Page 323 - DMGT207_MANAGEMENT_OF_FINANCES

Management of Finances

Notes  In India, the capital market is regulated by the Capital Markets Division of the Department
of Economic Affairs, Ministry of Finance.

 The Securities and Exchange Board of India (SEBI) is the regulatory authority established
under the SEBI Act 1992, in order to protect the interests of the investors in securities as
well as promote the development of the capital market.

 Trading on stock exchanges is done through brokers and dealers. All members can act as
brokers and or this purpose they have to maintain security deposits. Brokers act as agents
buying and selling or others for which they receive brokerage commission at stipulated
rates. Dealers act as principals and sell securities on their own accounts.

 Mutual fund means a fund established in the form of a trust to raise monies through the
sale of units to the public or a section of public under one or more schemes for investing
in securities, in accordance with regulations.

 Credit rating is a symbolic indication of the current opinion regarding the relative
capability of a corporate entity to service its debt obligations in time with reference to the
instrument being rated.

14.10 Keywords

Book Building: Book building is the process of setting price under a certain price band.
Capital Market: The capital market is designed to finance the long-term investments. The
transactions taking place in this market will be for periods over a year.
Central Bank: The bank that provides financial and banking services to the government of a
country and its commercial banking system and which implements the government’s monetary
policy.
Commercial Bank: A financial institution that provides commercial banking services. A
commercial bank accepts deposits, gives business loans and provides other services to businesses.
Commission Broker: The commission broker executes buying and selling on the floor of the
stock exchange.

Debenture: A debenture is a document evidencing a debt or acknowledging it and any document
which fulfills either of these conditions is a debenture.
Equity Shares: Equity shares having voting rights at all general meetings of the company. These
votes have the affect of the controlling the management of the company.
Mutual Funds: A mutual fund is a trust that pools the savings of a number of investors who
share a common financial goal.
Percentage Margin: The ratio of the net worth, or “equity value” of the account to the market
value of the securities.
Sweat Equity Shares: The phrase ‘sweat equity’ refers to equity shares given to the company’s
employees on favorable terms, in recognition of their work.

14.11 Review Questions

1. Define primary market. What are the key methods of issuing shares in primary market?
2. Describe the role of primary market in India financial market.
3. Define secondary market.

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