business studies and bodheswar

capital market Capital market means the market for medium and long term funds. It is an organized market consisting of suppliers, users of fund and institutions which assist them. Suppliers includes investing public, banks, financial institutions, mutual funds etc.. Users are business firm, government and semi government agencies. Those who are assisting the suppliers and users of funds are underwriters share brokers and stock exchanges and merchant bankers etc.. Capital market acts as a medium through which the savings of the public are available to business and government. This market is divided into two sections viz.1) The gilt- edged market 2) The Industrial securities market. The gilt- edged market- is a market for government and semi government securities. Also called government securities market. The industrial securities market is divided as !) primary m

Capital Budgeting Capital budgeting is the process of making investment decisions in capital expenditures. Capital expenditure is an expenditure incurred for acquiring or improving the fixed assets, the benefits of which are expected to be received over a number of years in future. Thus capital budgeting refers to long term investment decisions. Importance of capital budgeting 1. Large investment of funds:- capital budgeting involves large amounts of funds and the funds available with the firm are always limited. So it is important that the judicious use of available funds. 2. Long term commitment of funds:- capital budgeting involves large amounts of funds for long term or permanent basis. Long term commitment involves risk. 3. Irreversible nature:- Once decision for acquiring a permanent asset is taken, it becomes very difficult to dispose of these assets without incurring heavy loss. 4. Long term effect on profitability:- long term