Author Topic: Who Benefits from Capital Markets?  (Read 2850 times)


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Who Benefits from Capital Markets?
« on: June 03, 2018, 02:26:56 PM »
Who Benefits from Capital Markets?

Companies issue stocks and bonds and governments issue bonds through primary capital markets. Those who own stocks and bonds are able to trade them in secondary capital markets, such as the New York Stock Exchange. Both of these markets make it possible for individuals like you to invest your saving in stocks and bonds and potentially earn more than you would through a savings account or by keeping the money in a piggy bank.So, why might a company issue stock? A company that wants to expand its business or an entrepreneur that wants to start a business may issue stock.  When the stock is purchased by investors, the company receives financial capital. In return for that money, the business give up partial ownership--shares--of the company to the investors.  What about bonds? A company may issue a bond for the same reasons. And a government may issue a bond to fund a project without raising taxes, such as to complete a major highway project. When the bond is purchased, the company or government receives financial capital that they can spend now. That company or government agrees to repay the purchase price of the bond with interest. So, a bond is essentially a loan.Capital markets bring together businesses and governments in need of financial capital--money--with investors hoping to earn profit.  The benefits go both ways.

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