Dr. Stephen Hill, a successful optometrist in Indianapolis, Indiana, has tinkered with various inventions for years. Having finally developed what he believes is his first saleable product (a truly scratch-resistant and lightweight lens), Hill has decided to invest his life savings and open Hill Optometrics to manufacture and market his invention.
Unfortunately, despite possessing true genius in many areas, Hill is uncertain about the “finance side” of business and the various functions of different types of financial institutions in the economy. He is, however, fully aware that he will need financial services such as checking and savings accounts, various short-term investments that can easily and quickly be converted to cash as needs dictate, and sources of borrowing capacity—should the need for either short- or long-term loans arise.
Despite having read mounds of brochures from various local and national financial institutions, Hill is still somewhat unclear about the merits and capabilities of each type of financial institution. He has turned to you, his 11th patient of the day, for help.
Critical Thinking Questions
1. List the various types of U.S. financial institutions and the primary function of each.
2. What services of each financial institution is Hill’s new company likely to need?
3. Which single financial institution is likely to be best able to meet Hill’s small company’s needs now? Why?
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