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Financial Market NCERT Textbook With Solutions PDF Free Download
Chapter 10: Financial Market
You all know that a business needs finance from the time an entrepreneur makes the decision to start it.
It needs finance both for working capital requirements such as payments for raw materials and salaries to its employees, and fixed capital expenditure such as the purchase of
machinery or building or to expand its production capacity.
The above example gives a fair picture of how companies need to raise funds from the
capital markets. Idea Cellular decided to enter the Indian capital market for its needs of expansion.
In this chapter, you will study concepts like private placement, Initial Public Offer (IPO), and
capital markets which you come across in the example of Idea Cellular.
Businesses can raise these funds from various sources and in different ways through financial markets.
This chapter provides a brief description of the mechanism through which finances are mobilized by a business organization for both short-term and long-term requirements.
It also explains the institutional structure and the regulatory measures for different financial markets.
A business is a part of an economic system that consists of two main sectors – households that save funds and business firms which invest these funds.
A financial market helps to link the savers and the investors by mobilizing funds between them.
In doing so it performs what is known as an allocative function. It allocates or directs funds available for investment into their most productive investment opportunity.
There are two major alternative mechanisms through which allocation of funds can be done: via banks or via financial markets.
Households can deposit their surplus funds with banks, who in turn could lend these funds to business firms.
Alternately, households can buy the shares and debentures offered by a business using financial markets. The process by which allocation of funds is done is called financial intermediation.
Banks and financial markets are competing intermediaries in the financial system, and give households a choice of where they want to place their savings.
Financial markets provide valuable information about securities being traded in the market.
It helps to save time, effort, and money that both buyers and sellers of a financial asset would have to otherwise spend to try and find each other.
The financial market is thus, a common platform where buyers and sellers can meet for the fulfillment of their individual needs.
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NCERT Solutions Class 12 Business Studies Chapter 10 Financial Market
Q.1 What is a Treasury Bill?
Treasury bills are instruments that are used by the government for raising money from the financial market. It is issued as a promissory note with a discount.
The purpose of treasury bills is to fulfill the short-term money requirement of the government. It has a maximum maturity period of 364 days. It is one type of money market instrument.
Q.2 Explain the various segments of the NSE.
The various segments of NSE are:
1. Capital Market Segment: This is the segment in which NSE deals with equity shares, debentures, preference shares, ETF, etc. The capital market provides a transparent and efficient platform for conducting trading in a proper and fair way. It started in November 1995.
2. Wholesale Debt Market: This provides a platform for trading debt securities or fixed income. This was operational from June 1994.
Two parties are present in the debt market which are the participants and the trading members. Trading members are brokers who are recognized by the NSE and participants are those who are looking for buying and selling securities.
Q.3 State any two reasons why investing public can expect a safe and fair deal in the stock market. (Point w.r.t safety of Transactions – Functions of the Stock Exchange).
The investing public can expect a safe and fair deal in the stock market due to these two reasons:
i. The function of the stock exchange is to protect the rights and interests of the investors. It should be guiding individual investors and educate them on the ways to deal in the stock exchange.
ii. The function is to develop fair practices and codes of conduct by the intermediaries involved like merchant bankers, and brokers.
Q.4 What is the common name for Beneficiary Owner Account, which is to be opened by the investors for trading in securities?
The beneficial owner is the type of person who enjoys the ownership benefits even when the property title is in name of someone else. In other words, any individual or individuals who have the power to vote or influence any transaction decisions such as company shares either directly or indirectly.
Q.5 Name any two details that need to be provided by the investor to the broker while filling a client registration form
The investor needs to provide the following details to the broker at the time of filling out a client registration form
i. Date of birth and address
ii. PAN Number
NCERT Class 12 Business Studies Textbook Chapter 10 With Answer PDF Free Download