CHAPTER 1:

AN INTRODUCTION
TO FINANCIAL
MANAGEMENT
 What is Finance?
Study on how individuals or
businesses evaluate
investment opportunities,
business proposals, and
business projects, and raise
capital to fund them
How about the Financial
Management?
It is the efficient and
effective management of
fund
The Important Role of the Financial
Institution
Financial Institution
Evaluation of Investments
Financial Institution
(Lends Money) 2

1
Business
Borrower Project
Depositor
4
3
Financial Institution
Pays Interest Financial Institution
Return of Investment
Financial Instruments and Financial
Markets
Financial Institution – include
bank and nonbanks
Financial Instruments – tools
that help a business
operations and eventually
make it grow
Money Market Instruments –
expensive way for government
and financial institution to
raise funds
Different Money Market Instruments and
Their Characteristics
Short Term Debt
1. Treasury bills – issued by the
treasury/government
- maturity dates is about
1year.
2. Commercial papers – issued
financial-sound business to
fund investments in
-matures about nine months.
3. Money market funds – issued
by the banks or mutual funds
companies
-no specific maturity date
4. Consumer credit/Credit card
debt – issued by banks, credit
unions, finance companies
- maturity date is varies
LONG TERM DEBT
1. Treasury notes – issued by
the government
- matures in two, five or ten
years
2. Treasury bonds – issued by
the government
- matures in more than ten
years
3. Municipal bonds/local
government bonds– issued
by the local government
- matures up to 30 years
4. Corporate bonds– issued by
corporation
- matures in 40 years
Preferred and Common Stocks
1. Preferred stock– issued by
the corporation in
exchange for units of
ownership
- has no maturity date
- pay dividends when
declared
-has no voting rights
2. Common stock– units of
ownership in a public
corporation
- pay dividends when
declared
-has a voting rights
Different Kinds of Financial
Institution
1. Banks
2. Nonbanks
 Different Kinds of Banks
1. Thrift Banks/Savings
Banks
2. Commercial Banks
3. Universal Banks
4. Investment Banks
 Different Kinds of Nonbanks
1. Leasing Companies
2. Investment Companies
3. Mutual Funds
4. Insurance Companies
5. Private Equity Funds
 BE READY
TOMORROW
FOR
YOUR QUIZ
GOOD LUCK
AND
GOD BLESS
BY: MA’AM ELJEN