• Institutional arrangement for
borrowing of long term funds.
• Consists of series of channels through which the
savings of the community are made available for
industrial and commercial enterprises and public
• Mobilization of financial resources on a nation
• Leads to economic growth at a faster rate.
• Directs the flow of savings into most profitable
Primary Market Or New Issue
• Primary market is a market for raising long term
sources of finance.
• New securities that have never been previously
issued are offered.
• Both the new and existing companies can raise
capital from this market.
• Facilitate the transfer of funds from willing
investors to entrepreneurs setting up new
companies or going in for expansion, growth or
Securities dealt in primary
1. Equity Shares
• Equity shareholders are the real owners of the
• Have a control over the working of the company.
• Paid dividend after paying it to preference
• Rate of dividend depend upon the profits of the
• No dividend in case of no profits.
• Cannot be redeemed during the lifetime of the
Characteristics of equity shares
Right to income
2. Preference Shares
• These shares have certain preferences as compared to
other types of shares.
• Fixed rate of dividend is paid on preference share capital.
payment of dividend
Repayment of capital
Features of preference shares
3. No Par Stock
• Shares having no face value
• Capital of the company issuing such shares is divided into
a number of specified shares without any specific
• Share certificate of the company states number of shares
held by the owner without mentioning any face value
• Value of such share determined by dividing the real net
worth of the company with the total number of shares of
• Dividend is paid on per share
Debentures or Bonds
• It is a document under the company’s seal which
provides for the payment of a principal sum and
interest thereon at regular intervals.
• Debenture holder is the creditor of the company.
• A fixed rate of dividend is paid on the