This is the topic for the introduction of Financial Markets

Financial management is a fundamental aspect of both personal and corporate success, encompassing the processes, principles, and practices that guide financial decision-making. It involves planning, organizing, directing, and controlling financial resources to achieve an entity's objectives efficiently and effectively. Whether in a business or an individual's financial life, proper management of funds is crucial to maintaining stability, fostering growth, and ensuring long-term sustainability.

At its core, financial management focuses on three primary areas: investment decisions, financing decisions, and dividend decisions. Investment decisions involve allocating resources to profitable ventures, ensuring that capital is used efficiently to generate returns. Financing decisions determine how an organization raises funds, whether through equity, debt, or internal sources, balancing risks and rewards to optimize capital structure. Dividend decisions revolve around how profits are distributed to shareholders while maintaining sufficient reserves for future expansion.

In a corporate setting, financial management plays a vital role in strategic planning and daily operations. It ensures that businesses can meet their financial obligations, maximize profits, and enhance shareholder value. Functions such as budgeting, risk management, financial forecasting, and cost control fall under this domain, allowing companies to navigate economic fluctuations and maintain competitiveness in the market.

With the advent of technology, financial management has evolved significantly, integrating digital payment systems, artificial intelligence, and blockchain technology to enhance efficiency and security. These innovations have streamlined financial transactions, improved accuracy in financial reporting, and reduced fraud risks. Additionally, financial regulations and compliance measures have become more stringent, ensuring transparency and accountability in financial dealings.

For individuals, financial management is equally essential. Proper budgeting, saving, and investing enable people to achieve financial independence, manage risks, and plan for future expenses such as education, homeownership, and retirement. Understanding key financial principles such as asset management, credit management, and wealth accumulation empowers individuals to make informed financial decisions and avoid debt traps.

1. Financial Markets

2. Money Markets Prepared by: Ms. Ida

3. What is MONEY MARKET? The term "Money Market" refers to the network of corporations, financial institutions, investors and governments which deal with the flow of short-term capital.

4. What is MONEY MARKET? When a business needs cash for a couple of months until a big payment arrives, or when a bank wants to invest money that depositors may withdraw at any moment, or when a government tries to meet its payroll in the face of big seasonal fluctuations in tax receipts, the short-term liquidity transactions occur in the money market.

5. How does MONEY MARKET works? The money market exists to provide the loans that financial institutions and governments need to carry out their day-to-day operations. For instance, banks may sometimes need to borrow in the short term to fulfill, their obligations to their customers, and they use the money market to do so.

6. How does MONEY MARKET works? For example, most deposit accounts have a relatively short notice period and allow customers access to their money either immediately, or within a few days or weeks. Because of this short notice period, banks cannot make long-term commitments with all of the money they hold on deposit.

7. How does MONEY MARKET works? They need to ensure that a proportion of it is liquid (easily accessible) in market terms. Otherwise, if a large number of customers wish to withdraw their money at the same time, there may be a shortfall between the money the bank has lent and the cash deposits it needs to return to savers.

8. How does MONEY MARKET works? Banks may also find that they have greater demand for mortgages or loans than they do for savings accounts at certain times. This creates a mismatch between the money they have available and the money they have loaned out, so the bank will need to borrow in order to be able to fulfill the demand for loans.

9. How does MONEY MARKET works? The money markets are the mechanisms that bring these borrowers and investors together without the comparatively costly intermediation of banks. They make it possible for borrowers to meet short-run liquidity needs and deal with irregular cash flows without resorting to more costly means of raising money.

10. How does MONEY MARKET works? There is an identifiable money market for each currency, because interest rates vary from one currency to another. These markets are not independent, and both investors and borrowers will shift from one currency to another depending upon relative interest rates.

11. How does MONEY MARKET works? However, regulations limit the ability of some money market investors to hold foreign-currency instruments, and most money-market investors are concerned to minimize any risk of loss as a result of exchange-rate fluctuations. For these reasons, most money-market transactions occur in the investor's home currency.

12. Who uses the Money Market? The primary function of the money market is for banks and other investors with liquid assets to gain a return on their cash or loans. They provide borrowers such as other banks, brokerages, and hedge funds with quick access to short-term funding.

13. Who uses the Money Market? The money market is dominated by professional investors, although retail investors with P50,000 can also invest. Smaller deposits can be invested via money market funds. Banks and companies use the financial instruments traded on the money market for different reasons, and they carry different risks.

14. Who uses the Money Market? Companies When companies need to raise money to cover their payroll or running costs, they may issue commercial paper- short term, unsecured loans for Php100,000 or more that mature within 1-9 months.

