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CASH FLOW
Cash flow is the net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company liquid assets are increasing,enabling it to settle debts, reinvest in its business, return money to shareholders, payexpenses and provide a buffer against future financial challenges. Negative cash flow
indicates that a companys liquid assets are decreasing. Net cash flow is distinguishedfrom net income, which includes accounts receivable and other items for which payment
has not actually been received. Cash flow is used to assess the quality of a company
income, that is, how liquid it is, which can indicate whether the company is positioned to
remain solvent
Cash Flow Statement
Often called the "statement of cash flows," the cash flow statement indicates whether a
company& income is languishing in the form of IOUs – not a sustainable situation in the
long term – or is translating into cash flow. Even very profitable companies, as measured by
their net incomes, can become insolvent if they do not have the cash and cash-
equivalents to settle short-term liabilities. If a company's profit is tied up in accounts
receivable, prepaid expenses and inventory, it may not have the liquidity to survive a
downturn in its business or a lawsuit. Cash flow determines the quality of a company's
income; if net cash flow is less than net income, that could be a cause for concern.
Cash flow statements are divided into three categories: operating cash flow, investing cash
flow and financing cash flow. Operating cash flows are those related to a company's
operations, that is, its day-to- day business. Investing cash flows relate to its investments in
businesses through acquisition; in long-term assets, such as towers for a telecom provider;
and in securities. Financing cash flows relate to a company's investors and
creditors: dividends paid to stockholders would be recorded here, as would cash proceeds
from issuing bonds
Free cash flow is defined as a company's operating cash flow minus capital expenditures.
This is the money that can be used to pay dividends, buy back stock, pay off debt and
expand the business
CATEGORIES OF CASH FLOW
The three categories of cash flows are operating activities, investing activities, and financing
activities. Operating activities include cash activities related to net income.
Financial Statement Analysis
Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions.
These statements include the incomestatement, balance sheet, statement of cash
flows, and a statement of retained earnings
(Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a
company's financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and astatement of retained earnings.
Financial statement analysis is a method or process involving specific techniques for evaluating
risks, performance, financial health, and future prospects of an organization. [1]
It is used by a variety of stakeholders, such as credit and equity investors, the government, the
public, and decision-makers within the organization. These stakeholders have different interests and
apply a variety of different techniques to meet their needs. For example, equity investors are
interested in the long-term earnings power of the organization and perhaps the sustainability and
growth of dividend payments. Creditors want to ensure the interest and principal is paid on the
organizations debt securities (e.g., bonds) when due.
Common methods of financial statement analysis include fundamental analysis, DuPont analysis,
horizontal and vertical analysis and the use of financial ratios. Historical information combined with a
series of assumptions and adjustments to the financial information may be used to project future
performance. The Chartered Financial Analyst designation is available for professional financial
analysts)
Financial statement analysis involves the identification of the following items for a company's financial
statements over a series of reporting periods:
rends. Create trend lines for key items in the financial statements over multiple time periods, to see
how the company is performing. Typical trend lines are for revenues, the gross margin, net profits,
cash, accounts receivable, and debt.
Proportion analysis. An array of ratios are available for discerning the relationship between the size of
various accounts in the financial statements. For example, you can calculate a company's quick ratio
to estimate its ability to pay its immediate liabilities, or its debt to equity ratio to see if it has taken on
too much debt. These analyses are frequently between the revenues and expenses listed on the
income statement and the assets, liabilities, and equity accounts listed on the balance sheet.
Financial statement analysis is an exceptionally powerful tool for a variety of users of financial
statements, each having different objectives in learning about the financial circumstances of the
entity.
Users of Financial Statement Analysis
There are a number of users of financial statement analysis. They are:
Creditors. Anyone who has lent funds to a company is interested in its ability to pay back the debt,
and so will focus on various cash flow measures.
Investors. Both current and prospective investors examine financial statements to learn about a
company's ability to continue issuing dividends, or to generate cash flow, or to continue growing at its
historical rate (depending upon their investment philisophies).
Management. The company controller prepares an ongoing analysis of the company's financial results,
particularly in relation to a number of operational metrics that are not seen by outside entities (such
as the cost per delivery, cost per distribution channel, profit by product, and so forth).
Regulatory authorities. If a company is publicly held, its financial statements are examined by the
Securities and Exchange Commission (if the company files in the United States) to see if its
statements conform to the various accounting standards and the rules of the SEC.
