FINANCIAL STRUCTURE

DEFINITION:

Framework of various types of financing employed by a firm to acquire and support

resources necessary for its operations. Commonly, it comprises of stockholders' (shareholders')
investments (equity capital), long-term loans (loan capital), short-term loans (such as overdraft),
and short-term liabilities (such as trade credit) as reflected on the right-hand side of the firm's
balance sheet. Capital structure, in comparison, does not include short-term liabilities.

Makeup of the right-hand side of a company's Balance Sheet which includes all the ways
its assets are financed, such as trade accounts payable and short-term borrowings as well as long-
term debt and ownership equity. Financial structure is distinguished from Capital Structure
which includes only long-term debt and equity. A company's financial structure is influenced by
a number of factors, including the growth rate and stability of its sales, its competitive situation
(i.e., the stability of its profits), its asset structure, and the attitudes of its management and its
lenders. It is the basic frame of reference for analyses concerned with financial leveraging
decision.

FINANCIAL SYSTEM:

India has a financial system that is regulated by independent regulators in the sectors of
banking, competition, insurance, capital markets, and different services sectors. In finance, the
financial system is the system that allows the transfer of money between savers and borrowers. It
comprises a set of complex and closely interconnected financial institutions, services, markets,
instruments,practices,andtransactions.
Structure of Financial System
Financial structure refers to the mix of financial institutions, instruments and markets that
channel savings and other funds to businesses and other borrowers. In a bank-based system,
banks play the major role in channeling funds to businesses. In a market-based system, capital
markets - including the stock and bond markets - are the more important source of funds.
Components of Financial System
The financial system consists four components. These are financial markets, financial services,
financial instruments and financial institutions.

 Financial Institution: - Financial Institution can be classified as banking and non

banking institutions. Banking Institutions are creators and purveyors of credit while non
banking financial institutions are purveyors of credit.
 Financial Markets: - Financial Markets can be classified as primary and secondary
markets. A Primary Market deals with new issues and secondary markets is meant for
trading in existing securities.
 Financial Instruments: - A financial instrument is a claim against an institution or a
person for payment at a future date of a sum of money in the form of dividend.
 Financial Services: - Financial services are those , which help with borrowing and
funding, buying and selling securities, lending and investing, making and enabling
payments and settlements and managing risk exposures in financial markets.

Financial Structure of TERENA:

TERENA is an organisation created in order to "promote and participate in the

development of a high-quality international information and telecommunications infrastructure
for the benefit of research and education" (TERENA Statutes). Due to the nature of the
organisation, TERENA is heavily dependent on membership fees for covering its expenses,
which include personnel costs, office accommodation, equipment and other run-time expenses. It
also depends on the active participation of the membership to develop proposals and organise
technical activities.

While guaranteeing the financial stability of the organisation, it is desirable to provide the
opportunity to members to select projects that they are interested in and that may appear not to
be of interest to the whole of the membership; that way they can optimise their financial
investment in TERENA.

At the same time care should be taken to safeguard and promote the interests of countries where
research and education networking is not at the forefront of world-wide developments; their
needs and those of TERENA are to promote technological awareness and the advancement of
research and education networks.

The financial structure of TERENA could therefore be based on the following model:

1. All members pay a fixed membership fee (in different categories, in the case of national
members related to the gross national product of the country concerned). In principle the
total of these membership fees should cover the core costs of the association, including
the Secretariat expenses and the costs of the technical activities that are considered to be
of common interest to the members. These membership fees will need to be adjusted
periodically to take account of inflation factors.
2. In addition, members pay for technical projects or other activities organised by TERENA
that they are interested in. Such activities can be proposed by the TERENA Executive
Committee to the membership, or conversely TERENA members can propose such
(technical) activities to the TEC.

This financial model can have a number of advantages in addition to optimising members'
investment in TERENA. For example, it may bring more interest from industry as more topics
are covered.