Functions of Capital Market

Functions of Capital Market

Functions of Capital Market

Capital is essentially needed by an organization which is profitable or non-profitable. Capital is the money or a monetary value by which a firm runs its activities is called the capital of the concerned firm. All businesses must have capital in order to purchase assets and maintain their operations.

A capital market is the mirror of a country’s financial condition. It plays an important role in the economic development of a country. Some functions of a capital market are mentioned below:

Capital formation: This market collects individual savings to form the required capital for the corporate body. It helps the proper utilization of financial resources of a company for the development of the economic condition of a country.

Transaction: This market performs the transactions among the parties of a market. Through which the savings go to the firm and thus the economic cycle circulates.

Underwriting: This market takes the responsibility of collecting required capital for the firms that massively helps the firm to start and sustain. Underwriter provides company for selling the shares.

Lending: Through the govt. bond, note, capital market lend money for long-term. For individual it provides loan also to buy land, machine, building etc.

Development: Capital is the source collection capital of a company. It helps, to develop the overall financial market of a country. The capital market acts for developing the financial systems as a whole.

Industrialization: This market directly helps in industrialization in the home and abroad. Foreign capital, are provided by the capital market.

From the above discussion, we can say that from functions of the capital market a country gets the benefits and the proper utilization of financial asset is possible. It is needed to transfer Individual savings to the entrepreneurs to help in mass production.