Methods of Financial Statement Analysis
There are two key methods for analyzing financial statements. The first method is the use of
horizontal and vertical analysis. Horizontal analysis is the comparison of financial information over a
series of reporting periods, while vertical analysis is the proportional analysis of a financial statement,
where each line item on a financial statement is listed as a percentage of another item. Typically, this
means that every line item on an income statement is stated as a percentage of gross sales, while
every line item on a balance sheet is stated as a percentage of total assets. Thus, horizontal analysis
is the review of the results of multiple time periods, whiile vertical analysis is the review of the
proportion of accounts to each other within a single period. The following links will direct you to more
information about horizontal and vertical analyis:
Horizontal analysis
Vertical analysis
The second method for analyzing financial statements is the use of many kinds of ratios. You use
ratios to calculate the relative size of one number in relation to another. After you calculate a ratio,
you can then compare it to the same ratio calculated for a prior period, or that is based on an industry
average, to see if the company is performing in accordance with expectations. In a typical financial
statement analysis, most ratios will be within expectations, while a small number will flag potential
problems that will attract the attention of the reviewer.
There are several general categories of ratios, each designed to examine a different aspect of a
company's performance. The general groups of ratios are:
1. Liquidity ratios. This is the most fundamentally important set of ratios, because they measure
the ability of a company to remain in business. Click the following links for a thorough review
of each ratio.
Cash coverage ratio. Shows the amount of cash available to pay interest.
Current ratio. Measures the amount of liquidity available to pay for current liabilities.
Quick ratio. The same as the current ratio, but does not include inventory.
Liquidity index. Measures the amount of time required to convert assets into cash.
2. Activity ratios. These ratios are a strong indicator of the quality of management, since they
reveal how well management is utilizing company resources. Click the following links for a
thorough review of each ratio.
Accounts payable turnover ratio. Measures the speed with which a company pays its suppliers.
Accounts receivable turnover ratio. Measures a company's ability to collect accounts
receivable.
Fixed asset turnover ratio. Measures a company's ability to generate sales from a certain base
of fixed assets.
Inventory turnover ratio. Measures the amount of inventory needed to support a given level of
sales.
Sales to working capital ratio. Shows the amount of working capital required to support a
given amount of sales.
Working capital turnover ratio. Measures a company's ability to generate sales from a certain
base of working capital.
3. Leverage ratios. These ratios reveal the extent to which a company is relying upon debt to
fund its operations, and its ability to pay back the debt. Click the following links for a thorough
review of each ratio.
Debt to equity ratio. Shows the extent to which management is willing to fund operations with
debt, rather than equity.
Debt service coverage ratio. Reveals the ability of a company to pay its debt obligations.
Fixed charge coverage. Shows the ability of a company to pay for its fixed costs.
4. Profitability ratios. These ratios measure how well a company performs in generating a profit.
Click the following links for a thorough review of each ratio.
Breakeven point. Reveals the sales level at which a company breaks even.
Contribution margin ratio. Shows the profits left after variable costs are subtracted from sales.
Gross profit ratio. Shows revenues minus the cost of goods sold, as a proportion of sales.
Margin of safety. Calculates the amount by which sales must drop before a company reaches
its breakeven point.
Net profit ratio. Calculates the amount of profit after taxes and all expenses have been
deducted from net sales.
Return on equity. Shows company profit as a percentage of equity.
Return on net assets. Shows company profits as a percentage of fixed assets and working
capital.
Return on operating assets. Shows company profit as percentage of assets utilized.
Problems with Financial Statement Analysis
While financial statement analysis is an excellent tool, there are several issues to be aware of that can
interfere with your interpretation of the analysis results. These issues are:
Comparability between periods. The company preparing the financial statements may have changed
the accounts in which it stores financial information, so that results may differ from period to period.
For example, an expense may appear in the cost of goods sold in one period, and in administrative
expenses in another period.
Comparability between companies. An analyst frequently compares the financial ratios of different
companies in order to see how they match up against each other. However, each company may
aggregate financial information differently, so that the results of their ratios are not really comparable.
This can lead an analyst to draw incorrect conclusions about the results of a company in comparison to
its competitors.
Operational information. Financial analysis only reviews a company's financial information, not its
operational information, so you cannot see a variety of key indicators of future performance, such as
the size of the order backlog, or changes in warranty claims. Thus, financial analysis only presents
part of the total picture
.
