Chapter 1. Finance and Business Finance

Chapter 1. Finance and Business Finance. Students will learn from this chapter about different services provided by the bank to its clients. Besides this, they also can gain knowledge about the Bank’s responsibilities towards the clients and the client’s responsibilities towards the Bank. Also, students will be able to realize the importance of account secrecy.

The main ideology of banks is the relationship and belief between the Bank and the Client. If any step of each party is against this belief and trust the relationship between them will be disrupted which will cause the business to be dissolved.

Chapter 1. Finance and Business Finance

Even though trying for a long time  Abed couldn’t convince his friend opening an account in a bank, he always prefers to keep his money in Municipal Corporation due to certain procedures and interest rates. But some ago he had withdrawn a certain amount of money from the bank that he needed urgently to purchase different goods and decoration items. But Rahim failed to withdraw the money in time though he submitted the application and requested to the treasurer of Phulpur Co-operative repeatedly.

An entity whose income exceeds its expenditure can lend or invest the excess income to help that excess income produce more income in the future. Though on the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower—a financial intermediary such as a bank—or buy notes or bonds (corporate bonds, government bonds, or mutual bonds) in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary earns the difference for arranging the loan.

A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance) and by a wide variety of other organizations such as schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments and methodologies, with consideration to their institutional setting.

Finance is one of the most important aspects of business management and includes analysis related to the use and acquisition of funds for the enterprise.

Incorporate finance, a company’s capital structure is the total mix of financing methods it uses to raise funds. One method is debt financing, which includes bank loans and bond sales. Another method is equity financing – the sale of stock by a company to investors, the original shareholders (they own a portion of the business) of a share.

Ownership of a share gives the shareholder certain contractual rights and powers, which typically include the right to receive declared dividends and to vote the proxy on important matters (e.g., board elections). The owners of both bonds (either government bonds or corporate bonds) and stock (whether its preferred stock or common stock), may be institutional investors – financial institutions such as investment banks and pension funds or private individuals, called private investors or retail investors.

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