1. sicT½rhirBaØvtßú FINANCIAL SECTOR Share certificate CMBUkTI2
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CMBUkTI2
sicT½rhirBaØvtßú
FINANCIAL SECTOR
Share certificate
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2. Money and Banking
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esckþIepþIm Introduction: RTBümYyKWsMedAeTAelIGVImYyEdlpþl;eTAeGaym©as;vanUvRbeyaCn_Edl eKsgÄwm)annaeBlGnaKt. CaTUeTAmanRTBüBIrRbePTsMxan;²KW RTBüBit nig RTBühirBaØvtßú.
An asset is something that provides its owner with expected future benefits. There are two types of assets: real asset and financial asset.
Pension funds
CDs
Savings deposits
Checking deposits
Stocks
Bonds
Government
securities
Life insurance
Households
Outflows
From
Spending
Stream
Corporations
The Financial Sector as a Conduit for Savings
Inflows to
Large business loans
Small business loans
Venture capital loans
Working loans
Construction and
Investment loans
Savings
Loans
Financial Sector
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3. 1-1-RKwHsßanhirBaØvtßú (Financial Institutions)³
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1-1-RKwHsßanhirBaØvtßú (Financial Institutions)³
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RKwHsßanhirBaØvtßú³ Financial institution is a business whose primary activity is buying, selling, or holding financial asset.
Financial institutions sell Promises edayyl;RBmbg;eGayvijnaeBlGnaKt. Rkdas;snüaTaMgenH (Promises) GacCarbs;pÞal;xøÜn b¤ Carbs;GñkepSgeTot. ]TahrN_³
- GtifiCnebIkKNnI³ mann½yfa FnaKarlk;Rkdas;kic©snüa
Customer opens an account: means that bank sells promises.
- GtifiCnTijmUlbR½t³ mann½yfa FnaKar b¤ Rkumh‘unlk;Rkdas;kic©snüa
Customer buys securities: means that bank or company sells promises.
Equity
Every Financial Asset has a corresponding Financial Liability A B
Debt instrument
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4. 1-2-RbePTénRKwHsßanhirBaØvtßú (Types of Financial Institutions) ³
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1-2-RbePTénRKwHsßanhirBaØvtßú (Types of Financial Institutions) ³
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RKwHsßanhirBaØvtßúRtUv)aneKEckeTAtamRbePTFM²Ca 4 epSg²KñaKW³ RKwHsßandak;beBaØI (Depository Institutions) RKwHsßanGnþrkarIkic©snüa (Contractual Intermediaries) RKwHsßanGnþrkarI vinieyaK (Investment Intermediaries) nig RKwHsßanQµÜjhirBaØvtßúkNþal (Financial Brokers).
RKwHsßandak;beBaØI (Depository Institutions)³
They derive the bulk of their loanable funds from deposit accounts (Deposits in checking or Savings accounts) sold to the public.
Depository Institutions
Primary Assets
Primary Liabilities
Commercial banks
Business and consumer loans, mortgages, government securities, municipal bonds.
Checkable deposits and savings deposits
Savings and loan associations,
and mutual saving banks
Mortgages
Savings deposits (and checkable deposits)
Credit unions
Consumer loans
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5. Contractual Intermediaries
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RKwHsßanGnþrkarIkic©snüa (Contractual Intermediaries)
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Contractual Intermediaries are financial institutions that attract savings mainly from individuals and families and, for the most part, make long-term loans in the capital market. This means it attracts funds by offering legal contracts to protect the savers against risk.
Contractual Intermediaries
Primary Assets
Primary Liabilities
Pension funds
Corporate bonds and stock
Employer and employee contributions
Life insurance companies
Corporate bonds and mortgages
Policy obligations
Fire and casualty insurance companies
Municipal bonds, corporate bonds and stock, and government securities
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6. Investment Intermediaries
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RKwHsßanGnþrkarIvinieyaK (Investment Intermediaries)
Investment institutions sell shares to the public and invest the proceeds in stocks, bonds, and other securities.
Investment Intermediaries
Primary Assets
Primary Liabilities
Money market mutual fund
Money market instruments
Shares
Mutual fund
Stocks and bonds
Finance companies
Consumer and business loans
Commercial paper, stocks, and bonds.
Note:
Finance companies lend money to both businesses and consumers to meet short-term working capital needs and for long-term investment.
