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Name : Sugra Shamim Parkar

Roll No: 4302


Class: M.com II

Subject: CAPITAL MARKET


CAPITAL
MARKET
INSTRUMENTS..
INTRODUCTION

It is a place where buyers and sellers of securities


can enter into transactions to purchase and sell shares,
bonds and debentures.

The capital market includes Stock market and


Bond Markets. Capital market is a segment of financial
market that dealing with effective channeling of
medium to long term funds from surplus to deficit
units.
CAPITAL MARKET INSTRUMENT

Equity Debt
Security Security
Equity Debentures
Shares

Bonds
Preference
Shares
Equity Securities:
1. Equity Shares:
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.
Equity shares refers to those shares which are paid
dividends only when profits are left only after paying fixed
rate of dividend. The dividend is not fixed in equity shares,
it is depends on the company profit. If the profit is higher
dividend also higher or vice-versa. Equity shareholders
have voting right and right to control company affairs.
MERITS:
 A permanent source of finance to the Company.
No fixed rate of dividend
Easy liquidity and marketability

DEMERITS:
 No guarantee on returns to Shareholders
 Loss on Managerial Control
2. Preference Shares:

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.
Right to receive fixed rate of dividend before paying any
dividend on equity shares.
At the time of wound up of company, they have right to
return capital before paying equity shares.
TYPES OF PREFERENCE SHARES:

 Cumulative Preference Shares – Those share whose holders are entitled to


recovers the arrears of preference shares before paid on equity shares.
 Non-Cumulative Preference Shares _ The holders of which get fixed
amount of dividend out of year profit. If company is failed to paid amount
of dividend due to any reason , such shareholders get nothing nor they claim
dividend of any year.
 Participating Preference Shares – These shareholders have right to
participate in surplus profits and they have right to receive dividend equal to
the normal specified rate.
 Non-participating Shares – These shareholders get only fixed rate of
dividend and does not have right to participate in surplus profits or any
surplus on winding up.
 Redeemable Preference Shares – Those shares which will be repaid by the
company within stipulated period 0f issuing and fulfilling certain conditions.
 Irredeemable Preference Shares – Those shares whose capital is cannot be
refunded before winding up.
 Convertible Preference Shares – These Shares gives option to investors to
convert it preference shares into equity shares.
 Non-Convertible Preference Shares – Those shares in which their is no
option in conversion on shares. They get their money back on maturity.
3. Debentures:

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.
• Debentures are the document of Debts
• Fixed rate on interest
• Companies may have to mortgage their assets
• A Flexible source of finance
TYPES OF DEBENTURES:
4. BONDS:
• A bond is a written income instrument that
represents a loan made by a lender to a borrower
person.
•Bonds are issued by public authorities, credit
institutions, companies and super national
institutions in the primary market.
•A bond is a negotiable certificate which entitles
the holder of repayment of the principal sum
plus interest.
•The most common process of issuing bonds is
through underwriting.
THANK YOU!!