What is Capital Market Instruments?
Capital market is part of the financial market. where savings and investments are channeled between buyers and suppliers. Its deals with medium to long term finance. Capital markets include primary and secondary markets.
Types of Capital Market Instruments
There are two types of capital market Instruments
- Equity Security
- Debt Security
Equity shares are also known as ordinary shares. Equity shares are those shares which have rights to vote and enjoy the benefits of dividend in last after. Equity shareholders are considered as real owners of the company. Equity shares are the main source of finance of a firm.
Preference shares are those shares which have some certain special or priority rights for the investors. They enjoy the benefits of dividend before equity shareholders. Preference shares do not have voting rights.
Long-Term security which traded in capital market, issued by the company and secured against assets. Debentures are the loan from the public. it provides the fund to the company. a fixed rate of interest is given to the debenture holder. the debentures redeem after a certain period. debenture holders do not have any right in management.
A bond is a written income instrument that represents a loan made by a lender to a borrower person. Bonds can be created by legally by I.O.U. between lender and borrower that includes the details of the loan and its payments.