19/01/2011

CAPITAL MARKET

ACKNOWLEDGEMENT
Completion of any project report is the milestone in the life of every student and the success of this project then enhances the self confidence of the student. A successful and satisfactorily completion of any task is the outcome of the invaluable aggregate contribution of the different efforts in all the direction, explicitly or implicitly. The key to the acknowledgement of such a different task lies in the hands of the professor. Words are poor gratitude bearer but we would take this opportunity to thank our Ravindra Sir., professor fir the guidance without which this research would not have been done.

INDEX
NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 PARTICULAR INTRODUCTION SHARE (FINANCE) FEATURE OF SHARE CAPITAL MEANING OF SHARE CAPITAL TYPES OF SHARE CAPITAL EQUITY SHARES FEATURE OF EQUITY SHARE PREFRENCE SHARE: TYPES OF PREFRENCE SHARE DEBT DEBENTURE TYPES OF DEBENTURE BOND

INTRODUCTION
Capital markets in the United States provide the lifeblood of capitalism. Companies turn to them to raise funds needed to finance the building of factories, office buildings, airplanes, trains, ships, telephone lines, and other assets; to conduct research and development; and to support a host of other essential corporate activities. Much of the money comes from such major institutions as pension funds, insurance companies, banks, foundations, and colleges and universities. Increasingly, it comes from individuals as well. As noted in chapter 3, more than 40 percent of U.S. families owned common stock in the mid-1990s. Very few investors would be willing to buy shares in a company unless they knew they could sell them later if they needed the funds for some other purpose. The stock market and other capital markets allow investors to buy and sell stocks continuously. The markets play several other roles in the American economy as well. They are a source of income for investors.

SHARE (FINANCE)
What Does Share Capital Mean?
Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares. Also known as "equity financing".

MEANING OF SHARE CAPITAL:

Share capital denotes the amount of capital raised by the issue of shares, by a company. It is collected through the issue of shares and remains with the company till its liquidation. Share capital is owned capital of the company, since it is the money of the shareholder and the shareholder are the owners of the company. The total share capital is divided into

small parts and each part is called a share. Share is the smallest part of the total capital of a company.

FEATURE OF SHARE CAPITAL:

Owned capital: Share capital is owned capital of the company. It is actually the money of the shareholders and since the shareholders are the owner of the company, so share capital is the owned capital. Remains with the company: It remains with the company till its liquidation. Dependable sources: Share capital is the most dependable source of finance for the joint stock companies. Opportunity to participate: Share capital gives its shareholders an opportunity to participate in the company's management with normal rights of shareholders. Benefit of bonus shares: It gives it shareholders the benefit of bonus shares. Benefit of limited liability: Share capital also gives its shareholders the befit of limited liability as the liability of its shareholders is limited up to the face value of each share.

TYPES OF SHARE CAPITAL

Authorized capital: It is the maximum amount of capital which a company can collect or raise by selling its shares to the general public. Authorized capital is known as nominal capital or registered capital. The capital with which a company is registered is known as its authorized capital. Issued capital: It is that part of the authorized capital which is actually issued to the general public. For example: A company has issued 80 shares of Rs. 10/- each so the issued capital is Rs. 800/Unissued capital: It is that part of the authorized capital which is not being issued to the general public. That is, company has not issued 20 shares of Rs. 10/- each, so the unissued capital is Rs. 200/-.

Subscribed capital: It is that part of the issued capital which is actually subscribed by the general public. That is company has issued 80 shares out of which 70 shares are being bought by the general public, so the subscribed capital is Rs. 700/-. That is 70 shares of Rs. 10/- each. Unsubscribed capital: It is that part of the issued capital which is not subscribed by the general public. That is, if the the company has issued 80 shares out of which 70 are bought by the general public and 10 are not being bought by them, so the unsubscribed capital is 10 x Rs. 10 = Rs. 100. That is 10 shares of Rs. 10 each. Called up capital: It is that part of the subscribed capital which is actually called up by the company. For instance, if a company has asked its shareholders to pay Rs. 5/- per share so on 70 shares, they have to pay 70 shares x Rs. 5 each = Rs. 350/-. This is the called up capital. Uncalled up capital: It is that part of the subscribed capital which is not being called up by the company. It may be called up as and when the company needs funds. That is out of Rs. 10/- per share, Rs. 5/- per share is being called up by the company and Rs. 2 is being uncalled up and Rs. 3 is kept as reserve that is yet to be called. Reserve capital: Reserve capital is that part of the uncalled capital which is reserved to be called up only at the time of winding up or liquidation of the company. It cannot be called during the life time of a company. It is to be used only for meeting extra- ordinary situation such as liquidation of the company. The purpose of reserve capital is to meet the interests of the creditors at the time of winding up of the company. Paid up capital: It is that part of the called up capital which is actually paid up by the shareholders. For example, out of 70 shares which were subscribed for 60 shareholders have paid up their call money, that is 60 x Rs. 5 = Rs. 300/- is called as the paid up capital of the company. Unpaid up capital: It is that part of the called up capital which is not being paid by the shareholders. For example: out of 70 shareholders, 60 shareholders have paid up their call money and 10 shareholders have not paid their call money, so 10 x Rs. 5 = Rs. 50/- is called as unpaid up capital. Unpaid up capital is also known as Calls in Arrears.

