Corporation Acquisition Analysis

A-Level: Business Studies

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Financial institutions are critical to a smooth functioning economy. Firstly, financial institutions (but more precisely deposit-taking institutions (DTIs), credit-card providers and debit-card providers) process payments and settlements, without which the undertaking of commercial transactions would be extremely difficult. Secondly, financial institutions act as intermediaries channeling funds from those who are seeking a return on those funds, to those who seek to employ those funds. Without such intermediaries, the costs to many potential lenders and borrowers (particularly the small ones) of finding an acceptable match would be extremely high. Finally, financial institutions manage risk across the economy, evaluating the riskiness of loan requests, pricing the risk accordingly and diversifying the risk across the economy. Thus, the importance of financial institutions in the day-to-day life of consumers and firms is considerable.
With the advent of new technologies such as internet, modern communication methods and transportation, world is becoming a global village, thereby, increasing the importance of financial institutions in the global economy.

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