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Finance Market - Coggle Diagram

- - - - Distinguishing between markets is on the basis of the maturity of the securities traded in each market.
      - The money market is a financial market in which only short-term debt instruments (generally those with original maturity terms of less than one year) are traded
      - The capital market is the market in which longer-term debt
        instruments (generally those with original maturity terms of one year or greater) and equity instruments are traded.
      - Compare between Money market
        and Capital Market
        
        Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.
        
        Short-term securities have smaller fluctuations in prices than long-term securities, making them safer investments.
    - - Debt Market
        
        The most common method is through the issuance of a debt instrument, such as a bond or a mortgage
        
        The maturity of a debt instrument is the number of years (term) until that instrument's expiration date.
        
        A debt instrument is short-term if its maturity term is less than a year
        
        long-term if its maturity term is ten years or longer
        
        Debt instruments with a maturity term between one and ten years are said to be intermediate-term.
      - Equity Market
        
        The second method of raising funds is through the issuance of equities, such as common stock
        
        Equities often make periodic payments (dividends) to their holders and are considered long-term securities because they have no maturity date.
      - Compare between Debt Market
        and Equity Market
        
        The main disadvantage of owning a corporation’s equities rather than its debt is the corporation must pay all its debt holders before it pays its equity holders.
        
        The advantage of holding equities is that equity holders benefit directly from any increases in the corporation’s profitability or asset value because equities confer ownership rights on the equity holders.
        
        Debt holders do not share in this benefit, because their dollar payments are fixed.