Discuss Financial system | Functions of personal financial system

By sambit_ar | Date: 12/08/2222

Every country's financial system facilitates the raising of funds for the economic growth and development of that country and its residents. The financial system bridges the gap between those with surplus funds and those with deficit funds so that available funds can be better utilized by individuals, businesses or corporations.

Financial institutions provide a common platform for borrowers and investors so that investors can invest their money and borrowers can manage funds.

Functions of personal financial system

Some financial resources are scattered throughout the economy. Which requires a financial system that can enable timely deployment of these resources in various parts of the economy at the right time A well-functioning financial system is used to perform many functions. Here are some of them

Facilitating Payments:

A convenience payment constitutes a bribe, which usually expedites the administrative process. Which generally makes routine transaction or service performance easier and faster

Risk Management:

Risk management is the process of identifying, reducing or controlling risk. An organization needs to minimize and control the impact of negative events to maximize positive events. That is one type of risk management

Determination of equilibrium interest rate:

The rate of interest depends on the demand for money and the supply of money. The equilibrium interest rate is set at the level that will equalize the real money supply with the real money demand. At equilibrium interest rates the quantity of money demanded equals the quantity of money supplied at that interest rate. By realigning the money supply, the Federal Reserve can change the equilibrium interest rate. Equilibrium interest rates can be determined by money demand and money supply graphs.

Efficient capital allocation:

The Allocational efficiency is a characteristic of an efficient market in which capital is allocated in a way that is most beneficial to the parties involved. Allocational efficiency represents an optimal distribution of goods and services to consumers in an economy.for beneficial

Allocational efficiency long-term investment returns.Where management decides to spend money ultimately determines how quickly the company will grow and how much money is returned to shareholders.

Raising equity:

The Simpel, equity raising refers to the process of raising fund by trading shareholding interests in an enterprise. In practice, shares are issued to investors to support a enterprise’s business operations, especially during a company’s start-up new stage.

IPO. Virtually all companies start out life in privates hand, owned by founder, staff and early investors that specifically look to inject funding in small but fast-growing businesses

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Equity Raising - How Is It Done - Salzworth

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