CORPORATIONS AND FINANCIAL MARKET
After studying the materials of the chapter, the student must:
• the importance and role of the financial market in the national economy;
• features of individual segments of the financial market;
• types of professional activity in the stock market;
• the role of the stock exchange on the securities market;
• Legal regulation of the stock market;
be able to
• analyze and evaluate the activities of professional stock market participants;
• apply the acquired knowledge in the brokerage, dealer and other types of activity in the stock market;
• use the information received in the stock market to join all members and participate in exchange trades;
• information on the activities of professional participants in the securities market for its use in practical work;
• Methodical approaches to the use of methods and instruments of the financial market.
Purpose and functions of the financial market in the mobilization and distribution of corporate capital
The objective prerequisite for the functioning of the financial market is the mismatch of the need for financial resources in corporations with the availability of sources to cover these needs. In practice, free money resources may be available to some owners (owners), and investment needs arise from other market participants. To mobilize temporarily free cash and rational use of them, the financial market is intended. Its functional purpose is to mediate the movement of monetary resources from their owners to users.
The functioning of the financial market is inextricably linked with the presence in the economy of real owners who have full economic independence and responsibility for the final financial result. Only such independent owners are able to conclude transactions in the financial market and make a demand for stock instruments in exchange for money.
The composition of participants in the financial market and the functions performed by them are shown in Fig. 8.1.
Fig. 8.1. Functions of financial market participants
In the financial market, there are usually separate segments:
• The market of short-term means of payment (checks, bills of exchange, letters of credit, bills of lading, etc.) in circulation and performing identical functions is a money market;
• The market of loan capital, i.e. short- and long-term bank loans;
• Securities market - the stock market.
It should be assumed that the latter is actually a financial market in its narrower sense, representing a set of financial institutions that direct the flow of money from owners (investors) to borrowers (issuers) through financial instruments - equity securities ( shares and corporate bonds). Often the financial market is divided into two segments - the money market and the capital market. In the money market they sell and buy short-term securities (with a maturity of up to one year). On the capital market, deals are concluded with long-term securities with maturity of more than one year (shares and corporate bonds).
The capital market, in turn, is divided into primary and secondary. In the primary market, new issues of equity securities are offered. The secondary market is a mechanism for the purchase and sale of previously placed securities in order to extract economic benefits (income in the form of dividends, interest and a gain in the exchange value).
In terms of organization, the financial market can be divided into organized (stock and currency exchanges) and unorganized (buying and selling equity securities through a network of brokerage and dealer companies). In the scientific literature, you can also find other classification characteristics of the financial market.
The public function of the financial market is that with its help:
• ensure the redistribution of financial resources in time and space - between sectors of the economy, business areas, regions, etc.
• Achieve regularity of settlements between market participants in the sale and purchase of securities;
• Ensure the consolidation of financial resources in key areas of activity;
• Provide price and other information that allows you to carry out financial transactions with securities in different sectors of the economy and business areas;
• provide incentives for market participants in situations where one of the participants in a financial transaction has all the necessary information that the other does not possess, or one of the participants acts as an agent (commissioner) on behalf of the second;
• Achieve the most effective ways to manage financial risks (insurance, self-insurance, hedging, etc.) •
The financial market is diverse, but there are two items of purchase and sale: financial assets exchanged for money, and funds intended for the purchase of securities. The economic nature of the financial market is most clearly manifested in its functions , which include:
1) the realization of value and use value, concluded in financial assets;
2) the organization of the process of bringing financial assets to consumers (investors - buyers of securities);
3) financial support for the investment process (investment of capital in these assets);
4) the impact on monetary circulation in the country.
In the process of performing the first function by the financial market, the value of the gross domestic product (GDP) moves, which is expressed through the exchange: the money is exchanged for financial assets.
The process of investing in financial assets can be expressed by the formula
where I - investments (investments) of funds; DFA - monetary expression of investments invested in financial assets; D1 - income from financial assets in the form of dividends and interest.
Completion of the process of such exchange means the end of the act of realizing the value embodied in the financial instrument (security), and the public recognition of its use value expressed in this asset. The sale of a financial asset (the first function of the financial market) means the repayment of the initial investment and the receipt by the investor (investor) of additional income in the form of profit. The second function is the process of bringing financial assets to the consumer. This function is expressed through the creation of a network of various institutions for the sale of securities: banks, stock exchanges, investment funds, etc. The purpose of these institutions is to create acceptable conditions for the exchange of funds of investors (buyers) for financial instruments (securities) of interest to them./p>
The content of the third function of the financial market is the accumulation of funds from investors (investors) for the purchase of securities. The process of saving financial resources includes both the procedure for the accumulation of own capital, and borrowing (in the form of a loan), lease (investment seleng).The content of the fourth function is the creation by the financial market of favorable conditions for the continuous movement of money in the process of making payments and regulating the money supply in circulation. Through this function, the monetary policy of the state is realized on the financial market by diverting part of the money supply from circulation and investing it in securities. From the stability of monetary circulation in the country depends the stability of the financial market.
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