CIMA F2 Syllabus A. Financing capital projects - Capital markets - Notes ^{4 / 13}

Capital Markets

A stock market acts as a primary market for raising finance, and as a secondary market for the trading at existing securities.

Securities are tradable financial instruments. 

They can take the form of equity (such as shares), debt (such as bonds) or derivatives.

Capital markets are markets for trading in medium and long-term finance.

ln the UK the principal capital markets are:

• The Stock Exchange main market (for companies with a full Stock Exchange listing)

• The more loosely regulated second tier Alternative Investment Market (AIM)

Firms obtain capital in the following ways:

1. Raise Share capital

   They may raise share capital. 

   Most new issues of share capital are in the form of ordinary share capital. 

   Firms that issue ordinary Share capital are inviting investors to take an equity stake in the business, or to increase their existing equity stake.

2. Raise loan capital

   They may raise loan capital 

   Long-term loan capital may be raised in the form of loan notes, corporate bonds, debentures, unsecured and convertible bonds.