Financial Service Corporation
Financial service corporation is an entity that provides services such as investment banks, brokers, savings, loans to the public, and so on. The entity aims to provide a wide range of financial services to the public.
Financial service is like matching the people who need cash and the people who have surplus cash. The entity will provide loans to individuals or businesses who need extra cash to expand their business or for other purposes. The borrower must pay back the principal plus interest over time. The interest here is the income for the financial corporation, which the borrower needs to pay for.
On the other hand, an individual or business that has surplus cash can place a deposit with the financial service entity. As the result, they will receive interest income in exchange for the entity to use their cash.
The interest that the entity pay to the deposit must be lower than the interest charged on loan. The difference is simply the profit for them.
Financial Service Example
There are many kinds of financial service entities. They have included investment banks, stockbrokers, insurance companies, credit card company, and so on.
Bank mainly provide financial services such as loan and money deposit to the customer. Bank is separated into commercial bank, investment bank, credit union, and so on. Besides loans and deposits, they also provide other services such as letters of credit, bank guarantees, and many others.
Insurance companies provide insurance services such as health insurance, life insurance, and property insurance.
Important of Financial Service Corporation
Financial service entity plays an important role in a company economy. It helps small and medium businesses to raise capital to start and expand businesses. Investors can invest their cash in low-risk investments. Both services are the core of the economy, it ensures the cash flow in the market. It is the main place for the cash flow of capital and liquidity.
Financial entities help to attract foreign direct investment. Any huge investment or purchase will be made through the bank. Bank also a middle man to make international trade available. Various parties will rely on the bank rather than the others.
Type of Financial Service Corporation
Financial Service can separate into many entities which depend on the objective and service provided:
- Banking: it is the entity that provides loans and receives deposits from the customers. The bank will provide loans to customers who need money to invest in their business. In exchange, the bank charge interest over the loan provided. It also receives cash deposits from the customer which will generate some interest for them. The interest that bank charges is always higher than the interest provided.
- Advisory: It is the company that provides a wide variety rank of services to the customer such as due diligence, business valuation, and so on.
- Mutual Fund: is the company that collects funds from various investors and makes investments in bonds and stock of many other companies. The entity is diversify the investment to minimize risk while reducing the profit as well.
- Insurance: is the entity that provides insurance service to the customers.