15. Who uses the Money Market? Companies A company that has a cash surplus may “park” money for a time in short-term, debt-based financial instruments such as treasury bills and commercial paper, certificates of deposit, or bank deposits.

16. Who uses the Money Market? Bank s If demand for long-term loans and mortgages is not covered by “deposits from savings accounts, banks may the issue certificates of deposit, with a set interest rate and fixed-term maturity of up to five years.

17. Who uses the Money Market? Investor s Individuals seeking to invest large sums of money at relatively low risk may invest in financial instruments. Sums of less that Php50,000 can be invested in money market funds.

18. Who uses the Money Market? The money markets do not exist in a particular place or operate according to a single set of rules. Nor do they offer a single set of posted prices, with one current interest rate for money. Rather, they are webs of borrowers and lenders, all linked by telephones and computers.

19. Who uses the Money Market? At the centre of each web is the central bank whose policies determine the short-term interest rates for that currency.

20. Who uses the Money Market? Arrayed around the central bankers are the treasurers of tens of thousands of businesses and government agencies, whose job is to invest any unneeded cash as safely and profitably as possible and, when necessary, to borrow at the lowest possible cost.

21. Who uses the Money Market? The connections among them are established by banks and investment companies that trade securities as their main business. The constant soundings among these diverse players for the best available rate at a particular moment are the forces that keep the market competitive.

22. WHAT MONEY MARKETS DO There is no precise definition of the money markets, but the phrase is usually applied to the buying and selling of debt instruments maturing in one year or less. The money markets are thus related to the bond markets, in which corporations and governments borrow and lend based on longer-term contracts.

23. WHAT MONEY MARKETS DO Similar to bond investors, money-market investors are extending credit, without taking any ownership in the borrowing entity or any control over management.

24. WHAT MONEY MARKETS DO Yet the money markets and the bond markets serve different purposes. Bond issuers typically raise money to finance investments that will generate profits - or, in the case of government issuers, public benefits for many years into the future. Issuers of money-market instruments are usually more concerned with cash management or with financing their portfolios of financial assets.

25. WHAT MONEY MARKETS DO A well-functioning money market facilitates the development of a market for longer-term securities. Money markets attach a price to liquidity, the availability of money for immediate investment. The interest rates for extremely short-term use of money serve as benchmarks for longer-term financial instruments.

26. WHAT MONEY MARKETS DO If the money markets are active, or "liquid", borrowers and investors always have the option of engaging in a series of short-term transactions rather than in longer-term transactions, and this usually holds down longer term rates. In the absence of active money markets to set short-term rates, issuers and investors may have less confidence that longer-term rates are reasonable and greater concern about being able to sell their securities should they so choose.

27. WHAT MONEY MARKETS DO For this reason, countries, with less active money markets, on balance, also tend to have less active bond markets.

28. TYPES OF MONEY-MARKET INSTRUMENTS Money market securities are short-term instruments with an original maturity of less than one year. There are numerous types of money-market instruments. The best known are commercial papers, bankers' acceptances, treasury bills, repurchase agreements, government agency notes, local government notes, interbank loans, time deposits, bankers' acceptance, and papers issued by international organizations.

29. TYPES OF MONEY-MARKET INSTRUMENTS The amount issued the course of a year is much greater than the amount outstanding at any one time, as many money-market securities are outstanding for only short periods of time. Money market securities are used to "warehouse" funds until needed. The returns earned on these investments are low due to their low risk and high liquidity.

30. TYPES OF MONEY-MARKET INSTRUMENTS Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.

31. TYPES OF MONEY-MARKET INSTRUMENTS COMMERCIAL PAPER Commercial paper is a short-term debt obligation of a private-sector firm or a government-sponsored corporation. Only companies with good credit ratings issue commercial paper because investors are reluctant to bring the debt of financially compromised companies.

32. TYPES OF MONEY-MARKET INSTRUMENTS COMMERCIAL PAPER They tend to be issued by highly rated banks and are traded in a similar way to securities. In most cases, the lifetime, or maturity, greater than 90 days but less than nine months. This maturity is dictated by regulations. In the Philippines, most new securities must be registered with the regulator, the Securities and Exchange Commission.

33. TYPES OF MONEY-MARKET INSTRUMENTS COMMERCIAL PAPER Commercial paper is usually unsecured although a particular commercial paper issue may be secured by a specific asset of the issuer or may be guaranteed by a has paper bank.

34. TYPES OF MONEY-MARKET INSTRUMENTS COMMERCIAL PAPER Many large companies have continual commercial paper programmes, bringing new short-term debt on to market every few weeks or months. It is common for issuers to roll over their paper, using the proceeds of a new issue to repay the principal of a previous issue.

