Question

II Capital Raising by Corporations:

1. Identify and describe two types of securities corporations may issue in order to raise capital.

1. Is an initial public offering (IPO) a form of primary or secondary market transaction? What is (are) the difference(s) between primary and secondary markets?

Answer 1

Corporate mostly raise capital by 1) debt and 2) equity.

Debt financing is that when a company borrows money and agrees to pay it back to the lender at a later date

Equity capital is raises by selling the shares of the stock.

An IPO is an example of a primary market transaction.

Primary market is where securities are created. Where in secondary market, these securities are traded by investors.

The prices in the primary market are fixed, wherein secondary market the prices are variable.

In primary market investor can purchase shares directly from the company, wherein secondary market investors buys and sells shares and stocks in the market.

The primary market is rooted in a specific place and has no geographical presence and has no organizational set u up, wherein secondary market has physical presence as a stock exchange and has geographical presence.