Finance (Basic)
Ludek Benada
Department of Finance
Office 533
75970@mail.muni.cz

Structure of lectures
qIntroduction to finance
qFinancial markets
qBanks and bank systems
qOther financial institutions
qTime value of money
qCorporate finance
qPersonal finance
qInvestment
qInternational finance, International financial system

Why study finance?
qTo manage your personal resources
qTo deal with the world of business
qTo pursue interesting and rewarding career opportunities
qTo make informed public choices as a citizen
qTo be able answer different questions…

qI want buy a new car. Should I use my cash saving, lease, borrow?
qWhat happens if the government changes the tax rate?
qWhich is the best way to pay my house?
qI am thinking about starting a new business. Will it reward me adequately?
qShould I change money for my christmas holiday now or later?
qect.

What is finance
Definition: Finance is…..


Finance ≠ money
Cash versus Credit money
Functions of money:
q..
q..
q..

Scope of finance
qCF
qIF
qPF
qPubF
qDer
qRM
qPT
qAP
qFE

Finance nowadays and before
Tough financial dealings have existed for centuries, their presence and iportance have become even
more apparent in out modern era of thechology, information, consuption, and invetment.

Impact of finance
qGDP
qCPI
qSM
qi
qOil
qect.

Financial system
Definition: FS is ….


Function of FS
qTransfering money
qShare risk
q..
q..
q..
q..
q..

Form of FS
Great variety of FS in different countries.
e.g.
qUSA
qGermany

Spending sector (Macroeconomic)
qHousehold
qBusiness Firms
qGovernment
qForeign Sector

Surplus spending units
qHas more cash income flow than expenditure
qOther terms for SU – saver, lender,…
qThe SU may buy financial assets, hold more money, …
qUsually Household and foreign sectors

Deficit spending units
qHas more expenditures on consuption and real goods
qMust participate in the financial sector
qBorrower, demander of loanable funds, and seller of securities

Financial claims
Contracts related to the transfer of funds
Financial assets and liabilities, securities, loans and financial investment
Every FA an offsetting FL

The flow of funds diagram
Funds
Funds
Surplus Spending
 Unit (SSU)
Deficit Spending
Unit (DSU)
Financial Assets = Financial Claims

Financial intermediaries
Channeling funds between surplus and deficit agents (Banks, Insurance companies, ….).


Major function of intermediaries
qMaturity transforming
qRisk transforming
qConvenience denomination

Adventagies of FI
qCost advantage:
q..
q..
q..
q..
qMarket failure protection

DIRECT FINANCING (Markets)
Deficit Spending
Unit (DSU)
Surplus Spending
 Unit (SSU)
INDIRECT FINANCIAL INVESTMENT
OR INTERMEDIATION FINANCING
Brokers
Dealers
 Intermediaries
Funds
Funds
Funds
Funds
The flow of funds diagram

>

Thank you for your attention