What Are Capital Markets?
Capital markets deal with stocks and bonds in general. In simple words, any firm is it private of government, is always in need of funds, to finance its various operations to achieve specific long-term goals.
Thus every firm is supposed to acquire these very funds or capital; for which, it sells stocks and bonds. These stocks and bonds are basically like shares, all of which are in the companies name. For instance, when the government of any country, issues what are known as treasury bonds, it is tapping into the capital markets, thereby generating capital.
This process is known as the IPO or Initial Public Offering. Capital Markets are primarily divided into two types, the primary markets and secondary markets. The companies and governments sell their securities in the primary market, whereas the investors trade with this securities in what is known as the secondary markets. Thus, it is safe to say that the capital markets are an essential area of the finance industry.
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