FREE CASH FLOW
In corporate finance, free cash flow (FCF) or free cash flow to firm (FCFF) is a way of looking at a
business's cash flow to see what is available for distribution among all thesecurities holders of
a corporate entity. This may be useful to parties such as equity holders, debt holders, preferred
stock holders, and convertible security holders when they want to see how much cash can be
extracted from a company without causing issues to its operations.
Free cash flow can be calculated in various ways, depending on audience and available data. A
common measure is to take the earnings before interest and taxes multiplied by (1 - tax rate),
add depreciation and amortization, and then subtract changes in working capital and capital
expenditure. Depending on the audience, a number of refinements and adjustments may also be
made to try to eliminate distortions.
Free cash flow may be different from net income, as free cash flow takes into account the purchase
of capital goods and changes in working capital
USE OF CASH FLOW
by establishing how much cash a company has after paying its bills for ongoing activities
and growth, FCF is a measure that aims to cut through the arbitrariness and
"guesstimations" involved in reported earnings. Regardless of whether a cash outlay is
counted as an expense in the calculation of income or turned into an asset on the balance
sheet, free cash flow tracks the money.
To calculate FCF, make a beeline for the company's cash flow statement and balance
sheet. There you will find the item cash flow from operations (also referred to as "operating
cash"). From this number, subtract estimated capital expenditure required for current
operations:
Cash Flow From Operations (Operating Cash)
- Capital Expenditure
-- -- -- -- -- -- -- -- -- -- -- -- -- --
= Free Cash Flow
To do it another way, grab the income statement and balance sheet. Start with net
income and add back charges for depreciation and amortization. Make an additional
adjustment for changes in working capital, which is done by subtracting current liabilities
from current assets. Then subtract capital expenditure (or spending on plants and
equipment):
Net income
+ Depreciation/Amortization
- Change in Working Capital
- Capital Expenditure
-- -- -- -- -- -- -- -- -- -- -- -- -- --
= Free Cash Flow
It might seem odd to add back depreciation/amortization since it accounts for capital
spending. The reasoning behind the adjustment is that free cash flow is meant to measure
money being spent right now, not transactions that happened in the past. This makes FCF a
useful instrument for identifying growing companies with high up-front costs, which may eat
into earnings now but have the potential to pay off later.
FINANCIAL INTERMEDIARIES
Financial intermediaries issue (indirect) debt of their own to buy the (primary) debt of others.
Their issues attract funds from alternative expenditures by nonfinancial spending units on
consumption, tangible investment, or primary debt. Their lending directs the flow of funds to
expenditure by borrowers on consumption, tangible investment, or primary debt. They
intermediate between the sources of funds that flow to them and the ultimate users of these
funds.
The intermediaries may be identified by their balance sheets, which show a high proportion of
financial to tangible assets and of indirect debt to equity. Their income statements report high
ratios of income from interest and dividends to total income and of expense for interest and
dividends to total expense.
There are bank (monetary) intermediaries and nonbank (nonmonetary) intermediaries. The
former are commercial banks and the central bank, together constituting the monetary system,
which issues indirect debt, subject to unique regulations, in the form of money. The indirect debt
which is issued by nonbank intermediaries is not used as a means of payment.
Both types of intermediary are to be distinguished from other institutions that transmit funds
from ultimate lenders to ultimate borrowers. These other institutions do not issue their own
indirect debt in soliciting funds. They include security dealers, brokers, and exchanges.
Types of intermediary . The principal nonbank financial intermediaries in the United States are
the following:
Depositary intermediaries
Credit unions
Mutual savings banks
Savings and loan associations
Insurance and pension intermediaries
Casualty and miscellaneous insurance companies
Fire and marine insurance companies
Fraternal insurance organizations
Government retirement, pension, insurance, and
social security funds
Group health insurance
Private life insurance companies
Private noninsured pension funds
Savings bank life insurance departments
Finance companies
Factors
Mortgage companies
Personal finance companies
Sales finance companies
Investment companies
Closed-end companies
Face-amount certificate companies
Industrial loan companies
Open-end companies
Agricultural credit organizations
Federal land banks
Livestock loan companies
National farm loan associations
Production credit associations
Government lending institutions
Banks for cooperatives
Federal Home Loan Banks
Federal intermediate credit banks
Federal National Mortgage Association
Federal Savings and Loan Insurance Corporation
CASH FLOW
Cash flow is the net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company liquid assets are increasing,enabling it to settle debts, reinvest in its business, return money to shareholders, payexpenses and provide a buffer against future financial challenges. Negative cash flow
indicates that a companys liquid assets are decreasing. Net cash flow is distinguishedfrom net income, which includes accounts receivable and other items for which payment
has not actually been received. Cash flow is used to assess the quality of a company
income, that is, how liquid it is, which can indicate whether the company is positioned to
remain solvent
Cash Flow Statement
Often called the "statement of cash flows," the cash flow statement indicates whether a
company& income is languishing in the form of IOUs – not a sustainable situation in the
long term – or is translating into cash flow. Even very profitable companies, as measured by
their net incomes, can become insolvent if they do not have the cash and cash-
equivalents to settle short-term liabilities. If a company's profit is tied up in accounts
receivable, prepaid expenses and inventory, it may not have the liquidity to survive a
downturn in its business or a lawsuit. Cash flow determines the quality of a company's
income; if net cash flow is less than net income, that could be a cause for concern.
