What is the financial system?
The financial system concerns a set of components and mechanisms such as monetary policies, insurance and banks that allow economic transactions to occur. There are many types of financial systems that exist at different levels of society, from systems used to operate transactions within the company to those that facilitate international financial transactions. Without these systems, many normal activities would become difficult, if not impossible, such as trading and investing. Money, credit cards and checks are examples of components that may exist in the financial system. The accounting method, audit service and financing procedures are examples of mechanisms that facilitate the operation of these systems. The absence of a financial system would cause drastic changes in people may not have access to the loan, there are no money products that should be exchanged for goods, and there are no policy regulating complex transactions.
businesses generally exist to make money. Business thereforeUsually they must have its own internal financial system. This can determine how transactions are approved, taken into account, and how plans are for current assets. The trading system can reflect the functioning of a larger system, but is much less complex.
The national financial system is a system that affects not only individuals in the country, but also other nations. Since each country tends to interact with some other countries, it is necessary to have a functioning global financial system. This determines means for acts such as conversion and transfer of money. It also provides procedure for the application and granting the loan interdental entities. There must be an established method for these types of international transactions that allows financial institutions to interact.
Although each nation generally has a financial system, not all of them work the same. For example, in some countries, the use of credit cards is common. This part of the system allows people to make a purchasey without money if they agree to repay funds in small amounts and add interest. In other less developed countries, credit cards may not be used at all.
Some financial systems are weak and insufficient. This can cause many problems such as inflation and excessive debt. Systems such as these are also commonly susceptible to criminals with corrupt and fraudulent intentions. The main problem with non -standard national financial systems is that they often create problems that have far -reaching effects, which can lead to a global financial crisis, such as the one that can be seen at the beginning of the 21st century.