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EASTERN SAMAR STATE UNIVERSITY

GRADUATE SCHOOL
BORONGAN CITY
RASSEL C. SANTOS
MAED Educational Management

FINANCIAL MANAGEMENT
DR. EMILIA L. BAQUILOD

THE CAPITAL MARKET


Financial market, are forums in which suppliers of funds and demanders of funds can transact
business directly (Gitman & Zutter, 2013);
deals in financial securities or instruments and financial services; in simple
senses, it is a market which deals with various financial instruments (share,
debenture, bonds, treasury bills, commercial bills etc.) and financial services
(merchant banking, underwriting etc.) (Paramasivan & Subramanian)
Financial markets may be divided into two (2) key markets:
1. Money markets
2. Capital markets
Capital markets, defined as an organized mechanism for effective and efficient transfer of
money-capital or financial recourses from the individuals or institutional savers to
industrialist;
enables suppliers and demanders of long-term funds to make transactions.
KEY CAPITAL MARKET SECURITIES:
1. Bonds (long-term debt) long-term debt instruments used by business and government
to raise large sums of money, generally from a diverse group of lenders.
2. Common stock (equity, or ownership) are units of ownership, or equity, in a
corporation.
3. Preferred stock (equity, or ownership) is a special form of ownership that has
features of both a bond and common stock.
PRIMARY & SECONDARY CAPITAL MARKETS:
1. Primary capital market securities are initially issued; the only market in which the issuer
is directly involved in the transaction.
2. Secondary capital market is the market for old or already issued securities; preowned
securities (those that are not new issues) are traded.
a. Broke markets The securities exchanges on which the two sides of a
transaction, the buyer and seller, are brought together to trade securities.
b. Dealer markets - The market in which the buyer and seller are not brought
together directly but instead have their orders executed by securities dealers
that make markets in the given security.

SECURITIES EXCHANGES Organizations that provide the marketplace in which firms can raise
funds through the sale of new securities and purchasers can resell securities.
NASDAQ MARKET An all-electronic trading platform used to execute securities trades.
OVER-THE-COUNTER (OTC) MARKET Market where smaller, unlisted securities are traded
INTERNATIONAL CAPITALA MARKET
Foreign bonds, a bond that is issued by a foreign corporation or government and is
denominated in the investors home currency and sold in the investors home
market.
International equity market, a market that allows corporations to sell blocks of shares to
investors in a number of different countries simultaneously
ROLE OF CAPITAL MARKETS
From the FIRMS PERSPECTIVE, the role of a capital market is to be a
liquid market where firms can interact with investors to obtain valuable external
financing resources;
From INVESTORS PERSPECTIVES, the role of a capital market is to be an
efficient market that allocates funds to their most productive uses.
REFERENCES:
Gitman, L. J. & Zutter, C. J. 2012. Principles of Financial Management. 13th edition.
Prentice Hall
Paramasivan, C. & Subramanian, T. Financial Management. New Age International
Publishers