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प्रश्न
Answer the following question
State the features of capital market.
उत्तर
It is the market for borrowing and lending long-term capital required by business enterprises. As per SEBI, the capital market is a market for long-term debt and equity shares.
The features of the capital market are as follows:
1) LINK BETWEEN INVESTORS AND BORROWERS: The capital market links investors with the borrowers of funds. It routes money from savers to entrepreneurial borrowers.
2) DEALS IN MEDIUM AND LONG-TERM INVESTMENT: In the capital market, medium and long-term financial instruments are traded. Through this market, corporates, industrial organisations, financial institutions access long-term funds from both, domestic as well as foreign markets.
3) PRESENCE OF INTERMEDIARIES: Capital market operates with the help of intermediaries. The intermediaries like brokers, underwriters, merchant bankers, collection bankers, etc. play an important role in the capital market.
4) PROMOTES CAPITAL FORMATION: Capital market provides a platform for investors and borrowers of long-term funds to engage in trade. This leads to capital formation in the economy as it mobilises funds.
5) REGULATED BY GOVERNMENT RULES, REGULATIONS, AND POLICIES: Capital market operates freely. However, it is regulated by government rules, regulations, and policies. E.g.: SEBI is the regulator of Capital markets.
6) DEALS IN MARKETABLE AND NON-MARKETABLE SECURITIES: It trades in both, marketable and non-marketable securities. Marketable securities are securities that can be transferred. E.g.: shares, debentures, etc. Non-marketable securities are those which cannot be transferred. E.g.: term deposits, loans, and advances.
7) VARIETY OF INVESTORS: It has a wide variety of investors including both, individuals (i.e. general public) and institutional investors like mutual funds, insurance companies, financial institutions, etc.
8) RISK: Risk is very high as the instruments have long maturity periods. But along with that, the return on investments is also very high.
9) INSTRUMENTS: Equity shares, preference shares, debentures, bonds, government securities and public deposits are the main instruments in capital market.
10) TYPES: Capital market is mainly classified into two main types, government securities market or gilt-edged market and industrial securities market. Industrial securities market is further classified into the primary and secondary markets.
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संबंधित प्रश्न
Distinguish between money market and capital market.
The market where existing securities are resold or traded is called __________ market.
(a) commodity
(b) secondary
(c) primary
These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this, there is another market in which unsecured and short-term debt instruments are actively traded every day. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity.
1) Name the function being performed by the market in the above case.
2) Also. explain briefly three other functions performed by this market.
Helpequip Ltd. is a company dealing in distribution of medical equipments. The company recently imported 500 units of a diabetes monitoring machine which tests the sugar levels without taking blood samples. For deciding the marketing strategy, the Chief Executive Officer of the company called a meeting of the marketing heads of different zones. In the meeting, Sanjeev, the North Zone marketing head suggested that they need to visit hospitals to explain personally to the hospital staff who would be using the machine since the machine is sophisticated. He also suggested that additional staff may also be recruited for the same.
Rishu, another zonal head, was of this opinion that since a large amount of money had been spent on the purchase of the machines, additional funds were not available for recruiting the personnel as suggested by Sanjeev.
Ankur, a newly appointed zonal head of South Zone, suggested that since the size of the
order was not large, a detailed study of the factors determining the choice of channels of distribution was required before making the right choice.
1) Identify the factors influencing the choice of channels of distribution which were discussed in the meeting.
2) Also, explain the other considerations to be taken care of in each factor identified in part (a).
The financial market plays an important role in the allocation of scarce resources in an economy by performing many important functions.’ Explain any three such functions
A market where short term funds are borrowed and lent.
State, with reasons, whether the following statements are True or False
The financial market contributes towards the nation's economic growth and development.
Distinguish between the following.
Money market and Capital market.
Write a word or a term or a phrase which can substitute the following statement :
A definite promise in writing from a buyer for paying the amount on a specific Date.
Answer the following question.
What is meant by the 'Allocative Function' of Financial Markets?
Answer the following question.
How does Financial Market facilitate the 'Price Discovery' of financial assets?
Select the correct answer from the options given below and rewrite the statement.
A financial market is a market in which people trade _____________ and derivatives at low transaction costs.
Select the correct answer from the options given below and rewrite the statement.
When the trade bills are accepted by commercial banks it is known as _________.
State whether the following statement is true or false
A Financial Market is a market in which people trade financial securities and derivatives at high transaction costs.
Find the odd one.
Answer in one sentence.
What is financial market
Distinguish between the following.
Primary market and Secondary market
What are the functions of a financial market?
Match the FUNCTIONS of Financial Markets in Column I with their correct MEANING in Column II
| Column I | Column II | ||
| (a) | Allocated Function | (i) | Establish a price for the financial asset through interaction between house-holds and business firms. |
| (b) | Facilitating Price Discovery | (ii) | Easy purchase and sale of financial assets. |
| (c) | Financial Assets Liquidity | (iii) | Mobilization of savings and channelising them into the most productive use. |
Which of the following statements is false regarding financial market?
Tractors Pvt. Ltd. producing 2,00,000 trucks and generating revenue of Rs. 2,000 crores annually, has recently acquired the world's second largest truck manufacturing company. After this acquisition, Tractors Pvt. Ltd. will become the world's largest truck manufacturer. For financing the acquisition, the company had to arrange about Rs. 1,00,000 crores through debt and equity. ______ function is being performed by the company for arranging the funds through debt and equity.
Full form of IFCI
Match the pairs:
| Group 'A' | Group 'B' |
| (a) Investment in debenture | (1) Deals with acquisition and use of capital. |
| (b) Financial market | (2) Must inform the stock exchange about dividend declaration. |
| (c) Price of shares mentioned in the prospectus | (3) Trading of financial securities |
| (d) Corporate finance | (4) Safe and secure investment |
| (e) Listed company | (5) Must inform the government about dividend declaration |
| (6) Fixed price issue method | |
| (7) Risky investment | |
| (8) Trading of commodities. | |
| (9) Deals with acquisition and use of assets. | |
| (10) Book-Building Method. |
What is meant by the financial market?
Study the following case/situation and express your opinion.
| Jack & Jones, a newly incorporated organization wants to raise capital for the first time by issuing equity shares. |
- Should it go for Primary Market or the Secondary Market?
- What will be the issue of equity shares by Jack & Jones called?
The allocative function of Financial market helps in ______.