Investment companies pool the funds contributed by thousands of savers by selling shares and then invest in securities sold in the open market.
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7. Credit Market Instruments
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RKwHsßanQµÜjhirBaØvtßúkNþal (Financial Brokers)
RKwHsßanQµÜjhirBaØvtßúkNþal manBIrRbePTFM²KW³ FnaKarvinieyaK (Investment banks) nig pÞHQµÜjkNþal (Brokerage houses). vaRKan;EtCaGñkpþl;eyabl; pþl;CMnaj nig CMrujkMlag lk;sBaØab½NÑ nig PaKh‘unEtbu:eNaÑH. vaCYyedaHRsayskmµPaBmYycMnYndUcCa karbBa©ÚlKña (Mergers) b¤ karTijyk (Takeovers)rbs;Rkumhu‘n.
Finance brokers
Primary Assets
Primary Liabilities
Investment banks
None
Brokerage houses
Credit Market Instruments
Security
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8. 2-TIpSarhirBaØvtßú (Financial Markets)³
 TIpSarhirBaØvtßúTImYynigTIBIr (Primary and secondary Financial Markets)³
-·TIpSarhirBaØvtßúTImYy (Primary Financial Market) KWCaTIpSarmYyEdlenAkñúgenaH RTBü hirBaØvtßúEdle)aHpSayfµIRtUv)aneKdak;lk;.
-TIpSarhirBaØvtßúTIBIr (Secondary Financial Market) KWCaTIpSarmYyEdl)anepÞrRTBü hirBaØvtßúBIGñksnSMmñak;eTAeGayGñksnSMmñak;eTot.
 TIpSarrUbiyvtßúnigTIpSarmUlFn (Money Markets and Capital Markets)³
-TIpSarrUbiyvtßú (Money markets)³ TIpSarrUbiyvtßú KWCaTIpSarsMrab;\NTanry³eBlxøI.
(The market for short-term credits).
-TIpSarmUlFn (Capital markets)³ TIpSarmUlFnKWCasMrab;\NTanry³eBlEvg.
(The market for long-term credit).
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9. Money Market Security Yield Percent per annum Yield Spread from
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Money Market Security
Yield Percent
per annum
Yield Spread from
Basis Points
US Treasury bills
-Three-month
-Six-month
-One-year
6.07%
6.20
6.22
+13
+15
Federal Funds interest rate
6.77
+70
Commercial paper (prime quality)
7.27
7.25
7.15
+120
+118
+108
Certificates of deposits (in denomination
of $ 1,000,000 or more)
7.26
7.33
7.34
+119
+126
+127
Bankers’ acceptances (three-month maturity)
7.13
+106
Eurodollars deposits (three-month maturity)
7.39
+132
Sources: Board of Governors of the Federal Reserve System, Federal Reserve Bulletin, April 2001.
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10.  TIpSarebIkcMhnigTIpSarcrcar (Open and Negotiated Markets)³
-·TIpSarebIkcMh (Open Market)³ CaTIpSarpþl;kMcI nig lk;dUrmUlbR½tEdlenAkñúgenaH ÉktþCnmYy b¤ RKwHsßanNamYyk_GaccUlrYm)anEdr.
-TIpSarcrcar (Negotiated Market)³ Caynþkarpþ;l;kMcI nig lk;dUrmUlbR½tTaMgLay enAeBlNaEdllkçx½NÐénkarlk;dUrRtUv)anbegáIttamry³karcrcarrvagGñkpþl;kMcI nig GñksuMx©I.
TIpSardl;éd/TIpSarGnaKt/TIpSartamkalkMnt;/TIpSarCMerIs³
-TIpSardl;éd (Spot Market)³ rUbiyb½NÑTaMgLay b¤ mUlbRt½TaMgLayRtUv)aneKedaHdUr sMrab;karRbKl;dl;édPøam.
-TIpSarGnaKt (Future or Forward Market): sMrab;karRbKl;eTAeGayGñkTijenAeBl xagmuxEdl)ankMnt;TukenAeBlNaEdlGñklk;nigGñkTijyl;Rbmtamlkçx½NðmuneBlRbKl;.
-TIpSareRCIserIs (Options Market)³ siTöiTaMgeBlTijBI nig eBllk;mUlbR½tEdl eRCIserIsrYc eTAeGayGñksresrCMerIsenaHenARtg;éføEdl)anFanatamGayukal.
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11. 3-RTBühirBaØvtßú (Financial Assets)³
 RTBüTIpSarrUbiyvtßú (Money Market Assets)³
RTBüTIpSarrUbiyvtßú KWCaRTBühirBaØvtßúEdlmanGayukalticCagmYyqñaM. CaFmµtaeKbg; karR)ak;eGayRTBüTIpSarrUbiyvtßúTabCagkarR)ak;Edlbg;eGayRTBüTIpSarmUlFnBIeRBaHeKpþl; eGayGñkTijRTBüenHCasnÞnIyPaBeRcInCag (More liquidity). Figure 3
Principal Money Market
Instruments, 1990s
Sources:
Federal Reserve Bank and
author extrapolations.
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12. lixitbeBaØIGaccrcar)an (Negotiable CDs)³ KWCaRkdas;mYypÞaMgEdlbBa¢ak;fa Gñkman TwkR)ak;mYycMnYnenAkñúgKNnIsnSMenAkñúgFnaKarmYyEdlmanry³kMnt;mYy. A CD is a piece of paper certifying that you have a sum of money in savings account in the bank for a specific period of time. vaCaBakükat;rbs;Bakü Certificate of Deposit.
Rkdas;BaNiC¢kmµ b¤ plbR½tBaNiC¢kmµ (Commercial paper)³ vaCaRkdas;snüary³eBlxøI EdlminmanFanasnþisux e)aHecjedayRkumhu‘nl,I²faRkumhu‘nmanhirBaØvtßúxøaMg ehIypþl; GRta\NTanmYyx<s; eBalKWvamanGRtakarR)ak;x<s;CaglixitbeBaØI. Rkdas;BaNiC¢kmµenH manBIrRbePTFM²eTot KW Rkdas;edaypÞal; (Direct paper) nig Rkdas;rbs;QµÜj (Dealer paper)*
*The main issuers of direct paper are large finance companies and bank holding companies that directly with the investors rather than using a securities dealer as an intermediary and that borrow money continuously.
Security dealers on behalf of corporate customers issue the dealer papers. Also known as industrial paper, dealer paper issued by non-financial companies (including public utilities, manufacturers, retailers, wholesalers, and transportation companies). But bank holding companies issue both direct and dealer paper.
kic©RBmeRBogTijvij (Repurchase agreement): RPs KWCakarBnüaeBlbeNþaHGasnñmYy én\NTanEdlRtUv)anFanafamUlbR½tmanTIpSar. RPs are simply a temporary extension of credit collateralized by marketable securities. (ORP & TRP)
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13. Money and Banking
b½NÑrtnaKary³eBlxøI (Treasury bills): vaCab½NÑbMNulEdlmanGayukalminelIsBImYy qñaMe)aHecjedayrdæaPi)al. It is a less-than one-year note issued by government or it is a government IOUs .
-b½NÑEdlmanes‘rIeTogTat; (Regular-series bill): vaCaFmµtammanGayukalkMnt; 3 Ex nig 6 Ex Edlecjerogral;s)a‏þh_ nig b½NÑEdlmanGayukal 1 qñaM ecjCaerogral;Ex.
-b½NÑEdlmanes‘rImineTogTat; (Irregular-series bill): Cab½NÑEdle)aHecjenAeBlNa EdlRtUvkarsac;R)ak;CaBiessNamYy. If a bought a 90 day T-bill at $9,800 and held it until maturity, your interest would be $200.
lixitTTYlR)ak;FnaKar (Banker's acceptances)³ lixitTTYlR)ak;FnaKarKWCalixitman ry³eBlkMnt;mYyEdleRbIR)as;enAFnaKaredayGñknaMecjnigGñknaMcUledIm,Ibg;eGayéfø TMnij b¤ TijrUbiyb½NÑbreTs. A banker's acceptance is a time draft drawn on bank by an exporter or an importer to pay for merchandises or to buy foreign currencies. vaGacmanGayukalBI 30 eTA 270 éfJ ¬eRbIjwkjab;CageKKW ry³eBl 90 éfJ¦.
