Question

Assume you have held a new position for one year and are in charge of helping manage a company's short-term assets and liabilities. You are in charge of investing the company's money for 30-day to 180-day time periods. You know that if you prove yourself in this position that you may be on the fast-track for the Chief Financial Officer's job. The talk around the water cooler is that the current CFO is evaluating several new employees for potential to assume her job when she retires. Employee evaluations are coming up, and now is the time to show off your stuff!

Prepare a job evaluation summary for your boss that demonstrates your understanding of the financial markets, the various financial institutions, and how they apply specifically to your job.

Answer 1

Financial markets are an important constituent of any economy. They include money market and capital market
Money Market - The market for short term debts of upto 1 year.
Capital Market - The market for equity and long term debt funds for more than a year.

Financial markets meet various needs of Government, issuing companies, Investors and economy.

Financial Products and Market Entities
Governments issue treasury bills and government securities in the debt market. They
also offer shares of public sector undertakings in the equity market.
Financial products issued by companies include equity shares, preference shares,
convertable debentures, non convertable debentures, commercial paper, cerificate of deposit etc.

Companies can either mobilise moneys from retail investors through a public issue,
or target institutional investors through a private placement. Venture Capital Funds,
Private Equity Funds, Foreign Institutional investors and high net worth individuals are
leading investors in the private placement market.

Investment bankers help companies to mobilise the resources from investors. They also
help businesses acquire other businesses and re-structure themselves.

Broking houses have research teams that cover different sectors and companies.
Their research reports are an important source of information about companies for
investors.

Credit rating agencies rate the debt instruments issued to the public. They also provide
a rating for public issues of equity.

Financial products issued by governments and companies in the primary market are
traded in the secondary market. An active and liquid secondary market is important for
investors to be interested in the primary market.

Futures and options are popular derivative instruments.

Market Institutions

Stock exchanges provides the platform for secondary market trades. They also perform certain regulatory functions over companies whose stocks are listed on exchange.

The depositories make it possible for the market to trade securities in dematerialised
form. The elimination of physical securities has made it possible for large volumes of
trades to be executed and settled through exchange.