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Financial Institutions and Services
Notes 4. Comparing it with others, what is the main difference that you see in the components of
the financial system of developed countries and that of India?
5. What in your opinion is the main reason for having various regulatory authorities in a
financial system? Is the central monetary authority (the representative of the government
itself) unable to control the entire system?
6. Why does business need long-term finance? Explain in brief.
7. Give the advantages of equity shares to:
(a) The Management and
(b) The Shareholders
8. Differentiate between:
(a) Equity shares and preference shares
(b) Shares and debentures
9. Comment on the state of Indian financial system vis a vis its international counterparts.
10. Why might a company choose debt over equity financing?
11. What do you consider as the biggest advantage of financial derivatives?
12. Are asset based securities of any use to general public? If yes, elucidate upon the
benefit/s. If no, to whom and how are they beneficial?
Answers: Self Assessment
1. Foreign Exchange Management Act, 2. repaid
3. long-term 4. financial derivative
5. Shares 6. debentures
7. Time deposits 8. stability
9. financial assets 10. autonomy
11. payment and settlement 12. Fixed Income Securities
13. Demand deposits 14. one year
15. private
1.7 Further Readings
Books Cooper Kersey and Donald R. Fraser, The Financial Market Place, Addison Wesley
Publishing Company (Latest Edition).
Khan M.Y, Indian Financial System, Tata McGraw Hill.
Mandura Jeff, Financial Markets and Institutions, West Publishing Company, New
York.
Meir Kohn, Financial Institutions and Markets, McGraw Hill Publishing Company,
New York.
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