EQUITY SHARES:
Meaning: Equity shares are those shares which are ordinary in the course of company's business. They are also called as ordinary shares. These share holders do not enjoy preference regarding payment of dividend and repayment of capital.Equity shareholders are paid dividend out of the profits made by a company. Higher the profits, higher will be the dividend and lower the profits, lower will be the dividend.

FEATURE OF EQUITY SHARE

(1) Owned capital: Equity share capital is owned capital because it is the money of the shareholders who are actually the owners of the company. (2)Fixed value or nominal value: Every share has fixed value or a nominal value. For example, the price of a share is Rs. 10/- which indicates a fixed value or a nominal value. (3) Distinctive number: Every share is given a distinct number just like a roll number for the purpose of identification. (4) Attached rights: A share gives its owner the right to receive dividend, the right to vote, the right to attend meetings, the right to inspect the books of accounts. (5) Return on shares: Every shareholder is entitled to a return on shares which is known as dividend. Dividend depends on the profits made by a company. Higher the profits, higher will be the dividend and vice versa.

PREFRENCE SHARE:
DEFINATION: Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of liquidation. Like common stock, preference shares represent partial ownership in a company, although preferred stock shareholders do not enjoy any of the voting rights of common stockholders. Also unlike common stock, preference shares pay a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so.

CHARASTERISTIC: Preferred stock dividend payments must be paid prior to those remitted to common shareholders. The preferred stockholder's rights to property are also superior to common stock equity in the event of bankruptcy liquidation. Despite these ownership claims, preferred stock does not share the voting rights applicable to common. Generally, preferred shareholders are more so interested with collecting dividend income, rather than the capital appreciation of shares.

TYPES OF PREFRENCE SHARE:

1) Convertible preference shares: Have the privilege of being converted into ordinary shares at a specified date and rate. The terms of conversion are also being stated when the shares are issued. 2) Cumulative preference shares: Allows the company to pay any dividends that have not being paid in one year to be carried forward or cumulated to the following years for payment. 3) Participating preference shares: Are PRIVILEGE shares where the shareholders enjoy additional dividends besides the fixed rate? The amount of additional dividends is specified in the Articles and generally it is a proportion of dividend declared on ordinary shares. However, note that these participating preference shareholders will only be paid after all dividends on all other classes of shares have been paid. 4) Redeemable preference shares: Are shares that the company can buy back or redeemed at a specified future data at a predetermined price? The redemption details or terms are stated in the Articles when these shares are issued.

DEBT:
Definition: An amount owed to a person or organization for funds borrowed. Debt can be represented by a loan note, bond, mortgage or other form stating repayment terms and, if applicable, interest requirements. These different forms all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment terms. Credit and debt Debt is that which is owed; usually referencing assets owed, but the term can also cover moral obligations and other interactions not requiring money. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.

DEBENTURE:
A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

TYPES OF DEBENTURE:
Debentures are divided into different categories on the basis of: (1) convertibility of the instrument (2) Security Debentures can be classified on the basis of convertibility into: 1) Non Convertible Debentures (NCD): These instruments retain the debt character and cannot be converted in to equity shares 2) Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription.

3) Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. The ratio of conversion is decided by the issuer. Upon conversion the investors enjoy the same status as ordinary shareholders of the company. 4) Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue. On basis of Security, debentures are classified into: 5) Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. So if the issuer fails on payment of the principal or interest amount, his assets can be sold to repay the liability to the investors 6) Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount, the investor has to be along with other unsecured creditors of the company.

BOND:
What Does Bond Mean? A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Introduction to Bonds: A bond is a debt security, similar to an I.O.U note. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity known as the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it "matures," or comes due. A bond is a loan that pays interest over a fixed term, or period of time. When the bond matures at the end of the term, the principal, or investment amount, is repaid to the lender, or owner of the bond.

Typically, the rate at which interest is paid and the amount of each payment is fixed at the time the bond is offered for sale. That's why bonds are known as fixed-income securities. That's one reason a bond seems less risky than an investment whose return might change dramatically in the short-term.

CAPITAL MARKET

SHARE

DEBT

EQUITY SHARES

PREFRENCE SHARES

DEBENTURE

BOND

Convertable or non-convertable

Participating Preference Share or non-participating preference shares

Redeemable and Non- Redeemable

Cumulative or Noncumulative

BIBLIOGRAPHY
INTERNET SOURCES:

www.google.com

www.yahoo.com

BOOK REFRENSES:

Notes provided by Ravindra sir. Financial Marketing (SY.BCBI)