L1N_-_The_Financial_Markets_T1_
Deviation security market
Financial Markets
Markets are where products (assets) are traded. There are buyers and sellers of these assets. Money serves as the medium of exchange.
What products are traded define the various markets.
In the financial markets, financial assets are traded.
An asset is any possession or right that has value in an exchange (that is, in a trade). Real assets are tangible assets (such as physical assets and inventories) and intangible assets (such as brand name and know how).
They are the means by which firms create and provide goods and services.
These productive assets produce cash flows (income) into the future but have to be purchased now. They are sold in the markets for real assets.
Income generated from real assets is allocated to investors who hold claims to this income.
Financial assets are claims on real assets and on the cash those assets will generate. They are created when investors provide money to the firm.
The holders of these financial assets are entitled to some rights. Financial assets are intangible assets.
Financial assets define the allocation of income or wealth among investors.
Also called: securities or instruments or claims or contracts
Traded in the financial markets (where investors can trade the financial securities issued by the firm).
Give rise to liabilities for the firm, but are assets in the hands of investors.
An investment is a commitment of current resources in the expectation of getting future benefits.
