1. Introduction to the Financial World
Corporate Finance 2

2. The financial world Explain the role of the financial manager
Detail the value of financial intermediaries
Show an appreciation of the function of the major financial institutions and markets

3. Primitive and modern economies
Exhibit Flows within a simple economy – production level
Exhibit Flows within a simple economy – production level plus money

4. Flows within a modern economy
Exhibit Flows within a modern economy

5. The role of the financial manager
Exhibit The flow of cash between capital markets and the firm’s operations

6. The financial manager plays a pivotal role in the following:
Interaction with the financial markets
Investment
Treasury management
Risk management
Strategy

7. The flow of funds and financial intermediation
Exhibit The flow of funds and financial intermediation

8. The flow of funds and financial intermediation
Primary investors
Ultimate borrowers
Conflict of preferences

9. Savings into investment in an economy without financial intermediaries

10. The introduction of financial intermediaries
Brokers
Asset transformers
Risk transformation
Maturity (liquidity) transformation
Volume transformation
Intermediaries’ economies of scale
(a) Efficiencies in gathering information
(b) Risk spreading
(c) Transaction costs
Financial markets

11. Savings into investment in an economy with financial intermediaries and financial markets

12. Growth in the financial services sector
Reasons for growth of financial services in the UK
1 High income elasticity
2 International comparative advantage
Exhibit Main features of change in financial services

13. The financial system: the banking sector
Retail banks
Wholesale banks
Raising external finance for companies
Broking and dealing
Fund management (asset management)
Assistance in corporate restructuring
Assisting risk management using derivatives
International banks
Foreign banking
Eurocurrency banking
Building societies
Finance houses

14. The financial system: long-term savings institutions
Pension funds
The long time horizon of the pension business means that large sums are built up and available for investment – currently over £800bn
Insurance funds
General insurance
Life assurance
Term assurance, whole-of-life policies,
Endowment policies, annuities
Life assurance companies have over £900bn under management

15. The financial system: the risk spreaders
Unit trusts
Investment trusts
Open-ended investment companies (OEICs)

16. The financial system: the markets
The money markets
The bond markets
The foreign exchange markets (Forex or FX)
The share markets
The derivative markets

17. Lecture review 1 Financial institutions and markets Financial managers
Asset transformation
Intermediaries and economies of scale
Secondary markets
Financial services sector

18. Lecture review 2 The financial system The banking sector
Long-term savings institutions
The risk spreaders
The markets