Financial Management: Principles and Applications, 13/e

2.2 The Financial Marketplace: Financial Institutions

The financial markets facilitate the movement of money from savers, who tend to be individuals, to borrowers, who tend to be businesses. In return for the use of the savers’ money, the borrowers provide the savers with a return on their investment.

As shown in Figure 2.1, the institutions that make up the financial marketplace consist of commercial banks, finance companies, insurance companies, investment banks, and investment companies. We call these institutions that help bring together individuals and businesses financial intermediaries because these institutions stand between those that have money to invest and those that need money. Financial markets are often described by the maturities ...