main functions of financial institutions of this nature are as follows:
1. Accepting Deposits
2. Providing Commercial Loans
3. Providing Real Estate Loans
4. Providing Mortgage Loans
5. Issuing Share Certificates
Finance companies provide loans, business inventory financing and indirect consumer loans. These companies get their funds by issuing bonds and other obligations.
The functions of financial institutions, such as stock exchanges, commodity markets, futures, currency, and options exchanges are very important for the economy. These institutions are responsible for maintaining liquidity in the market and managing price change risks. As part of their various services, these institutions provide investment opportunities and help businesses to generate funds for various purposes.
The functions of financial institutions like investment banks are also vital and related to the investment sector. These companies are involved in a number of financial activities, such as underwriting securities, selling securities to investors, providing brokerage services, and fund raising advice.
Q4. Explain the different types of services provided by a bank or Financial Institution
Banks provide a number of important financial services to businesses:
1. Loans provide businesses with expansion capital. A bank will lend a business a given sum for a specified period of time.
2. Business account services enable a business to transact its day-to-day affairs, for example paying wages into employee's accounts, paying bills, and taking up periods of credit.
3. Overdraft facilities enable a business to have a short period of credit to smooth out cash flow difficulties.
4. Cheques, credit cards and bank drafts enable a business to smoothly manage its day-to-day payments and transactions.
5. The bank will also provide systematic and ongoing advice, particularly to small businesses and start-ups.
6. Banks also provide long-term finance in the form of mortgages for the purchase of land and property.
7. Merchant banks and issuing houses also support companies in the management of share issues.
Q5. Why Financial Intermediary is necessary? Or, Importance of Financial Intermediary
Financial intermediaries appear to have a key role in the restructuring and liquidation of firms in distress. In particular, there is rich evidence that financial intermediaries play an active role in the reallocation of displaced capital. Financial intermediaries can perform this role by aggregating the information on firms collected in the credit market. The function of intermediaries as matchmakers between savers and firms in the credit market can support their function as internal markets for assets.
Moreover, the financial intermediaries also assume importance in today's world as function for clearing and settling payments, function for provision of a mechanism for pooling of funds and subdivision of shares, it allows provision of ways to transfer economic resources, it allows provision of ways to manage uncertainty and control risk, provides price information, and so on.
Financial institutions are institutions that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. FIs include commercial banks, savings and loan associations, investment companies, insurance companies and pension fund. Every modern economy has FIs, which perform key financial functions for individuals, households, corporations, small and new business, and government.
Q2. What are the Different types of Financial Institutions?
Different types of FIs are:
1. Depository Institutions: These are the FIs, those accepts deposits. These deposits represent the liabilities of the deposit-accepting institution. Their income is derived from two sources: a) the income generated from the loans they make and the securities they purchase, and b) fee income. The various types of depository institutions are:
a. Commercial Banks: It provides numerous services in financial system. The services can classify into i) individual banking, ii) institutional banking, and iii) global banking.
b. Credit unions: They are commonly known as cooperative societies. The purpose of credit union is to service their members’ saving and borrowing needs.
2. Insurance companies: it provides insurance policies, which are legally binding contracts for which the policy holder pays insurance premium and the company promise to pay to policy holder on the occurrence of future events.
3. Mutual Funds: These are the portfolios of securities, mainly stocks, bonds, and money market instruments. The investment manager actively manages the portfolio i.e. buy and sell securities.
4. Pension funds: It is a fund that is established for eventual payment of retirement benefits financed by contribution by the employer. A pension is a form of employee remuneration for which the employee is not taxed until funds are withdrawn.
Q3. What are the functions of financial institutions?
The main functions of financial institutions of this nature are as follows:
1. Accepting Deposits
2. Providing Commercial Loans
3. Providing Real Estate Loans
4. Providing Mortgage Loans
5. Issuing Share Certificates
Finance companies provide loans, business inventory financing and indirect consumer loans. These companies get their funds by issuing bonds and other obligations.
The functions of financial institutions, such as stock exchanges, commodity markets, futures, currency, and options exchanges are very important for the economy. These institutions are responsible for maintaining liquidity in the market and managing price change risks. As part of their various services, these institutions provide investment opportunities and help businesses to generate funds for various purposes.
The functions of financial institutions like investment banks are also vital and related to the investment sector. These companies are involved in a number of financial activities, such as underwriting securities, selling securities to investors, providing brokerage services, and fund raising advice.
Q4. Explain the different types of services provided by a bank or Financial Institution
Banks provide a number of important financial services to businesses:
1. Loans provide businesses with expansion capital. A bank will lend a business a given sum for a specified period of time.
2. Business account services enable a business to transact its day-to-day affairs, for example paying wages into employee's accounts, paying bills, and taking up periods of credit.
3. Overdraft facilities enable a business to have a short period of credit to smooth out cash flow difficulties.
4. Cheques, credit cards and bank drafts enable a business to smoothly manage its day-to-day payments and transactions.
5. The bank will also provide systematic and ongoing advice, particularly to small businesses and start-ups.
6. Banks also provide long-term finance in the form of mortgages for the purchase of land and property.
7. Merchant banks and issuing houses also support companies in the management of share issues.
Q5. Why Financial Intermediary is necessary? Or, Importance of Financial Intermediary
Financial intermediaries appear to have a key role in the restructuring and liquidation of firms in distress. In particular, there is rich evidence that financial intermediaries play an active role in the reallocation of displaced capital. Financial intermediaries can perform this role by aggregating the information on firms collected in the credit market. The function of intermediaries as matchmakers between savers and firms in the credit market can support their function as internal markets for assets.
Moreover, the financial intermediaries also assume importance in today's world as function for clearing and settling payments, function for provision of a mechanism for pooling of funds and subdivision of shares, it allows provision of ways to transfer economic resources, it allows provision of ways to manage uncertainty and control risk, provides price information, and so on.
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