Cash flow statements are divided into three categories: operating cash flow, investing cash
flow and financing cash flow. Operating cash flows are those related to a company's
operations, that is, its day-to- day business. Investing cash flows relate to its investments in
businesses through acquisition; in long-term assets, such as towers for a telecom provider;
and in securities. Financing cash flows relate to a company's investors and
creditors: dividends paid to stockholders would be recorded here, as would cash proceeds
from issuing bonds
Free cash flow is defined as a company's operating cash flow minus capital expenditures.
This is the money that can be used to pay dividends, buy back stock, pay off debt and
expand the business
CATEGORIES OF CASH FLOW
The three categories of cash flows are operating activities, investing activities, and financing
activities. Operating activities include cash activities related to net income.
Financial Statement Analysis
Financial statement analysis (or financial analysis) is the process of reviewing and
analyzing a company's financial statements to make better economic decisions.
These statements include the incomestatement, balance sheet, statement of cash
flows, and a statement of retained earnings
(Financial statement analysis (or financial analysis) is the process of reviewing and analyzing a
company's financial statements to make better economic decisions. These statements include
the income statement, balance sheet, statement of cash flows, and astatement of retained earnings.
Financial statement analysis is a method or process involving specific techniques for evaluating
risks, performance, financial health, and future prospects of an organization. [1]
It is used by a variety of stakeholders, such as credit and equity investors, the government, the
public, and decision-makers within the organization. These stakeholders have different interests and
apply a variety of different techniques to meet their needs. For example, equity investors are
interested in the long-term earnings power of the organization and perhaps the sustainability and
growth of dividend payments. Creditors want to ensure the interest and principal is paid on the
organizations debt securities (e.g., bonds) when due.
Common methods of financial statement analysis include fundamental analysis, DuPont analysis,
horizontal and vertical analysis and the use of financial ratios. Historical information combined with a
series of assumptions and adjustments to the financial information may be used to project future
performance. The Chartered Financial Analyst designation is available for professional financial
analysts)
Financial statement analysis involves the identification of the following items for a company's financial
statements over a series of reporting periods:
rends. Create trend lines for key items in the financial statements over multiple time periods, to see
how the company is performing. Typical trend lines are for revenues, the gross margin, net profits,
cash, accounts receivable, and debt.
Proportion analysis. An array of ratios are available for discerning the relationship between the size of
various accounts in the financial statements. For example, you can calculate a company's quick ratio
to estimate its ability to pay its immediate liabilities, or its debt to equity ratio to see if it has taken on
too much debt. These analyses are frequently between the revenues and expenses listed on the
income statement and the assets, liabilities, and equity accounts listed on the balance sheet.
Financial statement analysis is an exceptionally powerful tool for a variety of users of financial
statements, each having different objectives in learning about the financial circumstances of the
entity.
Users of Financial Statement Analysis
There are a number of users of financial statement analysis. They are:
Creditors. Anyone who has lent funds to a company is interested in its ability to pay back the debt,
and so will focus on various cash flow measures.
Investors. Both current and prospective investors examine financial statements to learn about a
company's ability to continue issuing dividends, or to generate cash flow, or to continue growing at its
historical rate (depending upon their investment philisophies).
Management. The company controller prepares an ongoing analysis of the company's financial results,
particularly in relation to a number of operational metrics that are not seen by outside entities (such
as the cost per delivery, cost per distribution channel, profit by product, and so forth).
