Research
Paper on Banks Existence
The Banks
Banks are the largest lending institutions through out the
globe; the basic purpose of banks is to secure money of the
people/organizations and to lend the money to the
people/organizations as a creditor/lender. When they start
returning money back to the bank either at once or in portions
take interest on it. This interest is the prime source of the
banks profit; interest is also known as “Usury”.
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The Money
The money is coins and banknotes as the medium of exchange,
which is used when purchasing some thing or giving the value of
something, different countries have different
currencies/banknote/coins.
Following are the few features and functions related to money:
• Medium of Exchange
• Mode of payment
• Unit of Account
• Store of Value
• Fastest Liquid Asset (In terms of accounts)
• Economy depends upon it
• Prices are allocated on behalf of it
According to Glyn Davies writer of famous “A History of Money”
is that “Money is anything that is widely used for making
payments and accounting for debts and credits”.
Other Modes of Payments/Exchange
The other valuable mode of transactions are cheques and credit
cards, cheques are written order to the bank to pay certain
amount from the drawer’s account. In credit credits the bank
from the credit card holder’s account deducts the payment, it is
also known as smart money or plastic money. It is secure because
you don’t have to bring all the currency notes with your self,
so that the chance of robbery is minimize.
The Interest/Usury
It is very important to know about interest while studying
banks, this is the prime source of profit for banks. The
interest is collected from the individuals/organizations over
the credited money. Interest is of two types, which is given
below:
Simple Interest
Simple is interest is that interest is paid (earned) on only the
original amount, or principal, borrowed (lent).
Compound Interest
The notion of compound interest
is crucial to understanding the mathematics of finance. The term
itself merely implies that interest paid (earned) on a loan (an
investment) is periodically added to the principal. As a result,
interest is earned on interest as well as the initial principal
amount. It is the interest-on-interest, or compounding, effect
that accounts for the dramatic differences between simple and
compound interest. The compound interest can be used to solve a
wide variety of problems in finance.
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The History of Banks
The history of banks is old, but it is not exactly in that form
which today we have, as we developed the way of banking and
other related features are also changed. Initially people store
money in the royal palaces and temples, at that time there were
no concept of money they secure their grains and other
commodities into it, the reason behind this they feel that these
places are very secure and the chance of robbery or theft is
very less as compare to secure in there own houses.
Shareholder
Growing organization often requires more money; the owners often
sell shares of the business to other individuals or to other
organizations. These investors are known as shareholders. Large
cooperations may sell shares to thousands of shareholders, but
smaller businesses typically sell shares to only a few.
Shareholders who are dissatisfied with the management
performance may sell their shares and invest in another company.
This action is taken by other dissatisfied shareholders, will
put downward pressure on market price per share. Thus,
management must focus on creating value of the shareholders
Shareholder Wealth
The money invested by the shareholders for the sake of profit
earned from the company can be known as shareholders wealth. Its
growth depends upon the dividends distributed by the company,
capital growth that is, the increase in the market value of a
company's shares over the total cost of those shares, and can be
by new issuance of shares, which may be made by a company when
it requires further funds. Such new shares are usually offered
at a discount to existing shareholders.
Shareholders, hoping that the agents (managers) will act in the
shareholders best interests, delegate decision-making authority
to them. The key role in maximizing shareholders wealth is
played by managers (working as agents of the owners). While
maximizing the shareholders wealth the other major
responsibility over management is that, they should have to
protect the consumer, paying fair wages to the employees,
maintaining fair hiring practices and safe working conditions,
supporting education, and becoming involved in environmental
issues such as clean air and water.
Banking Today
Today banks are playing very essential role in our country
economy as well as in global economy; they are giving loans to
the organization and individuals, trying to make humans life
easier and developed. Without bank we cannot even think to live,
for example how do you feel if some one says that I have one
million or ten million dollar save in my cupboard locker,
obviously you can laugh over the person wisdom?
Now banks are providing greater facilities and constantly
improving their standards day by day, Stronger security, locker
facilities (where you can save and secure other stuff besides
money), credit card, Auto Teller Machine (ATM), easy loan
facilities (with low-markup), phone banking, mobile banking,
online banking, excellent customer services, customer 24/7 days
access to the account are the great features of the banking, and
these features are the key reasons for banks to exist in our
environment.
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