Financial management revision question and answer

CPA-Financial-Management-Section-3 Revision kit

What economic advantages are created by the existence of:

(i) Primary markets.
(ii) Secondary markets
(iii) Portfolio management firms.



Raising Capital Business
– mobilizing savings
– Government can raise capital (sell bonus)
– Open market operators (control excess liquidity)
– Vehicle for Foreign Direct Investment

– Investment improvement for companies and small investors.
– Barometer for Healthy of economy and companies ( as whole)
– Privatization of parastatals and giving local citizens a chance for ownership of multi-national companies.
– Realize investments (by disposal in small quantities due to separation of ownership and control.
– Improves corporate governance
– Diversification of investments hence reduction of risk
– Liquidity of securities improved.

(ii) Professional advice
(iii) Watchdog for share under/over valuation
(iv) Enhances market efficiency through information.

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