Important Parties in The Financial Environment

The important parties are made up of:-

1) Financial Managers

Financial managers are responsible for deciding how to invest the firm's funds for expanding its business (investment decision) and how to obtain funds (financing decision) for investment.

As financial managers, thay may have to deal with a wide variety of plans, such as production plans, financial plans, marketing plans and personnel plans.

2) Investors

Investors can be individuals or financial institutions that provide funds to firms, the government, agencies or other individuals who need those funds.

For examples individuals provides funds by purchasing securities of firms. Financial institutions or institutional investors provide funds by giving loans to individuals and firms or by purchasing securities issued by other firms.

3) Financial Markets

Financial markets represents forums that facilitate the flow of funds among investors, firms, government units and agencies. They provide a meeting place where suppliers and demanders of loans and investments can transact business directly.

It can be broken down into Money and Capital markets.

Money Markets are markets dealing with short term securities that have a life of one year or less. These securities are very liquid, and easily be convert into cash without loss of value.

Capital Markets are markets where securities have a life of more than one year. Examples include common stock, prreference stock and bonds.

4) Financial Institutions

Financial institutions serve as intermediaries that channel the savings of individuals, businesses and governments into loans or investments. They include commercial banks, saving institutions, insurance companies, pension funds, finance companies and mutual funds.