Financial Institutions and Influence of Government

banks

financial institutions that accept deposits and provide a wide range of financial services including loans, overdrafts and transaction accounts to businesses and individuals

• e.g. Commonwealth Bank providing a small business with a $200,000 loan to purchase new equipment

• e.g. a business using a bank overdraft to manage short term cash flow shortages

investment banks

specialised financial institutions that help businesses raise large amounts of capital, manage mergers and acquisitions and provide financial advisory services Provides services in both borrowing and lending to the business sector. They can customise loans to suit a business and impose stricter or more lenient conditions

• e.g. an investment bank managing a company's Initial Public Offering on the ASX

• e.g. Goldman Sachs advising a large corporation on a multi-billion dollar merger

finance companies

non-bank financial institutions that provide loans, credit and leasing arrangements to businesses and consumers, often with less strict lending criteria than banks

• e.g. a business obtaining vehicle finance through a finance company to purchase a company car fleet

• e.g. a consumer using a finance company to buy furniture on an interest free payment plan

superannuation funds

organisations that manage the retirement savings of employees by investing large pools of money into shares, property, infrastructure and other assets

• e.g. a superannuation fund investing billions of dollars into Australian infrastructure projects like toll roads and airports

• e.g. an industry super fund purchasing shares in ASX listed companies to grow members' retirement savings

life insurance companies

companies that collect regular premiums from policyholders and invest those funds into financial markets to generate returns and meet future claims

• e.g. a life insurance company investing policyholder funds into government bonds and shares

• e.g. an insurance company providing a business with key person insurance to protect against the loss of a critical employee

unit trusts

 investment vehicles that pool money from many individual investors and invest it across a diversified portfolio of assets managed by a professional fund manager

• e.g. an individual investor buying units in a managed fund that invests across Australian shares, property and bonds

• e.g. a business investing surplus cash into a unit trust to earn returns while maintaining some liquidity

Australian Securities Exchange (ASX)

the primary stock exchange in Australia where shares in publicly listed companies are bought and sold by investors

Australian Securties and Investments Commisions (ASIC)

the government regulatory body responsible for overseeing and enforcing laws relating to companies, financial markets and financial services in Australia to ensure fairness, transparency and investor protection

company taxation

Australian businesses are required to pay tax on their profits to the government, which directly affects how much money a business has available to reinvest or distribute to shareholders

• e.g. an Australian company paying 30% corporate tax on its $1 million annual profit, leaving $700,000 available

• e.g. a small business taking advantage of tax deductions on equipment purchases to reduce its taxable income