Financial Awareness- CAPITAL MARKET ( IBPS-PO 2018)

Financial Awareness

 CAPITAL MARKET ( IBPS-PO 2018)

CAPITAL MARKET

Maturity> 1 year

Regulated by SEBI (Security Exchange Board of India)



Authorized Capital – can max upto – 10,0000/

Issued Capital – Issue – 80,000

Subscribed Capital – Shareholder Buy – 60,000

Called –Up capital –Actual Price/Share – 60,000 × 10

Paid –Up Capital – First Call – 60,000 × 7

Authorized Capital = Nominal Capital = Registered Call

Company (Equity /Debt)

Equity 100%

51% -Company

49% - Shareholder

Shareholder share profit ( Dividend)

Debt (Debentures-Loan-Interest)

Share

Equity Preference



A general meeting Voting Rights No

Profit 2nd Priority Ist Priority

Loss Loss Profit

Wind Up 2nd Priority Ist Priority





Capital Market

Companies like manufacturing, infrastructure power generation and governments which need funds for longer duration period raise money from capital market.

Individuals and financial institutions who have surplus fund and want to earn higher rate of interest usually invest in capital market.

SEBI (Securities and Exchange Board of India) regulate the capital market in India.

Under Act 1992- a board is established to protect the interests of investors in Securities to promote and regulate the Security market.
Established -12 April 1992 under SEBI Act , 1992
SEBI Chairman- Upendra Kumar Sinha was appointed in 2011 replacing C.B.Bhave
Objective- To manage the fraudulent cases and stop fraudulent activities in stock market
Headquarter – Mumbai
Regional offices- Delhi , Kolkata , Chennai , Ahmedabad



Capital Market Instruments:

1. Shares

2. Debentures

Shares

If company issuing share for first time that it is known as IPO (Initial Public Offering).IPO of any company issued in primary market.

If company issuing shares for second or third time than it is known as FPO (Follow on Public Offering) and trading of already issued shares take place in secondary market.

Share gives ownership right to individuals who subscribe to it, in this way company has to dilute his ownership right up to 49 percent of their ownership and keep remaining 51 percent with them so that they have majority control.

A person earns from shares is company make profit which is distributed among share holders know as dividend and if company make loss value of share also falls so shares are high risk instruments.

Debt

A debt instrument is used by government or organization to generate funds for longer duration, and is known as Debentures.

The relation between people who invest in debt instrument is of lender and borrower .This gives no ownership right .A person receives fixed rate of interest on debt instrument.

A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company’s capital structure, it does not become share capital. Senior debenture gets paid before subordinate debentures, and there are varying rates and

payoff for these categories.

Debenture holders have no rights to vote in the company’s general meetings of shareholders.

The interest paid to them is a charge against profit in the company’s financial statements.

There are two types of debentures:

1. Convertible debentures:

Convertible bonds or bonds that can be converted into equity shares of the issuing company after a predetermined period of time.

Convertible bonds typically have lower interest rates than non-convertible corporate bonds.

2. Non-Convertible debentures:

Non Convertible Debentures are simply regular debentures, cannot be converted into equity shares

of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts.