What are financial services? Simply put, they are the economic services that the finance industry provides. These services include banks, credit-card companies, and credit unions. However, there are many more. In this article, we will focus on a few key terms related to financial services. Hopefully, you will be able to better understand what these services entail. Despite the broad definition of financial services, we will discuss some of the most common types.
All activities involved in the transformation of savings into investment
Savings and investment refer to the processes of mobilizing and allocating money. Savings and investment are different, but both involve the mobilization and allocation of savings. Banks and financial institutions offer financial services, and other types of organizations provide such services. Financial services also help in financial literacy training, loan management, and asset management. Through financial services, the ideal savings of individuals can be channeled into productive investment.
Source of finance
A business has two main types of sources of finance: external and internal. The former involves selling business products and is often used when an enterprise needs to raise cash quickly. The latter involves selling off surplus inventory and machinery to meet immediate capital needs. The benefits of selling off these assets are numerous. Listed below are three ways to use these assets as sources of finance. Listed below are the benefits of each type of source of finance. A business can benefit from one source or more, depending on its needs.
Source of savings
Many sources of savings have the same characteristics: low-income, low-risk clients. Low-income savers, for example, have multiple small accounts that provide a stable source of funds. Experienced savers, however, may have substantial balances in other savings institutions and are more willing to sacrifice liquidity for security and rates of return. These customers are loyal only to the institution that offers the highest return in their local market.
Source of investment
An investment is a type of debt that pays fixed interest. Debt is available in two forms, conversion and non-conversion. In the latter case, the investor must redeem the debt at the maturity date. Debt services provide both conversion and non-conversion services. Debt services are very beneficial to people who wish to invest in a business, but lack the time and resources to conduct their own research. Whether to invest in a debenture or not depends on several factors.
Functions of financial services
The financial services are the activities of banks, financial institutions, insurance companies, stock brokerages, and government-sponsored enterprises. They mobilize savings, distribute funds, and provide specialized services. Among other things, they provide credit. In addition, they monitor the use of funds and transform risks. The financial services institutions provide these functions in the form of capital and investments. In addition, financial markets help match savers and borrowers directly and allow the trading of financial instruments. The prices of these financial services reflect the demand and supply in the financial markets.