What are the functions of the Capital Market?a)The Capital Markets hel...
The functions of the Capital Market are as follows:
1. Accelerating Economic Growth:
The Capital Markets play a crucial role in accelerating economic growth by providing a platform for businesses to raise capital. Companies can issue stocks or bonds to investors, allowing them to raise funds for expansion, research and development, or other business activities. This capital infusion stimulates economic growth by enabling companies to invest in new projects, create jobs, and contribute to overall economic development.
2. Facilitating Capital Movement:
Capital Markets facilitate the movement of capital from savers to borrowers. Savers, such as individuals or institutional investors, can invest their surplus funds in various financial instruments available in the capital market. Borrowers, including companies and governments, can access this capital by issuing stocks or bonds. This movement of capital helps to allocate resources more efficiently, enabling it to be used more profitably and productively. It ensures that capital flows to where it is needed the most, ultimately contributing to economic growth.
3. Quick Valuations of Financial Instruments:
The Capital Markets provide a platform for the buying and selling of various financial instruments, such as stocks, bonds, derivatives, and commodities. These markets are highly liquid, allowing investors to quickly buy or sell their investments at fair prices. The availability of real-time information and efficient trading mechanisms ensures that financial instruments are accurately valued, reflecting the current market conditions. This transparency and liquidity enable investors to make informed investment decisions and mitigate risks.
4. Encouraging a Massive Range of Ownership:
Capital Markets encourage a massive range of ownership of productive assets. By investing in stocks or bonds, individuals and institutions become owners or stakeholders in companies or government entities. This broad ownership base promotes the democratization of wealth and economic participation. It allows individuals from various socio-economic backgrounds to participate in the growth and profitability of businesses and governments, promoting inclusivity and reducing income inequality.
In conclusion, the Capital Markets perform essential functions that contribute to economic growth, facilitate capital movement, provide quick valuations of financial instruments, and encourage a wide range of ownership. These functions not only benefit businesses and governments but also provide opportunities for individuals and institutions to participate in the economy and generate wealth.
What are the functions of the Capital Market?a)The Capital Markets hel...
Functions of Capital Market:
- The Capital Markets help to accelerate the process of economic growth
- Facilitates the movement of capital to be used more profitability and productively to boost the national income
- Minimization of transaction and information cost
- Quick valuations of financial instruments
- Encourages a massive range of ownership of productive assets