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14. Purchaser or importer of goods Investor in Money market
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EXHIBIT 2: The Creation of a Banker's acceptance
Effect of an Acceptance: Reduce risk to seller from shipping goods on credit because the purchaser has received a bank's guarantee of future payment, thus transferring risk from the seller to accepting bank and the seller can receive his or her funds right away by discounting the acceptance before.
Purchaser or importer of goods
Accepting bank
Seller or exporter of goods
Investor in Money market
Goods shipped (Now)
Shipping documents (Now)
Time draft accepted (Now)
Acceptance (Now)
Cash (Now)
Cash (later)
Matured acceptance (later)
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15. 3-RTBühirBaØvtßú (Financial Assets)³
 RTBüTIpSarmUlFn (Capital Market Assets)³
RTBüTIpSarmUlFnKWCa]bkrN_hirBaØvtßúEdlmanGayukaledIm cab;BImYyqñaMeLIgeTA ehIymanTMhMcab;BIkMcIcMnYntUcrhUteTAdl;\NTanTMhMFMEdlmancMnYnrab;landuløar. Capital market assets are financial instruments in the capital market that have original maturities of more than one year and range in size from small loans to very large multimillion dollar credits. Figure 3
Principal Capital Market
Instruments, 1990s
Sources:
Federal Reserve Bank and
author extrapolations.
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16. Money and Banking
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PaKhu‘n (Stocks)³ Stock is a special paper that released as a partial ownership right to a company. Stock certificate states that the holder (who's named on the certificate's face) owns a specified number of shares in the firm.
(Corporate stock ) RtUv)aneKEckecjCaBIreTotKW
-Common stock and
-Preferred stock sUmGanTMB½rTI 45 nig ]bsm<n½ñ 197
sBaØab½NÑ (Bonds)³ Bond is a promise of the bond-issuer (State and municipals-local government) to pay interest of a certain amount at specified intervals to the bondholder and to pay the bond' s face value when the bond matures..
sBaØab½NÑGnþrCatimanBIrRbePTeTotKW sBaØab½NÑbreTs Foreign bonds nig Eurobonds.
The Most Common Types of Corporate Notes and Bonds:
-Debenture -Subordinated Debenture -Mortgage Bond -Equipment Trust Certificates -Collateral Trust Bond
-Industrial Development Bond -Convertible Bond
-Income Bond - Pollution Control Bond
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17. Statement of Income (million except per share data)
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Nike, Inc.
Statement of Income (million except per share data)
Year Ended December 31
2002
2003
Revenue
$9,187.00
$6,471.00
Cost of sales
$5,503.00
$3,907.00
Gross profit
$3,684.00
$2,564.00
Selling and administration expenses
$2,304.00
$1,589.00
Income from operation
$1,380.00
$975.00
Other expense (Income)
Interest expense
$53.00
$39.00
Miscellaneous expense
$32.00
$37.00
Total other expense
$85.00
$76.00
Income before income taxes
$1,295.00
$899.00
Income taxes
$499.00
$346.00
Net income
$796.00
$553.00
Earnings per share
$2.68
$1.88
Computation of earnings per share:
2002
2003
Net income
$796,000,000.00
$553,000,000.00
Divided by average common shares outstanding
297,000,000
293,608,000
Earnings per share
$2.68
$1.88
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18. The retained income of a corporation equals revenue minus expenses
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“Retained income or retained earning" is ownership claim arising from the reinvestment of previous profits.
