Funds Flow Through the Financial System from Surplus Entities to Deficit Entities in Various Ways. for Example, Funds May Flow Via Financial Intermediaries or Through Equity Markets or Through Debt Markets. How Do You Account for the Existence of ...

Topics: Debt, Finance, Investment Pages: 4 (1302 words) Published: October 18, 2008
Why do entities choose the type of investment or source of funds that they do? Are there any other choices? Do these other choices exist? Why do they exist? Funds may travel from surplus entities to deficit entities, but why does this happen, and how. Surplus entities choose the type of investment to financially benefit themselves, as do deficit entities, choose the best finance of funds available to them with the lowest penalty. Not always is this choice available. Most of the types of investment and finance available has strict conditions, this is why these entities choose what is available to them. These funds may flow through primary and secondary markets. The finance may be debt or equity. Who really knows the best decision for the flow of funds? These days there are so many options, but most have one common denominator. The bank.

The financial system consists of funds flowing from surplus entities to deficit entities. These funds are a vital tool for surplus entities, as they can create greater wealth. These funds are also equally, if not more vital, for deficit entities. Deficit entities use these funds to finance their plans. The financial system is ever more becoming a fact of human existence, and the biggest part of this financial system, is the flow of funds from surplus entities to deficit entities. To match with the growing need for the use of the financial system, there is a growing diversity in the way these funds can flow.

In 2008, where financial systems are used on a daily, if not hourly basis, we find that these systems are continually improving into a more ‘modern’ financial system. This can be seen with the enormous boost in the number of automatic teller machines (ATMs) from 4600 in 1990 to over 21 000 by 2005 and the even more astonishing boost in the number of EFTPOS terminals in the same time period from 15 500 to over 465 000. The introduction of money and the development of local markets to trade goods were the genesis of...
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