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
Q. Explain Due Date and Due Diligence? Due Date -Every governing agency and its forms scheduled reporting and most significantly payments have a required due date. It's this

Documenting the accounting system There are 3 methods generally used to document the clients system. Narrative notes: Written description of the system Advantages:- C

364-Day T-Bills The Government considered that it is important to develop government securities market for monetary control. It also had an intention to ensure that government'

Swap-Linked Notes: Interest rate swaps are derivative products which help in transforming the cash flows of existing debt issues. These are not only useful in covering the exis

State the term nature of financial instruments. Nature of financial instruments (securities): Financial instruments (termed as securities) can be classifies in two broad

Evaluation of money-market hedge Expected receipt after 3 months = $300000 Dollar interest rate over three months = 5.4/ 4 = 1.35% Dollars to borrow now to have $300000 l

Why does the riskiness of portfolios have to be looked at differently than the riskiness of individual assets? The riskiness of portfolios has to be seemed to be at differently

The process by which an organization increase money by issuing equity and gets listed on a public stock exchange.

What is Inherent risk Susceptibility  of  an  account  balance  or  class  of  transactions  to  material  misstatement either  individually  or  when  aggregated  with misstat

Q. Show the Accounting Profit Criteria? Accounting Profit Criteria: - Under accounting profit criteria there is merely one method for making capital expenditure decisions. This