Regulatory authorities. If a company is publicly held, its financial statements are examined by the
Securities and Exchange Commission (if the company files in the United States) to see if its
statements conform to the various accounting standards and the rules of the SEC.
Methods of Financial Statement Analysis
There are two key methods for analyzing financial statements. The first method is the use of
horizontal and vertical analysis. Horizontal analysis is the comparison of financial information over a
series of reporting periods, while vertical analysis is the proportional analysis of a financial statement,
where each line item on a financial statement is listed as a percentage of another item. Typically, this
means that every line item on an income statement is stated as a percentage of gross sales, while
every line item on a balance sheet is stated as a percentage of total assets. Thus, horizontal analysis
is the review of the results of multiple time periods, whiile vertical analysis is the review of the
proportion of accounts to each other within a single period. The following links will direct you to more
information about horizontal and vertical analyis:
Horizontal analysis
Vertical analysis
The second method for analyzing financial statements is the use of many kinds of ratios. You use
ratios to calculate the relative size of one number in relation to another. After you calculate a ratio,
you can then compare it to the same ratio calculated for a prior period, or that is based on an industry
average, to see if the company is performing in accordance with expectations. In a typical financial
statement analysis, most ratios will be within expectations, while a small number will flag potential
problems that will attract the attention of the reviewer.
There are several general categories of ratios, each designed to examine a different aspect of a
company's performance. The general groups of ratios are:
1. Liquidity ratios. This is the most fundamentally important set of ratios, because they measure
the ability of a company to remain in business. Click the following links for a thorough review
of each ratio.
Cash coverage ratio. Shows the amount of cash available to pay interest.
Current ratio. Measures the amount of liquidity available to pay for current liabilities.
Quick ratio. The same as the current ratio, but does not include inventory.
Liquidity index. Measures the amount of time required to convert assets into cash.
2. Activity ratios. These ratios are a strong indicator of the quality of management, since they
reveal how well management is utilizing company resources. Click the following links for a
thorough review of each ratio.
Accounts payable turnover ratio. Measures the speed with which a company pays its suppliers.
Accounts receivable turnover ratio. Measures a company's ability to collect accounts
receivable.
Fixed asset turnover ratio. Measures a company's ability to generate sales from a certain base
of fixed assets.
Inventory turnover ratio. Measures the amount of inventory needed to support a given level of
sales.
Sales to working capital ratio. Shows the amount of working capital required to support a
given amount of sales.
Working capital turnover ratio. Measures a company's ability to generate sales from a certain
base of working capital.
3. Leverage ratios. These ratios reveal the extent to which a company is relying upon debt to
fund its operations, and its ability to pay back the debt. Click the following links for a thorough
review of each ratio.
Debt to equity ratio. Shows the extent to which management is willing to fund operations with
debt, rather than equity.
Debt service coverage ratio. Reveals the ability of a company to pay its debt obligations.
Fixed charge coverage. Shows the ability of a company to pay for its fixed costs.
4. Profitability ratios. These ratios measure how well a company performs in generating a profit.
Click the following links for a thorough review of each ratio.
Breakeven point. Reveals the sales level at which a company breaks even.
Contribution margin ratio. Shows the profits left after variable costs are subtracted from sales.
Gross profit ratio. Shows revenues minus the cost of goods sold, as a proportion of sales.
Margin of safety. Calculates the amount by which sales must drop before a company reaches
its breakeven point.
Net profit ratio. Calculates the amount of profit after taxes and all expenses have been
deducted from net sales.
Return on equity. Shows company profit as a percentage of equity.
Return on net assets. Shows company profits as a percentage of fixed assets and working
capital.
Return on operating assets. Shows company profit as percentage of assets utilized.
Problems with Financial Statement Analysis
While financial statement analysis is an excellent tool, there are several issues to be aware of that can
interfere with your interpretation of the analysis results. These issues are:
Comparability between periods. The company preparing the financial statements may have changed
the accounts in which it stores financial information, so that results may differ from period to period.
For example, an expense may appear in the cost of goods sold in one period, and in administrative
expenses in another period.
Comparability between companies. An analyst frequently compares the financial ratios of different
companies in order to see how they match up against each other. However, each company may
aggregate financial information differently, so that the results of their ratios are not really comparable.
This can lead an analyst to draw incorrect conclusions about the results of a company in comparison to
its competitors.
Operational information. Financial analysis only reviews a company's financial information, not its
operational information, so you cannot see a variety of key indicators of future performance, such as
the size of the order backlog, or changes in warranty claims. Thus, financial analysis only presents
part of the total picture
.
