Tutor Led Workshop 1 Introduction

• Accounting is :• the reporting of the financialposition of the company toshareholders on a an interimand an annual basis;• the adherence to extantnational legal requirementsand national and internationalguidelines and standards.
• The finance function isresponsible for managing thefinancial resources of thebusiness to meet theobjectives of the business, andincludes:• Raising and controlling the provision of funds• Deciding on the deployment of these funds• Controlling the resources of the business• Managing financial risks.
• Why is financial services important to the UK economy?

  1. Strong growth in the export of financial services from the UK
  2. The UK is the world's leading exporter of financial services
• Financial development is linked to economic growth
• The role of the financial system is to facilitate production, employment and consumption
• Resources are funneled through the system so resources flow to their most efficient uses.
• The key components of the financial services industry is investment chain, risk management and payment systems
• The investment chain includes markets to enable investors in equities and bonds or sell investments. It links those with surplus money to those with a need to borrow money.
• Risk management includes insurance providers to enable financial risks to be managed.
• Payment systems includes foreign exchange dealers to allow one currency to be exchanged for another to facilitate international trade.
• The goal of investing is to grow your money to achieve long-term financial goals.
• Investment


  any asset into which funds can be placed with the expectation that it will generate positive income and/or increase its value
• Portfolio


  a collection of different investments
• Return


  reward from investing
• Real Assets/Property


  assets used to produce goods and services.

  typically less liquid than securities
• real property


  permanently affixed to the land, such as land, buildings, and machines
• tangible personal property


  such as gold, artwork, antiques and collectables
• financial assets/securities


  such as stocks, bonds and options, that represent claims on the real assets or the income generated by them
• liquidity


  is the ability to buy and sell quickly
• direct investment


  investor directly acquires a claim/ownership
• indirect investment


  investor indirectly acquires a claim/ownership via a professional investment manager
• financial markets


  markets in which suppliers and demanders of funds trade financial assets, typically with the assistance of intermediaries such as securities brokers and dealers
• financial institutions


  organizations, such as banks andinsurance companies, that pool the resources of suppliersof funds and use those funds to make loans to and investin securities issued by demanders of funds
• financial markets


  places where financial instruments are bought and sold
• financial markets are the economy's central nervous system
• financial markets enable both firms and individuals to find financing for their activities
• financial markets promote economic efficiency
• the role of financial markets is to market liquidity, information and risk sharing
• market liquidity


  ensure owners can buy and sell financial insturments cheaply
• information


  pool and communication information about issuers of financial instruments
• risk sharing


  provide individuals a place to buy and sell risk
• individual investors


  individuals that manage their own funds to achieve their financial goals
• institutional investors


  investment professionals who earn their living by managing other people's money
• type of investors


  wholesale and retail
• wholesale investors


  individuals that manage their own funds to achieve their financial goals

  • equity markets
  • bond markets
  • derivatives
  • insurance
• retail sector - investors


  focus on services provided to personal customers

  • retail banking
  • insurance
  • pensions
  • investment services
  • financial planning and financial advice
• bond markets allow companies and governments to raise loans from investors
• bond markets facilitate the subsequent trading of debt securities created
• Derivative markets


  underlying instruments are used by savers/lenders to transfer resources directly to investors/borrowers

  this improves the efficient allocation of resources

  eg. stocks and bonds
• derivative instruments


  their value and payoffs are "derived" from the behaviour of the underlying instruments

  eg. futures, options, and swaps

  primary use - to shift risk among investors