You all know, that business needs finance from the time and entrepreneur makes the decision to start it. It needs finance both for working capital requirements such as payments for raw materials and salaries to its employees and fixed capital expenditure. such as the purchase of machinery for – building or to expand its production capacity.
Some examples gives share picture of how companies need to raise funds from the capital market. Idea cellular decided to enter the Indian capital market for its needs to expand. In this topic, you will study concepts like placement initial public offer and capital markets. Which you take come across in the example of Idea cellular business raise these funds from various sources.
In different ways, through the financial market because this will provide a brief description of the mechanic through which finances are mobilized by a business organisation for both short term and long term requirements. It also explains that institutional structure and the regulatory measures for different financial market.
Concept of Financial Market
Business is a part of the economic system that consists of two main factors household with safe points and business from which invest days points a financial market. There are name the arrivals and the investors by mobilizing. Sentence into it performs what is known as an allocated function it allocates for the direct second available for investment into their most productive investment opportunity. When the allocated function is performed well two consequences followed:
- The rate of return offered to the household would be higher.
- Scars resources are allocated to thoughts from which have the highest productivity for the economy.
There are some alternative mechanism through which allocation of funds can be done via banks for via financial markets. House force can deposit their surplus funds with and whom inter Woodland this business alternatively Housefull stand by the share and debentures offered by a business using financial market.
The process by which the allocation of funds is done is called financial intermediation. Banks and financial markets are competing intermediaries in the financial system households its choice of where they want to play store their savings.