The retained income of a corporation equals revenue minus expenses
“Statement of Income and Retained Earnings“ Ended December 31, 2003
Net sales
$750,000.00
Cost of sales
$420,000.00
Gross profit
$330,000.00
Selling and administration expenses
$110,000.00
Income from operation
$220,000.00
Other expense (Income)
Interest expense
$20,000.00
Total other expense
Income before income taxes
$200,000.00
Income taxes
$80,000.00
Net income
$120,000.00
Beginning retained earnings *
$440,000.00
Dividends *
-$30,000.00
Ending retained earnings *
$530,000.00
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19. Money and Banking
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niekçb (Mortgages)³ A mortgage is simply a special name for a secured loan on real estate. The construction of office buildings, shopping centers, and other commercial structures is generally financed with an instrument known as the commercial mortgage. vamanBIr³ kMcIvtßúbBa©aMry³eBlxøI (Short-term mortgage loans) kMcIvtßúbBa©aMry³eBlEvg (Long-term mortgage loans) . RbePTén]bkrN_niekçb (Types of Mortgage Instruments):
-Fixed-Rate Mortgage, FRM -Variable-Rate Mortgage, VRM
-Adjustable Mortgage Instrument, AMI -Convertible Mortgage Instrument, CMI
-Graduated-Payment Mortgage, GPM -Canadian Rollover Mortgage, CRM
-Renegotiate-Rate Mortgage, RRM -Deferred-Interest Mortgage, DIM
-Flexible-Payment Mortgage, FPM -Shared-Appreciation Mortgage, SAM
-Reverse-Annuity Mortgage, RAM
mUlbR½trbs;rdæaPi)al (Government securities)³ Rkdas;bMNulEdle)aHpSayeday rdaPi)al. mUlbRtTaMgenHEckecjCa
bMNulmanTIpSar (Marketable debt): Treasury bills ; Treasury notes ; Treasury bonds
bMNulminmanTIpSar (Non-marketable debt): Foreign issues ; Saving notes ; Saving bonds
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20. 4-1-haniP½yelIkarvinieyaKkñúgTIpSarhirBaØvtßú
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4-TMnak;TMnghirBaØvtßúenAkñúgesdækic© (Finance Relationships in economy)³
4-1-haniP½yelIkarvinieyaKkñúgTIpSarhirBaØvtßú
1-haniP½yelITIpSar (Market risk)
2-haniP½yelIkarvinieyaKeLIgvij (Reinvestment risk)
3-haniP½yelIkarxkxanmin)ansg (Default risk) 4-haniP½yelIGtiprNa (Inflation risk)
5-haniP½yelIrUbiyb½NÑ (Currency risk) 6-haniP½yelIneya)ay (Political risk)
4-2-tYnaTIRbBnæ½hirBaØvtßúenAkñúgesdækic© (Role of Financial system in economy)
¬1¦sMrYldl;karvinieyaK nig eFVIBaNiC¢kmµ ¬2¦ epÞrFnFan b¤ mUlniFiBIGñksnSMeTA Gñkx©I nig vinieyaK ¬3¦RbmUlpþúMmUlniFi ¬4¦eFVIkareRCIserIsKMerag ¬5¦karepÞr karEckcay nig karTTYlykrYmhaniP½y ¬6¦karbEgVrhaniP½y ¬7¦ karRtYtBinitü nig ¬8¦kareFVI Rbtibtþikartamkarsnüa.
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21. hirBaØb,TanpÞal; (Direct Financing)³
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hirBaØb,TanpÞal; (Direct Financing)³
(loans of spending power for an agreed-upon period of time)
Primary securities
Borrowers (deficit-budget units)
Lenders (surplus-budget units)
Flow of funds
(stocks, bonds, notes, etc., evidencing direct claims against borrowers)
hirBaØvtßúBak;kNþalpÞal; (Semi-direct Finance)³
Borrowers (deficit-budget units)
Lenders (surplus-budget units)
Flow of funds
(loans of spending power for an agreed-upon period of time)
Primary securities
(stocks, bonds, notes, etc., evidencing direct claims against borrowers)
Security brokers, dealers, and investment bankers.
Proceeds of security sales (less fees and commissions)
Flow of funds (loans of spending power)
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22. hirBaØb,TanRbeyal (Indirect Financing)³
Money and Banking
hirBaØb,TanRbeyal (Indirect Financing)³
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Flow of funds (loans of spending power)
Ultimate borrowers (deficit budget units)
Ultimate lenders (surplus budget units)
Financial Intermediaries (banks, savings and loan associations, insurance companies, credit unions, mutual funds, finance companies, pension funds)
direct claims,
against ultimate borrowers in the form of stocks, bonds, notes, etc.
Indirect claims,
against ultimate borrowers in the form of deposits, insurance policies, retirement savings accounts, etc.
Primary securities
Secondary securities
4-3-muxgarénRbBn½æhirBaØvtßú (Functions of the Financial System)³ 1-muxgarCasnSM (Saving Function) muxgarTukCaRTBüsm,tþi(Wealth Function)³ 3-muxgarCasnÞnIyPaB (Liquidity Function), 4-muxgarCa\NTan (Credit Function) 5-muuuxgarCakarTUTat; (Payments Function), 6-muxgarCahaniP½y (Risk Function)³ 7-muxgarCaeKalneya)ay (Policy Function)³
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