Question

Why secondary markets are so important to raise capital?

Please use a new words. Thank u

Answer 1

Secondary market is a market place where the previously issued financial securities such as stocks and bonds are bought and sold by investors. It facilitates investors to invest money in the form of shares that promotes better allocation of capital, economic growth, and gives liquidity to all investors.

Secondary markets are the vital source of capital formation and liquidity for the companies and the investors. In this, the price of a security is determined by its supply and demand that helps in valuing a company. Secondary markets provide investors with protection by organizing and regulating the markets.

There are following points due to which secondary markets are considered important for raising capital-

1. Generates economic efficiency as secondary markets promote safety and security in transactions.

2. An indicator of a country's economic health.

3. Creates additional economic value

4.  Provides liquidity to the economy.

5. Promotes long-term growth and investment.