The Equity- Capital Market (Topic 6)

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Which of the following is NOT a purpose or characteristic of the equity market?

• Allowing individuals and organizations to invest directly in companies

• Providing a forum for new companies to raise capital

• Issuing bonds for long-term financing

• Receiving a share of distributions from the company

Which of the following is NOT characteristic of the equity market?

• Highly visible in developed countries

• Traded on a central exchange

• Predominantly a wholesale market

• Serves both retail and wholesale investors

What is the primary purpose of the equity capital market?

• Providing short-term loans to companies

• Facilitating the buying and selling of company ownership

• Issuing government bonds

• Offering mortgage loans to individuals

Now, let's compare Equity and Debt

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• Yeah...

When comparing equity and debt, which statement accurately reflects the relationship between risk and ownership?

• Equity carries higher risk, but debt provides ownership rights.

• Debt carries lower risk, but equity provides ownership rights.

• Both equity and debt carry equal levels of risk and ownership.

• Equity and debt are unrelated; risk and ownership depend on market conditions.

When considering the maturity of financial instruments, which statement correctly distinguishes between equity and debt?

• Equity has a fixed maturity period, while debt has no maturity.

• Both equity and debt have fixed maturity periods

• Equity has no fixed maturity, while debt has a specified repayment period.

• Equity and debt are both perpetual instruments with no maturity.

So, we know that Equity has some advantages (and disadvantages) compared with Debt. Now, we will discuss the advantages of forming a company and the reasons for companies listing on the stock exchange.

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Which term is commonly used to describe the first sale of stock by a private company to the public?

• Private placement

• IPO (Initial Public Offering)

• ROI (Return on Investment)

• Share buyback

What is a key characteristic of a sole proprietorship?

• Limited liability for the owner

• Separate legal entity from the owner

• Multiple owners with shared decision-making

• Unlimited liability for the owner