Which of the following is a function that the financial system provides for savers and borrowers?

• A. Auditing the financial statements of corporations
• B. Facilitating the transfer of funds between savers and borrowers
• C. Preparing tax returns for individuals
• D. Setting accounting standards for public companies

Answer: (B)

Verified step by step guidance

1. Understand the role of the financial system: The financial system primarily exists to facilitate the efficient allocation of resources, enabling savers to lend their surplus funds to borrowers who need capital.
2. Identify the key function: The financial system provides mechanisms such as banks, financial markets, and intermediaries to transfer funds between savers and borrowers, ensuring liquidity and access to capital.
3. Eliminate unrelated options: Auditing financial statements, preparing tax returns, and setting accounting standards are functions of other entities like auditors, tax professionals, and regulatory bodies, not the financial system.
4. Focus on the correct function: Facilitating the transfer of funds between savers and borrowers is the core function of the financial system, as it bridges the gap between those with excess funds and those in need of financing.
5. Conclude the reasoning: The correct answer is the option that aligns with the financial system's primary purpose, which is facilitating the transfer of funds between savers and borrowers.