TUTOR MARKED ASSIGNMENT
Course Code: ECO - 01
Course Title: Business
Organisation
Assignment Code: ECO –
01/TMA/2015-16
Coverage: All Blocks
Maximum Marks: 100
Attempt all the questions.
Dear
Students,
As explained in the Programme Guide, you have to do one Tutor
Marked Assignment in this Course.
Assignment is given 30% weightage in the final assessment. To
be eligible to appear in the Term-end examination, it is compulsory for you to
submit the assignment as per the schedule. Before attempting the assignments,
you should carefully read the instructions given in the Programme Guide.
This assignment is valid for two admission cycles (July
2015 and January 2016). The validity is given below:
1. Those who are enrolled in July 2015, it is valid up
to June 2016.
2. Those who are enrolled in January 2016, it is valid
up to December 2016.
You have to submit the assignment of all the courses to The
Coordinator of your Study Centre. For appearing in June Term-End
Examination, you must submit assignment to the Coordinator of your study
centre latest by 15th March. Similarly for appearing in December
Term-End Examination, you must submit assignments to the Coordinator of
your study centre latest by 15th September.
Attempt all the questions.
1.
What are the essential requisites of an ideal form of business organization?
Explain the criteria for the selection of the form of organisation. (20)
2.
Differentiate between the following: (4×5)
(a) Commerce and Industry
(b) Wholesalers and Retailers
(c) Public limited Company and Co-operative Organisation
(d) Primary Market and Secondary Market
3.
Write short notes on the following: (4×5)
(a) Listing of a security on a stock exchange
(b) Insurable business risk
(c) Warehousing
(d) Development Bank
4.
What is channel of distribution? Discuss various factors which influence the
choice of channel of distribution. (20)
5.
(a) What is stock exchange? Explain its various functions. (10+10)
(b)
“There is no difference between money market and capital market”. Comment upon
the statement.
Solution
1. What are the
essential requisites of an ideal form of business organization? Explain the
criteria for the selection of the form of organisation. (20)
And: Before we discuss how to select a particular form of business
organisation in a given situation, we should know the essentials of an ideal
form of organisation. This may help you in the evaluation of each form of
organisation in the right perspective and take the final decision about the
choice of a particular form more judiciously. The requisites of an ideal form
of organisation are as follows:
1. Ease of formation: An
important factor for preferring a particular form of organisation to another is
the ease with which a business can be brought into existence. The comparative
ease of difficulty in forming a particular form of organisation mainly depends
on three factors: {i) formation expenses by way of registration fee, stamp
duty, fees of legal experts, charges involved in the drafting of documents,
obtaining licenses, etc., (ii) legal formalities, and (iii) procedural delays,
etc. Unless it is very essential, it is better to go for an organisation which
is easy to form.
2. Scope of raising capital: The choice
of organisation mainly depends on the amount of capital required which is determined
by the nature of business and the scale of operations. For example, if you want
to open a retail shop in groceries, the amount of capital needed will not be
much. But if you want to set up a sugar factory, you may require a large amount
of capital. Ideal form of organisation is one which provides scope for raising
the amount of capital as and when required.
3. Extent of liability: we know
that the element of risk and uncertainty is prevalent in each business. In view
of this, normally, the businessmen prefer limited liability. Obviously, limited
liability is considered as an important feature of a good form of organisation.
However, a certain amount of risk is also found to be important to provide the
needed spur for initiative, drive, and involvement in business. Many times, the
absence of such spur leads to weakness, inefficiency and even dishonesty on the
part of management personnel.
4. Flexibility of operations: The form
of organisation should be very flexible and adaptable to changing business
conditions without much difficulty or complication. For example, if you want to
expand your business, diversify or modernize the plant and equipment, the
organisation should be able to meet all requirements.
5. Stability and continuity: Stability
and long life of business is desirable from the point of view of owners,
employees, and customers. Employees always prefer a stable and continuous employment.
If the business is stable, the owner should be able to formulate plans for the
future and to make investments paying for a considerable length of time. From
the customers' point of view also, regular supply of goods and services is
expected to meet their needs. An ideal form of organisation is one which
provides reasonable amount of stability to the business.
6. Effectiveness of management: As you
know that the success of any business enterprise depends on the efficiency of
management. Managerial efficiency depends on skills, motivation, flexibility,
adaptability, etc. It is difficult for an individual to possess all these
qualities.
7. Extent of government control and
regulations: If the governmental control and regulations are too many, the
enterprise may have to divert a lot of time, money and energy for complying
with legal formalities and instructions. In some cases there may be too much interference
by the government officials in the day-to-day business of the firm. No doubt,
the investors, creditors, and customers trust the business enterprises whose
activities are properly regulated by the government. But too much government
interference is not favoured by the entrepreneurs because it mars their
initiative and disrupts the working of their business.
8. Business secrecy: In
business, it is important to maintain business secrets without leaking them out
to competitors. Therefore, a form of organisation which enables, retention of business
secrets is preferred to the one wherein business secrets are difficult to
preserve.
9. Tax burden: Business
taxes like sales tax, excise duty, and customs duty are charged on certain products
and services. Hence, such taxes affect all forms alike and they will not affect
the choice. But the income tax liability is different from one form of
organisation to the other. Naturally, the form of organisation which attracts
the minimum amount of this tax liability is considered as an ideal form. From
this point of view company form of organisation is considered to be best
because it enjoys a number of tax reliefs which are not available in case of
other forms of organisation.
10. Ownership prerogatives: Some
persons have a very strong desire to control the entire business activities
themselves and place a great value upon their right of personal leadership.
Some persons are desirous of sharing the responsibilities and risks of a business.
Some people may want to own a part of the capital without a strong desire to control
the affairs of the business. You can also find some persons who are not ready
to bear the business risk. An ideal form of organisation takes care of such
prerogatives of the owners.
CRITERIA FOR THE SELECTION OF THE FORM OF
ORGANIZATION:
Choice of a suitable form of business
organisation assumes great importance at the time of initiating or launching a
new business enterprise because it is the form of organisation which ultimately
determines the power and responsibility of the entrepreneur. The choice is dependent
on the following factors.
1. Nature of business: Choice of
a suitable form of organisation is dependent on the nature of the proposed
business. The organisational requirements are different for different types of
business. For example, a big cement manufacturing activity and a retail cement
shop cannot have the same form of organisation. Similarly, the form of
organisation suitable for a textile mill is not suitable for a tailoring shop.
2. Volume of business: The
expected volume of business also influences the decision about the suitable
form of organisation. If the volume of business is small, you need small amount
of capital and run less risk. In that case sole proprietorship may be quite
suitable. But if the volume of business is large, you need more capital anti
run Ignore risk which a single owner may find it difficult to cope with. So,
partnership form or a company form would be considered more suitable.
3. Area of operation: The area
of operation of the business also influences the choice of form of organisation.
If the area is limited and confined to a particular locality, the suitable form
of organisation may be sole proprietorship. In case the area is widespread, the
suitable form may be a joint stock company.
4. Desire for control: The extent
of control and supervision will also determine the choice of organisation. If
it is desired to have a direct control over the business operations, a sole proprietorship
or a partnership form of business should be adopted. In case if you feel that there
is no need for direct control, the company form of organisation is the best.
5. Capital requirements: The form
of organisation will also depend on the extent of financial requirements of the
business. A business which requires a small amount of capital can be organised
on sole proprietorship or partnership basis. But if the financial requirements
are huge, then the joint stock company form of organisation may be preferred.
6. Government regulations: As you
know the governmental controls and regulations are more in company form and
cooperative form of organisations compared to the remaining two forms. If you
do not want too much government control and regulation, you should choose
either sole proprietorship form or partnership form.
2. Differentiate between
the following: (4×5)
(a) Commerce and
Industry
Ans:
Comparison between Industry and Commerce:
1)
MEANING: Industry- Extraction, reproduction, conversion, processing and construction of useful products.
Commerce-
Activities involving distribution of goods and services.
2)
SCOPE: Industry- Consists of all activities involving conversion of materials and
semi-finished products into finished products.
Commerce
- Comprises trade and auxiliaries to trade.
3)
CAPITAL: Industry- Generally large amount of capital is required.
Commerce-
Need for capital is comparatively less.
4)
RISK: Industry- Risk involved is usually high.
Commerce-
Relatively less risk is involved.
(b) Wholesalers and
Retailers
Ans: Difference between wholesalers and Retailers
|
BASIS OF
DISTINCTION
|
WHOLESALER
|
RETAILERS
|
|
PURCHASE
AND SALE
|
They purchase
goods from manufacturer and sells to retailer
|
They purchase
goods from wholesaler and sell them to consumer.
|
|
QUANTITY
|
They buy and
sell goods in large quantities.
|
They buy and
sell goods in small quantities
|
|
SPECIALISATION
|
They specialize
in purchase and sale of one quantity
|
They provide
all types of goods and they do not specialize in one type of goods.
|
|
CAPITAL
|
They require a
large amount of capital.
|
They require a
less amount of capital.
|
|
PRICE
|
Wholesale price
is lower than retail price.
|
Retail price is
more than wholesale price.
|
|
LINK
|
Wholesalers are
link between manufacturer and retailer.
|
They are a link
between wholesaler and consumer.
|
|
LOCATION
|
Location of
wholesaler shop is not important.
|
Location of a
retail shop plays an important role as it as should be centrally located.
|
|
CREDIT
TRANSACTION
|
They sell goods
on credit.
|
They sell goods
in cash.
|
|
SCOPE
|
Its scope is
vast.
|
Its scope is
limited.
|
(c) Public limited
Company and Co-operative Organisation
Ans: We can explain the difference
between Public Limited Company and cooperative society as under these headings:
1. LEGISLATION: Public Limited Company: A Public Limited Company is controlled by the company ordinance 1984.
Cooperative society: A cooperative society is controlled by the co-operative society act
1912.
2. FORMATION: Public Limited
Company: Public Limited Company formation procedure is difficult.
Cooperative society: Cooperation society formation is easy.
3. NUMBER OF MEMBERS: Public
Limited Company: Public limited company is
formed at least by two members and private by seven members.
Cooperative society: Co-operative society is formed at least by ten members above than 18
years.
4. OBJECTIVE: Public Limited Company: Public Limited Company basic objective to earn maximum profit.
Cooperative society: Co-operative society main objective is to improve the economic
conditions of the members.
5. LIABILITY: Public Limited Company: Public Limited Company shareholders liability is limited.
Cooperative society: Cooperative society liability may b limited or unlimited.
6. RIGHT OF TRANSFER: Public
Limited Company: Public Limited Company shares
can be transferred freely.
Cooperative society: Cooperative society shares can not be transferred to the nonmembers.
(d) Primary Market and
Secondary Market
Ans: Difference between Primary Market and Secondary Market
|
Primary Market
|
Secondary Market
|
|
It is the market where the securities are
issued for the first time. It is also referred as New issue market.
|
It is the market where the existing
securities are traded. It is also called stock Exchange.
|
|
The prices of the securities are determined by
the company.
|
The prices of the securities are determined
by the forces of demand and supply of the securities.
|
|
Here, only buying of the securities take
place.
|
Here, buying and selling of the securities,
both take place.
|
|
Securities are sold by the company directly
to the investors.
|
Ownership of the securities is exchanged
among the investors. The company is not involved at all.
|
|
Purpose of primary market is to provide
capital for setting new business.
|
The main purpose of secondary market is to
provide liquidity of securities.
|
3. Write short notes on
the following: (4×5)
(a) Listing of a
security on a stock exchange
Ans: A company,
desirous of listing its securities on the Exchange, shall be required to file
an application, in the prescribed form, with the Exchange before issue of
Prospectus by the company, where the securities are issued by way of a
prospectus or before issue of 'Offer for Sale', where the securities are issued
by way of an offer for sale. The company shall be responsible to
follow all the requirements specified in the Companies Act, the listing norms
issued by SEBI from time to time and such other conditions, requirements and
norms that may be in force from time to time and included hereafter in these
Bye-laws and Regulations to make the security eligible to be listed and for
continuous listing on the Exchange. The Exchange may grant approval to the
issuer for any security sought to be listed on the Exchange on completion of
the listing conditions, requirements and norms by the issuer, as may be
specified by the Exchange from time to time. Such security shall be called
listed security.