FREE CASH FLOW
In corporate finance, free cash flow (FCF) or free cash flow to firm (FCFF) is a way of looking at a
business's cash flow to see what is available for distribution among all thesecurities holders of
a corporate entity. This may be useful to parties such as equity holders, debt holders, preferred
stock holders, and convertible security holders when they want to see how much cash can be
extracted from a company without causing issues to its operations.
Free cash flow can be calculated in various ways, depending on audience and available data. A
common measure is to take the earnings before interest and taxes multiplied by (1 - tax rate),
add depreciation and amortization, and then subtract changes in working capital and capital
expenditure. Depending on the audience, a number of refinements and adjustments may also be
made to try to eliminate distortions.
Free cash flow may be different from net income, as free cash flow takes into account the purchase
of capital goods and changes in working capital
USE OF CASH FLOW
by establishing how much cash a company has after paying its bills for ongoing activities
and growth, FCF is a measure that aims to cut through the arbitrariness and
"guesstimations" involved in reported earnings. Regardless of whether a cash outlay is
counted as an expense in the calculation of income or turned into an asset on the balance
sheet, free cash flow tracks the money.
To calculate FCF, make a beeline for the company's cash flow statement and balance
sheet. There you will find the item cash flow from operations (also referred to as "operating
cash"). From this number, subtract estimated capital expenditure required for current
operations:
Cash Flow From Operations (Operating Cash)
- Capital Expenditure
-- -- -- -- -- -- -- -- -- -- -- -- -- --
= Free Cash Flow
To do it another way, grab the income statement and balance sheet. Start with net
income and add back charges for depreciation and amortization. Make an additional
adjustment for changes in working capital, which is done by subtracting current liabilities
from current assets. Then subtract capital expenditure (or spending on plants and
equipment):
Net income
+ Depreciation/Amortization
- Change in Working Capital
- Capital Expenditure
-- -- -- -- -- -- -- -- -- -- -- -- -- --
= Free Cash Flow
It might seem odd to add back depreciation/amortization since it accounts for capital
spending. The reasoning behind the adjustment is that free cash flow is meant to measure
money being spent right now, not transactions that happened in the past. This makes FCF a
useful instrument for identifying growing companies with high up-front costs, which may eat
into earnings now but have the potential to pay off later.
FINANCIAL INTERMEDIARIES
Financial intermediaries issue (indirect) debt of their own to buy the (primary) debt of others.
Their issues attract funds from alternative expenditures by nonfinancial spending units on
consumption, tangible investment, or primary debt. Their lending directs the flow of funds to
expenditure by borrowers on consumption, tangible investment, or primary debt. They
intermediate between the sources of funds that flow to them and the ultimate users of these
funds.
The intermediaries may be identified by their balance sheets, which show a high proportion of
financial to tangible assets and of indirect debt to equity. Their income statements report high
ratios of income from interest and dividends to total income and of expense for interest and
dividends to total expense.
There are bank (monetary) intermediaries and nonbank (nonmonetary) intermediaries. The
former are commercial banks and the central bank, together constituting the monetary system,
which issues indirect debt, subject to unique regulations, in the form of money. The indirect debt
which is issued by nonbank intermediaries is not used as a means of payment.
Both types of intermediary are to be distinguished from other institutions that transmit funds
from ultimate lenders to ultimate borrowers. These other institutions do not issue their own
indirect debt in soliciting funds. They include security dealers, brokers, and exchanges.
Types of intermediary . The principal nonbank financial intermediaries in the United States are
the following:
Depositary intermediaries
Credit unions
Mutual savings banks
Savings and loan associations
Insurance and pension intermediaries
Casualty and miscellaneous insurance companies
Fire and marine insurance companies
Fraternal insurance organizations
Government retirement, pension, insurance, and
social security funds
Group health insurance
Private life insurance companies
Private noninsured pension funds
Savings bank life insurance departments
Finance companies
Factors
Mortgage companies
Personal finance companies
Sales finance companies
Investment companies
Closed-end companies
Face-amount certificate companies
Industrial loan companies
Open-end companies
Agricultural credit organizations
Federal land banks
Livestock loan companies
National farm loan associations
Production credit associations
Government lending institutions
Banks for cooperatives
Federal Home Loan Banks
Federal intermediate credit banks
Federal National Mortgage Association
Federal Savings and Loan Insurance Corporation
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