2. Introduction
Company needs funds for various reasons such as expansion,
debt reduction, Research & Development etc.
There are two common ways to raise fund:-
1. Debt Financing
2. Equity Financing
3. What is Debt Financing and Equity
Financing
Debt Financing
• In Debt financing, the fund or the working capital is raised by
taking the loan from banks or other financial organisations.
• The debt loan issued is to be returned to the bank
along with the interest.
4. What is Debt Financing and Equity
Financing
Equity Financing
• In Equity financing the funds are raised by selling the shares of
the company. The shares are nothing but the units of ownership.
• In equity financing the funds are neither returnable nor there
is need to pay the Interest because company gets the fund while
people get ownership in the company.
5. Initial public offering (IPO)
• When a company sells its shares for the very first time to the
public then it is called as Initial public offering (IPO).
• It is the process through which a private company becomes a
public company.
6. Initial public offering (IPO)
• It is a direct deal between the company and the buyer or
investor.
• In IPO, the buyers can buy shares directly from company but
to sell the shares they have to wait until the company gets listed
on stock exchange.
7. Example of IPO
• In March 2017 the parent company of D-Mart, Avenue
Supermart raised G 1872 crores through IPO.
• In return they gave 10% ownership of Avenue Supermart to
public.
8. Stock Market
• The stock market is the medium through which the exchange
of shares take place between the seller and buyer.
• Stock exchanges act as a mediator between buyers and sellers.
9. Stock Market
• National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE) are two main stock exchanges in India.
Image Source: financialexpress.com
Image Source: businesszoom.in
10. How Stock market works
• First, company raises fund through IPO, where investors can
directly bid for the shares in IPO and buy them.
11. How Stock market works
• Then the stock gets listed on the stock exchange and shares
issued by the company can be traded on the stock exchange. This
is where most of the trading happens.
12. Who regulates the stock market?
• The SEBI has the all authority to make rules and regulation
and to control the stock market.
• SEBI approves the licence to broker and
dealers for stock market.
Image Source: livemint.com
13. Watch this video to learn more about
How Share market works (in Hindi)
https://www.youtube.com/watch?v=zxKURXHy6es
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