Full Answer Section

• To manage risk: Businesses face a variety of risks, such as financial risk, operational risk, and legal risk. Managers need to understand these risks and how to mitigate them. They also need to have a plan in place in case a risk materializes.
• To make strategic decisions: Managers need to make a variety of strategic decisions, such as what products or services to offer, where to expand, and how to price their products or services. These decisions have a significant financial impact on businesses, so managers need to understand the financial implications of their decisions.

Financial markets are important to managers because they provide a way for businesses to raise capital and invest funds. Financial markets are also important because they help to price risk and allocate capital efficiently.

Here are some of the characteristics of financial markets that are important for managers to understand:

• Liquidity: Liquidity refers to the ability to buy and sell assets quickly and easily. Liquid financial markets make it easier for businesses to raise capital and invest funds.
• Competitiveness: Competitive financial markets help to ensure that businesses pay a fair price for capital. This is important because it helps to protect businesses from exploitation by lenders and investors.
• Efficiency: Efficient financial markets help to allocate capital to the most productive uses. This is important because it helps to promote economic growth.

By understanding the characteristics and importance of financial markets, managers can make better financial decisions that will help their businesses succeed.