Capital Market Overview

Financial Managers

• Prepare financial statements, business activity reports, and forecasts
• Monitor financial details to ensure legal requirements are met
• Supervise employees who do financial reporting and budgeting
• Review company financial reports and seek ways to reduce costs
• Analyze market trends to find opportunities for expansion or for acquiring other companies
• Help management make financial decisions

Financial Market

• A marketplace where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place
• Plays a crucial role in allocating limited resources in the country's economy
• Acts as an intermediary between savers and investors by mobilizing funds between them
• The Malaysia financial market is governed and regulated by the Bursa Malaysia or the Malaysia stock exchange

Types of Financial Markets

Money Market

• Exists as a result of the interaction between the suppliers and demanders of short-term funds (less than 1 year)
• Most transactions are made in marketable securities which are short-term debt instruments such as T-bills and commercial paper
• Transactions can be executed directly or through an intermediary

Capital Market

• A market that enables suppliers and demanders of long-term funds to make transactions
• Key securities are bonds (long-term debt) and both common and preferred stock (equity)
• Bonds are long-term debt instruments used by businesses and government to raise large sums of money or capital
• Common stock are units of ownership interest or equity in a corporation

Primary Market vs Secondary Market

Primary Market

• The market that facilitates the issuance of new securities
• The first offering of stock to the public is referred to as an Initial Public Offering (IPO)

Secondary Market

• The sale of shares between investors
• The market that facilitates the trading of existing securities

Financial Intermediaries

• Financial institutions that channel the savings of individuals, business, and government into loans or investment
• Key suppliers and demanders of funds are individuals, business, and government
• Individuals are net suppliers of funds, while business and governments are net demanders of funds

Introduction to Finance

• Definition: Finance is a field concerned with the allocation (investment) of assets and liabilities over space and time, often under conditions of risk or uncertainty
• Also referred to as the art and science of managing money or fund
• Finance refers to 2 main activities: (a) actual process of attracting money, (b) management of the fund

Corporate Finance

• Concerns on the creation and maintenance of economic value or wealth of a firm
• Focuses on the process of planning and managing a firm's long-term investment and also the mixture of debt and equity maintained by a firm

Investment and Insurance

• Investment is an asset or item that is being purchased with the hope that it will generate income or appreciate in the future
• In an economic sense, an investment is the purchase of goods that are used to create wealth in the future
• In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future
• Insurance is a contract in which an individual or entity receives financial protection or reimbursement against losses from an insurance company