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Category: Business and Industry
Date Submitted: 08/27/2015 02:41 AM
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...