Business Management: Navigating Capital Markets

Capital Markets Overview

• Capital markets facilitate the buying and selling of goods, bonds, and other financial resources, enabling the expansion of small businesses and building up of reserves for companies.
• The course covers global markets, emerging trends, equity markets, investment strategies, portfolio management, risk management, asset allocation, and diversification.

Foundations of Capital Markets

• The primary function of capital markets is to secure or raise long-term financing for firms, entrepreneurs, and governments.
• Capital markets facilitate debt repayment, business expansion, and the introduction of new products by connecting investors with publicly issued equity shares, bonds, and debentures.
• Stocks (equities) represent ownership in a company, granting shareholders voting rights and increased acquired assets and dividends.
• Bonds are used to finance infrastructure projects, covering government or company debt.
• Derivatives are legally binding agreements between two parties, derived from stocks, commodities, and currencies.

Investment Strategies and Portfolio Management

• Value investing involves a methodical approach to mitigate risk by establishing precise investing goals, specifying risk tolerance, and creating an all-inclusive investment plan.
• Principles of risk management include diversification, asset allocation, stop-loss, position sizing, and regular monitoring.
• Asset allocation involves distributing assets among several asset classes, including cash, stocks, bonds, and real estate, based on return expectations, risk tolerance, and market conditions.
• Diversification lowers risk by distributing investments across various industries and asset classes.
• Growth investing aims to maximize returns by investing in companies with high growth potential, but comes with higher risk.
• Principles of risk management for growth investors include diversification, stop-loss, position sizing, and regular monitoring.
• Asset allocation for growth investors typically involves a mix of equities, fixed income, and alternatives.
• Passive portfolio management involves investing in a broad market index to achieve long-term returns, with limited risk exposure, no explicit asset allocation, and built-in diversification.
• Active portfolio management involves actively selecting individual securities to beat the market's returns, requiring a more nuanced understanding of risk management, asset allocation, and diversification.

Market Analysis and Valuation Techniques

• Fundamental analysis is a crucial aspect of stock market analysis that involves examining the intrinsic value of a company to determine its stock's true worth.
• Important elements of fundamental analysis include financial statements analysis, ratio analysis, industry and market analysis, management team analysis, and economic analysis.
• Practical examples of fundamental analysis include financial statements analysis of Amazon and Alibaba Group, ratio analysis of Johnson & Johnson's dividend yield, industry and market analysis of the e-commerce industry, and management team analysis of Amazon's CEO Jeff Bezos.
• Case studies of Netflix's fundamental analysis revealed strong revenue growth rates, high profit margins, and a low debt-to-equity ratio.

This quiz is designed for business management students, covering the basics of capital markets, buying and selling of financial resources, and small business expansion.