Answer:
The primary purpose of the financial markets is to route surplus reserves from people who have gathered from their salaries to people who need to finance their expenditure or corporations that require reserves to support capital investments. There are couple ways in which funds are routed from savers/donors to spenders/borrowers.
- Direct Financing: Funds are loaned directly from savers to spenders.
- Indirect Financing: Where an intermediary i.e. bank is involved between donors and borrowers.
