SS2 Third Term Financial Accounting Lesson Note – Capital Market and Loan Capital

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WEEK TWO (2)

TOPIC: CAPITAL MARKET AND LOAN CAPITAL

CONTENTS: CAPITAL MARKET

• Terminologies
• Debentures
• Mortgage
• Interest
• Preparation of debentures

SUB-TOPIC: CAPITAL MARKET

The Capital Market is the market for medium or long-term loan.  The capital market is not like the commodity market because there only stocks and shares instead of goods are sold.

The capital market is a network of institutions and mechanisms through which medium and long-term funds are made available to businesses and governments and instruments outstanding are transferred among investors.

Capital market or stock market is a market which deals with the buying and selling of shares and government bonds. The stock market carries out two important functions. It provides:

1. A Primary market (or new issue) for raising capital by the issue of new stock, shares and bonds.
2. A Secondary market for trading in existing or old stocks in the market. This enhances the easy transferability of securities. (The stock exchange is part of the secondary market).

Institutions that operate in the Capital Market are:

1. Issuing houses
2. Stock Exchange
3. Banks
4. Pension funds
5. Insurance companies

The Instruments used in capital markets include:

• Shares
• Bond
• mortgage
• Debentures
• Stocks

Careers in the Capital Market

Careers are available in the capital market for those who study Accountancy, Economics, Finance and Business administration.  Such people can work in:

1. Stock broking firms

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