Capital Market

Capital Market
Institutional arrangement for
borrowing of long term funds.

lending

and

Consists of series of channels through which the

savings of the community are made available for
industrial and commercial enterprises and public
authorities.

Functions
Mobilisation of financial resources on a nation
wide scale.
Leads to economic growth at a faster rate.
Directs the flow of savings into most profitable
channels

Primary Market Or New Issue

Market
Primary market is a market for raising long term
sources of finance.
New securities that have never been previously
issued are offered.
Both the new and existing companies can raise
capital from this market.
Facilitate the transfer of funds from willing
investors to entrepreneurs setting up new
companies or going in for expansion, growth or
modernization.

Securities dealt in primary

market
Securitie
s
Creditorship
securities

Ownership
securities

Equity
Shares

Preferenc
e shares

No par
stock

Debentures

Ownership
securities

1. Equity Shares
Equity shareholders are the real owners of the
company.
Have a control over the working of the company.
Paid dividend after paying it to preference
shareholders.
Rate of dividend depend upon the profits of the
company.
No dividend in case of no profits.
Cannot be redeemed during the lifetime of the
company.

Characteristics of equity
shares

2. Preference Shares
These shares have certain preferences as compared to
other types of shares.
Fixed rate of dividend is paid on preference share capital.

Features of preference
shares

Types of preference
shares

3. No Par Stock
Shares having no face value
Capital of the company issuing such shares is divided
into a number of specified shares without any specific
denomination
Share certificate of the company states number of shares
held by the owner without mentioning any face value
Value of such share determined by dividing the real net
worth of the company with the total number of shares of
the company
Dividend is paid on per share

Creditorship
securities

Debentures or Bonds
It is a document under the companys seal which
provides for the payment of a principal sum and
interest thereon at regular intervals.
Debentureholder is the creditor of the company.
A fixed rate of
dividend is paid on the
debentures.

Types of Debentures

Features of Debentures

SECONDA
RY
MARKET

* Stock market represent the secondary market

* Existing securities are traded
* Organized mechanism for purchase and sale of
existing securities
* Allow trading in securities both to genuine investors
and speculators.

DEFINITION
Stock exchanges are market places where
securities that have been listed thereon may be
bought and sold either investment or
speculation.

Characteristics

Functions of Stock Exchange