The Capital Market

1. That is the capital market? How is the primary market different from the secondary market? In your opinion, are these markets sufficient? Explain.

Capital markets are common markets that involve individuals and institutions taking part in financial securities. This covers both public and private sectors organization and institutions and the major interest is to sell securities on the capital markets in order to raise funds for the institutions. These markets can be classified as either primary or secondary markets. ‘Both the bond and stock markets make the main part of the capital markets and it is in essence why companies engage in the investing in the IPO’ (Gurusamy, 2009, p. 73). Mortgages, equities and bonds and other investment funds are also traded. The primary markets involve the distribution of new issues among the investor. Secondary markets in which the already existing markets securities are traded. The secondary market has to been used to refer to the market for any used good or asset which can also be an alternative use for an existing product or asset on which the customer base is the consideration of the second market. The primary market involves issuance of primary securities or financial instruments or the purchase of the securities directly from the issuers such as corporations that give the issuers as corporation giving out the shares and an IPO. These markets are sufficient and vital in that they allow the securities to be transferred from one investor and speculator to another.

2. What ratios measure a corporation’s liquidity? What are some problems associated with using such ratios? How would the DuPont analysis overcome these problems?

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