(b) Insurable business
risk
Ans: Business risk
means possibility of some occurrence, which might lead to some loss for the
business. No business can run without some element of risk in it. In fact business means
assuming risk. Uncertainty is the main cause of business risk. Fluctuations in
demand or prices, wrong estimates of demand and supply, changes in government
policies are some of the examples of uncertainly, which influence the
business. Out of several business risks, some risks are insured by an insurance
risk. Such types of risk are called insurable business risk. All the business
risk can be insured because the insurance company gives insurance cover to only
those risks which can be anticipated. For example, risk of one’s life, risks
caused by enemy action during a war etc.
(c) Warehousing
Ans:
Warehousing refers to the storage of goods on a large scale and as a
specialised function. It involves providing facilities for preservation of
goods in proper condition so as to prevent Loss or damage, and making the goods
available to traders or dealers for sale. Warehouses are places where storage
facility exists. Thus, warehousing is an essential aid to trade or ancillary of
trading activity. It creates both time and place utilities, as goods stored in
warehouses can be available whenever and wherever needed by buyers.
Manufacturers, wholesalers as well as dealers can make use of warehousing
facilities to bridge the gap between the time when goods are procured or
manufactured and the time they are demanded by customers. The warehousing also arises
from the modem systems of production and distribution of goods. Large scale
production generally takes place in anticipation of demand for goods, but not
necessarily in response to specific orders of customers. Such goods cannot be
sold immediately after production. The manufacturers thus need adequate
facilities for storage of their products to meet the demand schedule of
customers. Again, there are certain products which have seasonal demand, but
produced through but the year.
(d) Development Bank
Ans: Development banks are specialized financial institutions
which provide medium and long term finance to private entrepreneurs and help in
economic development of the country. It is considered as a hybrid institution
which combines in itself the functions of a finance corporation and a development
corporation. They also act as a catalytic agent in promoting balanced and
viable development by assuming promotional role of discovering project ideas,
undertaking feasibility studies and also provide technical, financial and
managerial assistance for the implementation of project.
In India ‘Industrial Development Bank on
India’ (IDBI) is the unique example of development bank. It has been designated
as the principal institution of the country for co-ordinating the working of
the institutions engaged in financing, promoting or development of industry.
Some other examples of development banks are Industrial Development Bank of
India, National Bank for Agriculture and Rural Development, Small Industries
Development Bank of India, State Industrial Development Corporation, State Financial
Corporation, etc.
4. What is channel of
distribution? Discuss various factors which influence the choice of channel of
distribution. (20)
Ans: Channel of distribution: The prime of object of production is its consumption.
The movement of product from producer to consumer is an important function of
marketing. It is the obligation of the producer to make goods available at
right place, at right time right price and in right quantity. The process of
making goods available to the consumer needs effective channel of distribution.
Therefore, the path taken by the goods in its movement is termed as channel of
distribution. The goods may be sent to the consumer directly or indirectly
through middlemen. The channel of distribution may be classified as:
1. Direct channel of distribution
2. Indirect channel of distribution
The producer can select any channel depending on nature of
product. Same channel of distribution cannot be used for all products because
all products are not similar.
The
following factors concerning the product, affect the selection of the channel
of distribution:
Every
producer, in order to pass on the product to the consumer, is required to
select a channel for distribution. The selection of the suitable channel of
distribution is one of the important factors of the distribution decisions. The
following factors affect the selection of the channel of distribution:
A.
Factors Pertaining to the Product:
Keeping in view the nature, qualities and peculiarities of the
product, could only the channel for distribution be properly made. The
following factors concerning the product, affect the selection of the channel
of distribution:
(1) Price of
the Product: The products of a lower price
have a long chain of distributors. As against it, the products having higher
price have a smaller chain. Very often, the producer himself has to sell the
products to the consumers directly.
