Capital markets Essay Example | Topics and Well Written Essays - 2000 words

Capital markets - Essay archetypesically is a promise to pay back the face value of the bond on maturity together with making periodic interest fees known as coupon rate (Palmiter, 2009).Plowback-Earnings is another important reference book of new funds which corporations use on crown projects. Instead of paying out dividends to sh arholders, a gild may decide to plowback the profits made back into the corporation. Plowback is basically reinvesting profits back into the backing. It is an attractive demeanor of raising capital since it is usually subject to the control of management. There is no approval required from the political sympathies for its use, as happens when a corporation seeks to raise funds via selling of sprouts, bonds and securities. In addition, bonds and stocks have costs cerebrate to them, for instance, interest that is paid on bonds whereas profit retention avoids such costs (Tirole, 2010).Private equity-This is a showtime that is popular with small sm asheds or start-ups that cannot raise funds through the stock exchange or kinda do not desire to subject themselves to other financing options available. Thus they prefer raising capital via private equity, a process that basically comprises of private investors offering capital to a corporation in exchange for a given stake in the firm. A private equity company is a consortium of investors that pool their capital together for purposes of investment, mostly in other companies (Scanlan 1997).Equity securities-commonly referred to as stock is the fourth source of capital for corporations. Equity is basically an ownership stake in a business or property. Stock being the smallest form of new capital is of great importance to a firm in beginning a company and its early operations. A stock will offer an investor some(prenominal) legal rights such as ownership, sharing in earnings, transferability as well as the power to vote. Stocks are acquired through payment of cash (Jenkins 2013).2. A financial market basically entails a market where entities and bulk