35. TYPES OF MONEY-MARKET INSTRUMENTS COMMERCIAL PAPER In effect, this allows issuers to borrow money for long periods of time at short-term interest rates, which may be significantly lower than long-term rates. The short-term nature of the obligation lowers the risk perceived by investors.

36. TYPES OF MONEY-MARKET INSTRUMENTS COMMERCIAL PAPER These continual borrowing programmes are not riskless. If market conditions or a change in the firm's financial circumstances preclude a new commercial paper issue, the borrower faces default if its lacks the cash to redeem the paper that is maturing.

37. TYPES OF MONEY-MARKET INSTRUMENTS BANKER’S ACCEPTANCES Before the 1980s, bankers' acceptances were the main way for firms to raise short-term funds in the money markets. An acceptance is a promissory note issued by a non-financial firm to a bank in return for a loan. The bank resells the note in the money market at a discount and guarantees payment. Acceptances usually have a maturity of less than six months.

38. TYPES OF MONEY-MARKET INSTRUMENTS BANKER’S ACCEPTANCES Bankers' acceptances differ from commercial paper in significant ways. They are usually tied to the sale or storage of specific of specific goods, such as an export order for which the proceeds will be received in two or three months. They are not issued at all by financial-industry firms.

39. TYPES OF MONEY-MARKET INSTRUMENTS BANKER’S ACCEPTANCES They do not bear interest; instead, an investor purchases the acceptance at a discount from face value and then redeems it for face value at maturity. Investors rely on the strength of the guarantor bank, rather than of the issuing company, for their security.

40. TYPES OF MONEY-MARKET INSTRUMENTS TREASURY BILL S Treasury bills, often referred to as T-bills, are securities with a maturity of one year or less, issued by national governments. Treasury bills issued by a government in its own currency are generally considered the safest of all possible investments in that currency. Such securities account for a larger share of money-market trading than any other type of instrument.

41. TYPES OF MONEY-MARKET INSTRUMENTS GOVERNMENT AGENCY NOTE S National government agencies and government-sponsored corporations are heavy borrowers in the money markets in many countries. These include entities such as development banks, housing finance corporations, education lending agencies and agricultural finance agencies.

42. TYPES OF MONEY-MARKET INSTRUMENTS LOCAL GOVERNMENT NOTES Local government notes are issued by, provincial or local governments, and by agencies of these governments such as schools authorities and transport commissions. The ability of governments at this level to issue money-market securities varies greatly from country to country.

43. TYPES OF MONEY-MARKET INSTRUMENTS LOCAL GOVERNMENT NOTES In some cases, the approval of national authorities is required; in others, local agencies are allowed to borrow only from banks and cannot enter the money markets.

44. TYPES OF MONEY-MARKET INSTRUMENTS INTERBANK LOAN S Loans extended from one bank to another with which it has no affiliation are called interbank loans. Many of these loans are across international boundaries and are used by the borrowing institution to re-lend to its own customers.

45. TYPES OF MONEY-MARKET INSTRUMENTS TIME DEPOSIT S Time deposits, another name for certificates of deposit or CDs, are interest-bearing bank deposits that cannot be withdrawn without penalty before a specified date. Although time deposits may last for as long as five years, those with terms of less than one year compete with other money-market instruments.

46. TYPES OF MONEY-MARKET INSTRUMENTS TIME DEPOSITS Time deposits with terms as brief as 30 days are common. Large time deposits are often used by corporations, governments and money-market funds to invest cash for brief periods. Interest rates depend on length of maturity, with longer terms getting better rate. The main risks are being locked into low interest rates if rates rise and early withdrawal penalties.

47. TYPES OF MONEY-MARKET INSTRUMENTS REPO S Repurchase agreements known as repos, play a critical role in the money markets. They serve to keep the markets highly liquid, which in turn ensures that there will be a constant supply of buyers for new money-market instruments.

48. TYPES OF MONEY-MARKET INSTRUMENTS REPOS A repo is a combination of two transactions. In the first, a securities dealer, such as a bank, sells securities it owns to an investor, agreeing to repurchase the securities at a specified higher price at a future date. In the second transaction, days or months later, the repo is unwound as the dealer buys back the securities from the investor.

49. TYPES OF MONEY-MARKET INSTRUMENTS REPOS The amount the investor lends is less than the market value of the securities, a difference called the spread or haircut, to ensure that it still has sufficient collateral if the value of the securities should fall before the dealer repurchases them.

50. END :) MORE MARKETS TO COME…