Capital markets best described as financial markets that bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets. Capital markets mainly include the stock market and the bond market.
Capital market helps people with ideas become entrepreneurs and help small businesses grow into big companies. They also give people like you and me opportunities to save and invest for our futures.
What is that which comes to your mind when you hear the word “market”? Whatever the thing that comes to your mind, here is where you will learn new things about market
You should not be surprised to learn that some important markets aren’t stores at all. Even the buyers and sellers will probably never meet. You should know that our economy would not function the same without these markets that we call capital market.
Financial capital is the money that entrepreneurs and businesses use to buy their resources and supplies. These would be used to make products or provide services to buyers. This capital is raised through capital markets in two ways.
They can either by selling bonds, which are like loans that the business will repay at later with interest, or by selling stocks, that are sold in exchange for the partial ownership of that business.
The issuing or selling stocks takes place through an Initial Public Offering (IPO). The amount buyers want to spend and sellers want to make will determine the price of the stock. The person or institution with the highest shares at any time is the company’s main owner.
Several small businesses conduct IPOs and earn money to become large companies. These companies will then expand across the country and create thousands of jobs. They also brings about new businesses related to supplies, production and delivery, and provide a good or service that consumers value.
People will buy stock because they believe eventually the value of the stock will go up, allowing them to sell the stock at a higher price than the initial purchase price, thereby making profit. The only risk is that the value of the stock could go down.
Capital markets reduce the cost of doing businesses by providing the global economy with a source of cash or liquidity which is reliable.
Capital markets also bring borrowers and lenders together in efficient ways and help channel resources to create a healthy national and global economy. They provide important funding that have great effects on people’s lives in many ways, from starting a business to expanding a current one, or providing investment opportunities for people planning for their future.
Businesses also have lowered risk and expenses in acquiring financial capital because they have reliable markets where they can obtain funding. Capital markets are there to provide them with the best funding source.