FUNCTIONS OF CAPITAL MARKET. Definition Capital market is a market for medium-term and long-term loans. The capital market serves the needs of industry and the commercial sector. It comprises all the institutions which are concerned with either the supply of or demand for long-term capital… ACCORDING to Investopedia.com. the capital market is defined this way.”Capital markets are where savings and investments are channeled between suppliers and those in need. Suppliers are people or institutions with capital to lend or invest and typically include banks and investors. Those who seek capital in this market are businesses, governments, and individuals. Capital markets are composed of primary and secondary markets. The most common capital markets are the stock market and the bond market. They seek to improve transactional efficiencies by bringing suppliers together with those seeking capital and providing a place where they can exchange securities.”
Identify the types and functions of the institutions.
Explain the types and features of securities.
Explain the process of and requirements for accessing the capital market
List the benefits of the capital markets.
Demonstrate the understanding of the meaning, transaction and trading methods in the secondary market.
Instruments used in capital market
Instruments used in capital markets are mainly stocks and shares. Stocks and shares are securities purchased by individuals, which is an evidence of contributing part of the total capital used in running an existing industry.
At the end of a normal business year, stock and share holders receive dividend as a reward for contributing the money used in running the business. The word dividend is like a reward like interest paid to someone who gave his resources or funds to be used for business corporation or firm.
Dividends are benefit or return on investment paid to a share holder in a firm at the end of every month
To know more about shares and stock market and how business enterprises and firms raises money to finance growth check out some our articles below or read from here
Institutions involved in capital market
Institutions involved in capital market include:
- Issuing houses
- Insurance companies
- Development banks
- Building societies
- National Provident Fund (NPF)
- Stock Exchange
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Advantages of capital market
Provision of long-term loans: Capitalism market provides long-term loans to the private and public sectors for investments.
Mobilization of savings: Savings are mobilized in the capital market.
Growth of merchant banks: The existence of capital market helps the
growth and development of merchant banks.
General running of the economy: The existence of capital market encourages the general public to participate in the running of the economy of the country.
- economic tools for nation building
- factors affecting the expansion of industries
- mineral resources and the mining industries
- demand and supply
Meaning: capital consumption refers to the using up of existing capital stock and not replacing worn-out capital goods used in production. When fixed assets like building, motor vehicles, plants and machinery are being used and tear of these capital goods which reduce their value that is referred to in economic as consumption or depreciation. During the period of capital consumption enough saving are not made to maintain and place depreciating capital goods or assets. If a country finds it difficult to maintain its stock of capital, either by making provision for appreciation or her inability to replace worn-out on capital or consuming capital and this affects the standard of living of the people negatively.
4.14 THE ENTREPRENUER
Definition: an entrepreneur can be defined as the factor of production that co-ordinates and organizes other factor of production (Land, Labour and Capital) in order to produce goods and services. The entrepreneur bears the risks and takes major decisions of the business. He risks his capital in setting up the business with the aim of obtaining maximum profit.
In summary, the entrepreneur is the person who co-ordinates, controls and organizes the process of production in order to make maximum output at minimum cost thereby making profits. He is the M.D or CEO in an executive office. The reward for entrepreneur is profit.
Characteristics of entrepreneur
- Risk bearer: he risks his capital in the course of investment and whatever comes out of it, whether good or bad, he has to take.
- Organization: he organizes productive resources for the production of goods and services.