Comments on the following: Important Instruments of financial markets,

Answer 2(a)(ii) Following are the important instruments for raising funds from the market Following are Capital Market Instruments: (Governed by SEBI) Equity Shares: The equity share holders are the part owner of the company. These shares can be obtained either through the Initial Public Offerings (IPOs), Further/Follow-on-Public Offerings (FPOs), Qualified Institutions Placements (QIP)/Private Placements/Right Issues (Primary Markets) and can also be bought in the stock markets after the stocks are listed (Secondary Market). Issue of equity provide long-term capital in the company. Preference Share: Preference shareholders are entitled for fixed dividend over other equity shareholders and in case of surplus, preference is given in distribution of income, over equity shareholders. In case of liquidation, their claim would rank above the equity shareholders. Companies can issue redeemable preference shares. Debenture: A debenture holder enjoys a fixed rate of interest payable half yearly/yearly, on a fixed date. The principal amount is repayable on the date of redemption. Debentures may be secured or unsecured. Debenture holders are creditors of the company. Bond: A bond is issued in the form of a negotiable certificate/document against indebtedness. Bonds and debentures are same. Government or Local Authorities issues bonds but corporate entities give name of such borrowings Debenture or Bond. Bonds are of various types based on security convertibility etc. Following are Money Market Instruments: (Governed by RBI) Commercial Paper (CP): CP is issued by companies with high credit ratings, in the form of promissory notes, at discount but repayable at par, to their holder at maturity. Certificate of Deposit (CD): A CD is issued by a bank at discount to be redeemable at par on the maturity date. Minimum amount ₹ 1,00,000 and period 7 days to one year. CDs are issued in the form of usance promissory note.