CAPITAL MARKET Lesson Note
Learning Objectives
This SS3 ACCOUNTING lesson note covers CAPITAL MARKET for First Term, Week 3.
Lesson Note
Learning Objectives
At the end of the lesson, students should be able to:
Explain the importance of the capital market.
Identify the parties involved in the capital market.
Explain the benefits of the capital market to the parties involved.
Evaluate the importance of the capital market to the Nigerian economy.
State how the capital market contributes to economic development.
A. MEANING OF CAPITAL MARKET
The capital market is a financial market where long-term funds are raised and invested.
It provides a place where companies, government and other organisations can obtain money for long-term projects. Investors can also use the market to invest their money in securities such as shares and bonds.
B. PARTIES INVOLVED IN THE CAPITAL MARKET
The major parties involved include:
Government – raises money to finance development projects.
Companies – raise funds for expansion and other business activities.
Investors – provide money by buying shares, bonds and other securities.
Financial institutions – help to arrange and facilitate investments.
Regulatory bodies – supervise the market and protect investors.
C. IMPORTANCE OF CAPITAL MARKET TO THE PARTIES INVOLVED
1. IMPORTANCE TO GOVERNMENT
It helps government raise money for development projects.
It provides funds for building roads, schools, hospitals and other public facilities.
It reduces the government’s dependence on short-term borrowing.
2. IMPORTANCE TO COMPANIES
It provides long-term funds for business expansion.
It helps companies finance new projects.
It gives companies an opportunity to raise money through shares and bonds.
It can help companies grow and create more jobs.
3. IMPORTANCE TO INVESTORS
It provides opportunities to invest their savings.
Investors may earn income through dividends or interest.
Investors may make gains when the value of their investments increases.
It provides different investment opportunities to choose from.
4. IMPORTANCE TO FINANCIAL INSTITUTIONS
They earn income by providing services to companies and investors.
They help to connect people who have money with those who need money.
They contribute to the smooth operation of the financial market.
5. IMPORTANCE TO REGULATORY BODIES
It gives them a platform to supervise market activities.
They help protect investors from dishonest practices.
They ensure that participants follow the rules of the market.
IMPORTANCE OF CAPITAL MARKET TO THE NIGERIAN ECONOMY
The capital market is important to Nigeria because:
It encourages investment: It provides opportunities for people and organisations to invest their money.
It promotes economic growth: Funds raised through the market can be used for business expansion and development.
It provides employment: When businesses raise funds and expand, they can employ more workers.
It helps government development: Government can raise funds through the capital market to finance important projects.
It encourages savings: People are encouraged to save and invest rather than keeping all their money idle.
It supports businesses: Companies can obtain long-term funds needed for expansion and development.
It attracts foreign investment: A well-organised capital market can encourage foreign investors to invest in Nigeria.
It improves the standard of living: Investment and business expansion can lead to more employment, income and better goods and services.
It promotes proper use of funds: Money can move from people who have excess funds to businesses and organisations that need funds.
It contributes to national development: The activities of the capital market support the overall development of the Nigerian economy.
Evaluation
OBJECTIVE QUESTIONS
The capital market mainly provides ______ funds. A. short-term B. long-term C. daily D. petty
Which of the following can raise funds through the capital market? A. Companies B. Street traders only C. Households only D. Pupils
One benefit of the capital market to investors is ______. A. investment opportunities B. free goods C. free houses D. free transport
Government can use the capital market to raise money for ______. A. development projects B. birthday parties C. personal shopping D. entertainment
When companies raise funds and expand, they can create more ______. A. unemployment B. jobs C. poverty D. taxes only
The capital market encourages people to ______ their money. A. waste B. save and invest C. hide D. destroy
Which of the following is an importance of the capital market to Nigeria? A. It discourages investment. B. It promotes economic growth. C. It prevents businesses from growing. D. It reduces employment.
A person who buys shares in a company is a/an ______. A. investor B. regulator C. debtor D. employee
The capital market can help Nigeria attract ______ investment. A. foreign B. illegal C. useless D. personal
The overall effect of a well-functioning capital market is to support ______ development. A. economic B. personal C. family D. domestic only
Theory Questions
1a. What is a capital market?
1b. Mention five parties involved in the capital market.
2a. State four importance of the capital market to companies.
2b. Explain four benefits of the capital market to investors.
2c. Evaluate five ways the capital market contributes to the Nigerian economy.