Business Report: Importance of Flow of Fund Function

Business Report

The Importance of The Flow of Funds Function

of A Financial System

ZIJIE HU

Student ID: 26221810

Tutorial time: Monday 4pm

Tutor's name: Yen Nguyen

Word count: 2645

Table of content

Table of content………………………………………………………………………2

Executive Summary………………………………………………………………….3

1.0 Introduction……………………………………………………………………...4

2.0 Flow of Funds Function…………………………………………………………4

3.1 Direct Financing Channel…………………………………………………..5

3.2.1 Direct Financing Market…………………………………………...5

3.2.2 Bill Acceptance Arrangment……………………………………….6

3.2.3 Funds Management…………………………………………………6

3.2.4 The Role of Financing Institution in Direct Financing…………...7

3.2 Indirect Financing Channel………………………………………………..9

3.3.5 Authorised Deposit-taking Institutions (ADIs)…………………...9

3.3.6 The Indirect Financing Role of ADIs……………………………...9

3.3.7 Importance of Authorised Deposit-taking Institution…………..10

3.0 Importance of The Flow of Funds Function………………………………….11

4.3 General……………………………………………………………………..11

4.4 Focus on Australia…………………………………………………………12

4.0 Conclusion……………………………………………………………………….13

5.0 Reference List…………………………………………………………………...15

Executive Summary

This report shows how does the flow of funds function of a financial system work and its importance. The purpose of the flow of funds function is to achieve an efficient use of funds a higher return with taking risk into account.

The funds flow function will be explained in two basic methods: direct financing and indirect financing. Direct financing, also known as the flow of funds arranged by the market process, in which deficit raise funds directly from surplus units, normally through security issuance. However, in indirect financing, deposit-taking institutions play a significant role. Deposit-taking institutions act as an intermediary that borrow money from surplus units and make loans to...