How Capital Markets Transform Financial Flows

Financial capital markets have the power to repackage money as it moves from those who supply financial

capital to those who demand it. Banks accept checking account deposits and turn them into long-term loans to

companies. Individual firms sell shares of stock and issue bonds to raise capital. Firms make and sell an

astonishing array of goods and services, but an investor can receive a return on the company’s decisions by

buying stock in that company. Financial investors sell and resell stocks and bonds to one another. Venture

capitalists and angel investors search for promising small companies. Mutual funds combine the stocks and

bonds—and thus, indirectly, the products and investments—of many different companies.

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