Primary market, Financial Management

Primary Market

In an economy, at a given point of time, there will be people/entities called savers the surplus units, whose current income exceeds their current expenditure while there are others called investors/deficit units whose current expenditure exceeds their income.
The function of a financial system is to channelize the funds from the surplus units to the deficit units. An efficient financial system not only encourages savings and investments but also efficiently allocates resources in different investment avenues and thus accelerates the rate of economic development.

Capital markets enable the flow of capital in the most profitable channels. Companies, which have more profitable investment opportunities are normally able to raise funds in the capital market because its shares are listed on the stock exchange. The performance of the company is reflected in the market price of the equity stocks. Put differently, the company's performance is more visible in the eyes of the public. Such a public exposure normally induces companies to raise their standard of performance.
The companies, public or private, raise their long-term finance from the primary market. Primary market is a major channel through which the household savings are mobilized by companies and the Government. The issuance of shares and debentures takes place in this market. The issuance of shares or debentures may be through a public offer or a rights issue. Industries raise capital in the form of financial obligations. These financial obligations may be in the form of shares or debentures.

 

Posted Date: 9/10/2012 5:34:11 AM | Location : United States







Related Discussions:- Primary market, Assignment Help, Ask Question on Primary market, Get Answer, Expert's Help, Primary market Discussions

Write discussion on Primary market
Your posts are moderated
Related Questions
On Completion of her introductory finance course, Kieran was so pleased with the amount of useful and interesting knowledge she gained that she convinced her parents, who were weal

In structured products like mortgage-backed and assets-backed securities, the cash flows include both principal repayment and interest. The complication arises wh

Describe the sales forecasting process. Sales assumptions are a group effort. Marketing and Sales personnel usually provide assessments of demand and the competition.  Producti

Inventory T ur nover In the accounting, a measure of the number of times that the average amount of inventory on hand is sold within a given time of period. In the o

The financial ratios of a firm are given:     Current ratio    =  1.33   Acid-test ratio   =  0.80   Current liabilities  = 40,000   Inventory turnover ratio = 6    What is the

Considering the following information, what is the price of the share as per Gordon's Model?  Details of the Company

K is a kitchen and bathroom design and installation company which currently has showrooms in one region only of Country T. The company has enjoyed considerable success since it was

Mount Hutt Ltd. just paid dividend of $2.20 per share. The dividends are expected to grow at a constant rate of 4% per year, indefinitely. If investors require an 11% return on Mou

Shareholders versus Managers A Limited Liability company is possessed by the shareholders though in most of the cases is managed by a board of directors selected by the shareho

Individual Project Due Date: Mon, 06/08/15 Points Possible: 100 Deliverable Length: 8-10 slides with speaker notes Description: You are the CFO of a 400-bed hospital in Texas