Definitions [6]
Answer each of these questions in about fifteen words:
What do you understand by internal sources of finance?
Internal sources of finance is referred to as owner’s own money. It is also known as owner’s equity. Particularly in the case of small entrepreneurs the owner’s money is very small.
Answer each of these questions in about fifteen words:
Give the significance of finance in an enterprise.
The significance of finance in enterprise is elucidated like a lubricant to the process of production.
Answer each of these questions in about fifteen words:
What do you understand by finance?
‘Finance’ refers to funds or monetary resources needed by individuals, business houses and the government.
Answer each of these questions in about fifteen words:
Name the most important prerequisite to start an enterprise
Finance is the most important prerequisite to start an enterprise.
Answer each of these questions in about fifteen words:
How will you differentiate between financial market with other market? Give one difference.
Financial market is a market in which people and entities can trade financial securities (stocks and bonds), commodities (including precious metals or agricultural goods), and others like crude oil etc. at prices that reflect supply and demand. Market refers to the aggregate of possible buyers and sellers of a certain good or service and the transactions between them.
Answer each of these questions in about fifteen words:
‘Production’, ‘Marketing’, and Financing’ – deemed as the most important factors for any business’s survival rates. Among these name the most critical element and why?
Production, marketing, and financing, deemed to be the most important factors for any business survival. ‘ Financing’ is considered to be the first because no entrepreneur can start and run the business without money. Among this the most critical element for success in business is ‘Finance’. Before doing anything, an entrepreneur should clearly answer the following three questions:
- How much money is required?
- Where will money come from?
- When does the money need to be available?
Key Points
- Capital market is for long‑term funds (debt and equity).
- Supports investment and economic growth.
- Demand: agriculture, trade, industry.
- Supply: individual savers, corporates, banks, insurance companies, special institutions.
- Institutions and instruments: development banks, commercial banks, stock exchanges, shares, debentures, bonds, mutual funds, public deposits.
- Secondary market is the stock exchange / stock market.
- It deals in existing or second-hand securities.
- Stock exchange is a platform for trading securities.
- Companies Act 1850 was introduced to promote investment in corporate securities.
- First stock exchange: Bombay, 1875, later called BSE.
- Other exchanges came up in Ahmedabad, Calcutta and Madras.
- Post-1991, Indian secondary market has a three-tier structure: Regional Stock Exchanges, NSE and OTCEI.
- SEBI was established in 1988 and became a statutory body in 1992 under the SEBI Act, 1992.
- SEBI regulates, supervises and promotes the securities market while protecting investors' interests.
- The main objectives of SEBI are regulation, investor protection, prevention of malpractices and enforcement of a code of conduct.
- SEBI performs three major functions: Protective, Developmental and Regulatory.
- The major intermediaries regulated by SEBI are stock exchanges, stock brokers, merchant bankers, depositories, credit rating agencies and mutual funds.
- The two major depositories in India are NSDL and CDSL, while the major stock exchanges are BSE and NSE.
- The leading credit rating agencies are CRISIL and ICRA, and the oldest mutual fund in India is UTI.
