(a) State four functions of a Stock Exchange. (b) Explain the following types of securities traded on the Stock Exchange: i. debentures ii. bonds iii. share...
(b) Explain the following types of securities traded on the Stock Exchange: i. debentures ii. bonds iii. shares iv. stock.
(a) Four functions of a Stock Exchange are:
Providing a platform for companies to raise capital: Companies can sell shares or other securities to investors in order to raise money for business activities.
Facilitating liquidity and price discovery: Stock exchanges provide a marketplace where investors can buy and sell securities, thereby ensuring that investors can easily and quickly convert their investments into cash.
Providing a measure of company performance: Share prices are often used as a barometer of a company's performance, and the stock exchange provides a public record of this performance.
Providing a source of investment opportunities: The stock exchange provides investors with a range of investment opportunities, allowing them to choose from a variety of companies and industries.
(b)
Debentures are a type of long-term debt instrument issued by companies to raise capital. They are similar to bonds, but unlike bonds, they are not secured by specific assets. Instead, debentures are backed only by the general creditworthiness and reputation of the company that issued them.
Bonds are also a type of long-term debt instrument, but unlike debentures, they are typically secured by specific assets such as property or equipment. Bonds typically have a fixed interest rate and maturity date, and investors can receive interest payments and the return of their principal investment at maturity.
Shares represent ownership in a company and are issued by companies that want to raise capital. Investors who purchase shares become part owners of the company and can participate in the company's profits through dividends or by selling their shares at a higher price than they paid.
Stock is a term that is often used interchangeably with shares, but it can also refer to a company's total outstanding shares. When a company issues shares to raise capital, the total number of shares outstanding increases. Investors who own stock in the company own a portion of the company's assets and profits, and the price of the stock reflects the market's assessment of the company's performance and future prospects.
Providing a platform for companies to raise capital: Companies can sell shares or other securities to investors in order to raise money for business activities.
Facilitating liquidity and price discovery: Stock exchanges provide a marketplace where investors can buy and sell securities, thereby ensuring that investors can easily and quickly convert their investments into cash.
Providing a measure of company performance: Share prices are often used as a barometer of a company's performance, and the stock exchange provides a public record of this performance.
Providing a source of investment opportunities: The stock exchange provides investors with a range of investment opportunities, allowing them to choose from a variety of companies and industries.
(b)
Debentures are a type of long-term debt instrument issued by companies to raise capital. They are similar to bonds, but unlike bonds, they are not secured by specific assets. Instead, debentures are backed only by the general creditworthiness and reputation of the company that issued them.
Bonds are also a type of long-term debt instrument, but unlike debentures, they are typically secured by specific assets such as property or equipment. Bonds typically have a fixed interest rate and maturity date, and investors can receive interest payments and the return of their principal investment at maturity.
Shares represent ownership in a company and are issued by companies that want to raise capital. Investors who purchase shares become part owners of the company and can participate in the company's profits through dividends or by selling their shares at a higher price than they paid.
Stock is a term that is often used interchangeably with shares, but it can also refer to a company's total outstanding shares. When a company issues shares to raise capital, the total number of shares outstanding increases. Investors who own stock in the company own a portion of the company's assets and profits, and the price of the stock reflects the market's assessment of the company's performance and future prospects.