(2) Perishability: The products which are of a perishable nature need lesser
number of the intermediaries or agents for their sale. Under this very rule,
most of the eatables (food items), and the bakery items are distributed only by
the retail sellers.
(3) Size and
Weight: The size and weight of the
products too affect the selection of the middlemen. Generally, heavy industrial
goods are distributed by the producers themselves to the industrial consumers.
(4) Technical
Nature: Some products are of the nature that prior to their selling,
the consumer is required to be given proper instructions with regard to its
consumption. In such a case less of the middlemen arc) required to be used.
(5) Goods Made
to Order: The products that are
manufactured as per the orders of the customers could be sold directly and the
standardized items could be sold off only by the middlemen.
(6) After-Sales
Service: The products regarding which the
after-sales service is to be provided could be sold off either personally or
through the authorized agents.
B.
Factors pertaining to the Consumer or
Market: The following are the main elements concerned
with the consumer or the market:
(1) Number of
Customers: If the number of customers is
large, definitely the services of the middlemen will have to be sought for. As
against it, the products whose customers are less in number are distributed by
the manufacturer himself.
(2) Expansion
of the Consumers: The
span over which are the customers of any commodity spread over, also affects
the selection of the channel of distribution. When the consumers are spread
through a small or limited sphere, the product is distributed by the producer
himself or his agent. As against it, the goods whose distributors are spread
throughout the whole country, for such distributors, services of wholesaler and
the retailer are sought.
(3) Size of
the Order: When bulk supply orders are
received from the consumers, the producer himself takes up the responsibility
for the supply of these goods. If the orders are received piece-meal or in
smaller quantities, for it the services of the wholesalers could be sought. In
this way, the size of the order also influences the selection of the channel of
the distribution.
(4) Objective
of Purchase: If the product is being
purchased for the industrial use; its direct sale is proper or justified. As
against it, if the products are being purchased for the general consumption,
the products reach the consumers after passing innumerable hands.
(5) Need of
the Credit Facilities: If,
for the sale of any product, it becomes necessary to grant credit to any
customer, it shall be helpful for the producer that for its distribution, the
services of the wholesalers and retailer businessmen be sought. In this way,
the need of the credit facilities too influences the selection of the channel
of distribution.
C. Factors Pertaining to the Middlemen: The
following are the main factors concerned with the middlemen:
(1) Services
Provided by Middlemen: The
selection of the middlemen is made keeping in view their services. If some
product is quite new and there is the need of its publicity and promotion of
sales, then instead of adopting the agency system, the work must be entrusted
to the representatives.
(2) Scope or
Possibilities of Quantity of Sales: The
same channel should be selected by means of which there is the possibility of
more sales.
(3) Attitude
of Agents towards the Producers' Policies: The
producers generally prefer to select such middlemen who go by their policies.
Very often when the distribution and supply policies of the producers being
disliked by the middlemen, the selection of middlemen becomes quite limited.
(4) Cost of
Channel of Distribution: While
selecting the channel of distribution, the cost of distribution and the
services provided by the middlemen or agents too must be kept into
consideration. The producers generally select the most economical channel.
D.
Factors Pertaining to the Producer Or
Company: The following factors, concerning the
producer, affect the selection of the channel of distribution:
(1) Level of
Production: The manufacturers who are
financially sound and are of a larger category, are able to appoint the sales
representatives in a larger number and thug could distribute the commodities
(products) in larger quantities. As against it, for the smaller manufacturers,
it becomes necessary to procure the services of the wholesalers and the retail
traders.
(2) Financial
Resources of the Company: From
the financial point of view, the stronger company needs less middlemen.
(3) Managerial
Competence and Experience: If
some producer lacks in the necessary managerial experience or proficiency, he
will depend more upon the middlemen. The new manufacturers in the beginning
remain more dependent upon the middlemen.
E.
Other Factors
(1) Distribution
Channel of Competitors: While
determining the channel of distribution, the channels of distribution of the
competitors too must be borne in mind.
(2) Social
Viewpoint: What is the attitude of society
towards the distribution, this fact too must be kept into consideration while
selecting the middlemen.
(3) