Financial services


 The entity whose income exceeds its expenditure (Lender ) can:
1. Lend the excess income.
by finding: 1) a borrower 2) a financial intermediary (a bank ).




2. Invest the excess income.
by buying: notes or bonds in the bonds market, and receives interest.




 On the other hand, an entity whose income is less than its expenditure (borrower ) can raise capital by:
1. Borrowing.
2. Selling equity claims.
3. Decreasing its expenses
4. Increasing its income.
The borrower pays a higher interest than the lender receives, and the financial intermediary earns the difference for arranging the loan.
 The bank aggregates the activities of many borrowers and lenders. It accepts deposits from lenders; on which it pays interest, The bank then lends these deposits to borrowers.