Capital Market II SS3 Financial Accounting Lesson Note

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

1. State the benefits of the capital market to individual investors.
2. State the benefits of the capital market to the government.

INSTRUCTIONAL TECHNIQUES: 

• Identification, 
• explanation, 
• questions and answers, 
• demonstration, 
• videos from source

INSTRUCTIONAL MATERIALS: 

• Videos, 
• loudspeaker, 
• textbook, 
• pictures

NOTE

BENEFITS OF CAPITAL MARKET

INDIVIDUAL INVESTORS

1. The benefit of earning additional income: investors benefit from the potential to earn additional income from the assets they purchase.
2. The benefit of higher liquidity from investment: when investors purchase stocks, bonds, and other securities, they benefit from higher liquidity in their investment portfolio.
3. The benefit of regular returns: investors benefit from regular and fixed returns on the assets they purchase. It may be in the form of yearly dividends from shares purchased.
4. Risk-benefit: investors also benefit because the financial assets they purchase in capital markets are risk-free. The potential for loss is nearly zero.
5. The benefit of the right issue: investors in shares also benefit from the right issues floated by companies.

 BENEFIT OF CAPITAL MARKET TO GOVERNMENT

The following are benefits derived by Government from the capital market:

1. Access to funds for projects: the government can access further funds from the capital market to execute some capital projects.
2. Access to cash: capital markets provide the government with easy access to cash for short-term use. E.g. For recurrent expenditures such as payroll expenses.
3. Tax benefits: companies that participate in the capital market pay taxes.
4. Budget financing benefit: the government can also raise a certain amount from the capital market that will help in financing part of the budget.

 EVALUATION:    

1. Mention 4 benefits of the capital market to individual investors.
2. Mention 3 benefits of the capital market to the government.
3.  State two differences between stock and bond