Financial Management: Principles and Applications, 13/e

2.1 The Basic Structure of the U.S. Financial Markets

In Chapter 1, we showed that businesses typically opt to take on the form of a corporation when they need to raise large amounts of capital. In this chapter, we will demonstrate how a corporation raises capital using the U.S. financial markets.

As discussed in Chapter 1, a financial market is any place where money and credit are exchanged. When you take out a car loan from your bank, you participate in the financial markets. Within the financial markets, there are three principal sets of players that interact:

1. Borrowers. Those who need money to finance their purchases. These include businesses that need money to finance their investments or to expand their inventories as well as individuals ...