-The abstract science

of number, quantity, and space.

-The action or process

of investing money for profit or material
result.
✓ involves cash outlay from which future benefits are expected.
✓ the acquisition of machinery for production and for purchase of
merchandise for future selling to the public.
✓ application of developed technology and the deployment of
national resources improve and increase the productive capacity
of a country .
✓ patenting or licensing of a new technology e.g., an accounting
software, or the funding for the construction of irrigation canals
to Increase farm output.
✓ physical assets that have an intrinsic worth due to their substance
and properties. Real assets include precious metals, commodities,
real estate, land, equipment, and natural resources.
✓ physical things or structures that can generate future cash flow to the
investor by producing goods and services that will make sales and
profit for him.
✓ A financial asset is a liquid asset that gets its value from a
contractual right or ownership claim. Cash, stocks, bonds,
mutual funds, and bank deposits are all are examples of
financial assets. Unlike land, property, commodities, or
other tangible physical assets, financial assets do not
necessarily have inherent physical worth or even a physical
form. Rather, their value reflects factors of supply and
demand in the marketplace in which they trade, as well as
the degree of risk they carry.
❑ Cash
❑ Equity instruments of an entity—for example a share
certificate
❑ A contractual right to receive a financial asset from another
entity—known as a receivable
❑ The contractual right to exchange financial assets or
liabilities with another entity under favorable conditions
❑ A contract that will settle in an entity's own equity
instruments
✓ In addition to stocks and receivables, the above
definition comprises financial derivatives,
bonds, money market or other account
holdings, and equity stakes. Many of these
financial assets do not have a set monetary
value until they are converted into cash,
especially in the case of stocks where their
value and price fluctuate.
•Stocks are financial assets with no set ending or expiration date. An
investor buying stocks becomes part-owner of a company and shares in
its profits and losses. Stocks may be held indefinitely or sold to other
investors.
•Bonds are one way that companies or governments finance short-term
projects. The bondholder is the lender, and the bonds state how much
money is owed, the interest rate being paid, and the bond's maturity
date.
•A certificate of deposit (CD) allows an investor to deposit an amount of
money at a bank for a specified period with a guaranteed interest rate.
A CD pays monthly interest and can typically be held between three
months to five years depending on the contract.
✓ Derivatives are financial contracts, set between two or more parties, that
derive their value from an underlying asset, group of assets, or benchmark.
✓ A derivative can trade on an exchange or over-the-counter.
✓ Prices for derivatives derive from fluctuations in the underlying asset.
✓ Derivatives are usually leveraged instruments, which increases their
potential risks and rewards.
✓ Common derivatives include futures contracts, forwards, options, and
swaps.
✓ common stocks of PLDT, San Miguel, Asia Brewery etc.
✓ Derivatives generally give the holder the privilege to purchase a certain
number of shares within a specific future date at a specific price. They do
not have a value of their own, but rather derive their value from the price
of their underlying stocks.
✓The traditional principal activity of banks is lending.
✓Commercial banks are major providers of funds to
businesses, individuals and government units, national
and local.
✓Banks develop new types of loan is for them, e.g. loans
that often have maturity repayment arrangement and
other characteristics much different from the
traditional short-term, self-liquidating loans.
✓ type of investments and their maturities, level of asset quality,
and liquidity must be decided upon as part of a broad set of policies
and strategies.
✓ overseeing and handling of a financial institution's cash flow.
✓ The fund manager ensures that the maturity schedules of the
deposits coincide with the demand for loans. To do this, the
manager looks at both the liabilities and the assets that influence
the bank's ability to issue credit.
activity of banks
✓ The claim is an asset to the saver/ tender and a liability to the borrower/user
of fund activity of banks.
✓ When you invest in loans by means of assignment agreements (so-called
“claims”), you are buying rights to receive loan repayments from the borrower
based on an assignment agreement, in which the terms of your investment are
described in detail.
✓ A financial claim is created on the firm, the buyers of the bond will account it
as an asset in their balance sheet, while the proceeds of the bond sale will be
created on the issuing firm's balance sheet as additional liabilities. In this case,
no real investment occurs unless and until the proceeds of the bond sale is used
by the issuing firm to execute its planned project.
✓ can be kept and hoarded.
✓ savers can transfer their money balances to those who need them for business or
consumption in exchange for claims.
✓ savers can transfer their money balances to institutions that specialize in
transferring funds to deficit units
✓ Surplus units those who transfer their savings to other individuals or entities in
exchange for claims
✓ Deficit units those who receive the funds
✓ In exchange, the financial institutions receive financial claims from the deficit
units, having delivered claims to the surplus units. Because of this role, the said
institutions act as intermediaries between the surplus unit and the deficit units.
✓ Financial intermediaries. institutions act as intermediaries between the surplus
unit and the deficit units
✓ Financial intermediaries provide a middle ground between two parties in any
financial transaction. A prime example would be a bank, which serves many
different roles: it acts as a middleman between a borrower and a lender, and pools
together funds for investment. However, there are many types of financial
intermediaries.

✓ Financial intermediation refers to the practice of linking an investor and borrower.

Acting as a third party, an intermediary aims to meet the financial needs of both
parties to mutual satisfaction. Looking at the wider picture, intermediaries benefit
consumers and businesses alike by offering services on a larger economy of scale
than would otherwise be possible. A financial intermediary serves two
fundamental purposes creating funds and managing the payment systems.
✓ Typically, the intermediary accepts a deposit from the investor or lender, passing
this on to the borrower at a high interest rate to make up their own margin. At the
same time, they make the market more efficient by conducting these activities on
a large scale, lowering the overall cost of doing business.

▪ How does the intermediation process work?

✓ When banks act as financial intermediaries, they can accept deposits. However,
other types of intermediaries don’t involve a deposit. Instead, the intermediation
process involves the movement of funds from one party to another. The
intermediary acts as a factor in this case, managing the cash flow.
✓ Examples of this type of intermediary could include a financial advisor, who
connects investors with businesses, or a pension fund that collects money from
members and distributes payments to pensioners.
Commercial Bank
✓ Banks, more precisely termed as retail or the commercial banks, fall under the
category known as the banking financial institutions. A bank is actually a financial
intermediary, they act as a middleman between the suppliers of funds or the depositors
and the borrowers. The major task of the bank is to accept the deposits and use the
funds which will later on to offer loans to the customers. Yet another duty of a bank is
to act as a payment agent, that is done by offering a payment. A bank makes
money by investing the deposits in the financial securities and assets, but they
mostly make money by lending the funds further to its customers. The primary reasons
that the public deposits the money in banks are for convenience, safety and to
gain interest income.