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State the Functions Performed by Financial Market. - CBSE (Commerce) Class 12 - Business Studies

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Questions

State the functions performed by financial market.

State any four functions of financial market.

State the functions of financial market.

Solution

Financial market is a common platform where buyers and sellers of securities interact and exchange their holdings of bonds such as shares and debentures. Functions of a financial market:-

i. Channelisation of funds:- Financial markets primarily operate to channelise funds from the investors to the companies. It serves the dual purpose of providing investors with an interest on their funds and providing companies with the required finance to pursue their business operations.

ii. Determining the price:- The determination of fair price of securities is facilitated by financial markets as it provides a place where buyers can meet sellers and undertake different transactions of securities. Such a commonplace ensures trading at a fair and justifiable price of the security which is determined by the opposite forces of demand and supply.

iii. Ease of convertibility in cash:- Because financial markets operate in a transparent and legal manner for the purchase and sale of securities, any person can convert his bonds into cash or cash equivalent at any particular time in a hassle-free manner.

iv. Minimising brokerage and other transaction charges:- Financial markets aim at the minimisation of unnecessary brokerage and transfer charges levied by different dealers by making the relevant information available at all times. It also aims to digitalise the transaction for optimisation in terms of time and cost.

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Solution State the Functions Performed by Financial Market. Concept: Concept of Financial Markets.
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