Financial Management

1. Functions of banks.
 Accepting Deposits: This is the core function of most banks. They offer various saving and checking
accounts to individuals and businesses, allowing them to deposit and store their money safely. The
bank earns interest on these deposits, which it uses to fund other activities.
 Lending Money: Banks act as intermediaries between depositors (savers) and borrowers (investors).
They use the deposited funds to provide loans to individuals, businesses, and governments. This
helps finance various activities like buying homes, starting businesses, and funding infrastructure
projects.
 Payment Services: Banks facilitate various payment transactions, including:
o Cash withdrawals and deposits: This allows individuals and businesses to access their deposited
funds.
o Electronic payments: Online transfers, debit cards, and credit cards enable convenient and
secure payment processing.
 Foreign Exchange: Banks assist individuals and businesses with converting currencies when
conducting international transactions. They buy and sell foreign currencies, setting exchange rates and
facilitating international trade and investment.

2. What is monetary policy?

Monetary policy is a set of actions taken by a central bank to influence the money supply and credit
conditions in an economy. Its main objectives are to promote:

 Price stability: Controlling inflation and maintaining the value of the currency.
 Economic growth: Encouraging sustainable economic expansion and employment opportunities.
 Financial stability: Mitigating financial risks and promoting a sound financial system.

3. What are the types of financial institutions and their functions?

 Banks:
o Accepting deposits (checking, savings, money market)
o Offering loans (mortgages, personal loans, business loans)
o Providing payment services (cash withdrawals, electronic payments, checks)
o Facilitating foreign exchange
o Offering safekeeping services for valuables

 Credit Unions:
o Similar to banks, but often focused on serving specific communities or groups (e.g., teachers,
military personnel) - Generally, offer more competitive interest rates and lower fees

 Investment Banks:
o Helping companies raise capital (through issuing stocks and bonds)
o Facilitating mergers and acquisitions
o Providing financial advice and trading services

 Brokerage Firms:
o Allowing individuals to buy and sell investments (stocks, bonds, mutual funds)
o Providing investment research and advice
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 Insurance Companies:
o Offering various types of insurance (life, health, auto, property)
o Providing protection against financial losses in case of unforeseen events

4. Difference between limited and unlimited companies?

Limited Company:

 Liability of shareholders is limited to the amount they invested in the company. This means that if the
company goes bankrupt or incurs debts, the shareholders' personal assets are protected beyond their
initial investment.
 This provides greater personal financial security for investors and encourages investment in the
company.
 However, there are more formalities and regulations associated with setting up and running a limited
company.

Unlimited Company:

 Shareholders have unlimited liability. This means that if the company goes bankrupt or incurs debts,
the shareholders are personally responsible for those debts. Their personal assets can be seized to
pay off company debts.
 This type of company structure is less common due to the high personal risk involved for
shareholders.
 it offers simpler setup and fewer regulations, making it potentially attractive for small businesses or
ventures with close involvement from the owners.

5. Financial staff responsibilities?

1. Recording and Reporting:

 Transaction processing: Recording all financial transactions accurately and in a timely

 Reconciling accounts: Ensuring that financial records match external statements and internal
reports.

 Preparing financial statements: Creating regular reports such as balance sheets, income
statements, and cash flow statements to provide an overview of the organization's financial
health.

 Budgeting and forecasting: Assisting with developing and monitoring budgets, as well as
forecasting future financial performance.

2. Analysis and Planning:

 Financial analysis: Analyzing financial data to identify trends, assess risks, and inform decision-
making.

 Cost analysis: Identifying and managing costs to improve efficiency and profitability.

 Investment analysis: Evaluating potential investments and recommending sound financial

strategies.

 Risk management: Identifying, assessing, and mitigating financial risks.

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3. Compliance and Controls:

 Tax compliance: Ensuring the organization complies with all relevant tax laws and regulations.

 Internal controls: Implementing and maintaining internal controls to safeguard assets and prevent
fraud.

 Auditing