Primary market, Financial Management

Assignment Help:

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.

 


Related Discussions:- Primary market

Insider trading, Insider Trading Insider trading refers to dealing in s...

Insider Trading Insider trading refers to dealing in securities by persons who are privy to specific information of companies. This possession of confidential information gives

Benefits of interest rate swaps, Q. Benefits of Interest rate swaps? I...

Q. Benefits of Interest rate swaps? Interest rate swaps may provide several benefits to companies including: - The ability to get finance at a cheaper cost than would be p

Functional classification of mutual funds, Functional Classification of Mut...

Functional Classification of Mutual Funds Functional classification of Mutual Funds is based on the basic characteristics of the mutual fund schemes for subscription. Mutual Fu

Examine the examples of political risk within countries, Examine the Exampl...

Examine the Examples of political risk within countries Outbreak of national war, unrest, civil war or riot. Nationalisation of industriesfor example confiscation of as

Principle of calculation of goodwill, This question tested the core area of...

This question tested the core area of specifically gradually consolidation and acquisitions (control to control). The principle of calculation of goodwill at the date where control

Brief introduction of asset backed security, An asset-backed security is a ...

An asset-backed security is a type of bond or note that is based on a pool of assets, or collateralized by the cash flows from a specified pool of underlying assets. As

Compute the income available for equity shares, Evergreen Company Ltd has b...

Evergreen Company Ltd has been promoted by promoters. They are trying to decide how the company could be financed. There are three choices: i. Issue Rs 500,000 in Equity shares

What is the basic goal of a business, What is the basic goal of a business?...

What is the basic goal of a business? The primary financial goal of the business organizations is to maximize the wealth of the firm's owners.  In turn Wealth refers to value.

Abnormal earnings valuation model, Abnormal Earnings Valuation Model Ab...

Abnormal Earnings Valuation Model Abnormal Earnings Valuation Model is a method to analyse the value of the firm. The value of the firm can be the sum of three components - the

Advanced financial management, QUESTION 1 [25 marks] Xelo Ltd, whose curren...

QUESTION 1 [25 marks] Xelo Ltd, whose current sales consist of fixed operating costs of R140 000 and variable operating costs equal to 22% of sales, has made the following two sale

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd