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    Capital Market Instruments Are Basically Either Equity (Stock) Securities or Debt (Bond)

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    maryani
    Capital market instruments include equity securities like stocks and debt securities like bonds. Companies use various instruments to raise capital, including loans, leases, mortgages, and letters of credit which are non-negotiable. Stocks are the largest capital market instrument and represent ownership in a company. They do not have maturity dates and remain outstanding as long as the company operates. Stocks are traded on stock exchanges and over-the-counter markets. They earn dividends paid from company earnings.

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    Capital Market Instruments Are Basically Either Equity (Stock) Securities or Debt (Bond)

    Uploaded by

    maryani
    48 views2 pages
    Capital market instruments include equity securities like stocks and debt securities like bonds. Companies use various instruments to raise capital, including loans, leases, mortgages, and letters of credit which are non-negotiable. Stocks are the largest capital market instrument and represent ownership in a company. They do not have maturity dates and remain outstanding as long as the company operates. Stocks are traded on stock exchanges and over-the-counter markets. They earn dividends paid from company earnings.

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    Capital Market Instruments

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    Capital market instruments include equity securities like stocks and debt securities like bonds. Companies use various instruments to raise capital, including loans, leases, mortgages, and letters of credit which are non-negotiable. Stocks are the largest capital market instrument and represent ownership in a company. They do not have maturity dates and remain outstanding as long as the company operates. Stocks are traded on stock exchanges and over-the-counter markets. They earn dividends paid from company earnings.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    48 views2 pages

    Capital Market Instruments Are Basically Either Equity (Stock) Securities or Debt (Bond)

    Uploaded by

    maryani
    Capital market instruments include equity securities like stocks and debt securities like bonds. Companies use various instruments to raise capital, including loans, leases, mortgages, and letters of credit which are non-negotiable. Stocks are the largest capital market instrument and represent ownership in a company. They do not have maturity dates and remain outstanding as long as the company operates. Stocks are traded on stock exchanges and over-the-counter markets. They earn dividends paid from company earnings.

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    Capital Market Instruments 

    Capital market instruments are basically either equity (stock) securities or debt (bond)
    securities, as far as negotiable securities are concerned.  

    Non-negotiable Instruments 

    1. Loans 
    Companies who need a large amount of funds to finance special needs like
    purchase of land or building, plant expansion, or even bond retirement usually resort to
    borrowing from institutional lenders like commercial banks. Long time, well-established
    companies can really borrow a large amount of funds to finance their capital needs. 

    2. Leases 
    Arrangements where the owner of the property (lessor) leases/rents the
    property out to the user of the property (lessee) for a fixed monthly lease payment.
    Companies who want to buy capital equipment or machinery can arrange for a lease-
    to-own contract with financial institution.  

    3. Mortgages 
    Land, building, and machineries are usually mortgaged upon purchase. The
    companies borrow money from banks and other lending institutions to buy the land,
    building or machinery, and these are used as collateral for the loan obtained.  

    4. Letters of Credit 
    It is a letter from a bank guaranteeing a buyer’s payment to seller on the
    agreed date and for the correct amount. In the event that the buyer is unable to make
    payment on the purchase, the bank will be required to cover the full or remaining
    amount of the purchase. 

    Negotiable Capital Instruments 

    1. Corporate Stocks 
    This is the largest capital market instrument. Stocks are evidences or
    certificates of ownership in a corporation. The holders are called shareholders or
    stockholders. The capital stock of a company is divided into shares and each share is
    denominated in Philippine currency or the currency of the country where the company
    is located. 

    Unlike debt instruments, stocks do not have maturity dates. They remain
    outstanding as long as the issuing corporation is in business and is not retired or called
    in by issuing company.  Stocks are traded by brokers in organized stock exchanges
    and over-the-counter (OTC) market.  Any corporation with more than 300 stockholders
    may have its stock traded over the counter.  Large corporations meet certain standards
    of size and stability may apply to the Securities and Exchange Commission (SEC) for
    listing on organized stock exchanges such as Philippine Stock exchange (PSE).
    Stocks earn dividends out of earnings in the form of:  

     ∙ Cash dividends  

     ∙ Stock dividends 

     ∙ Stock option 

     ∙ Property dividends 

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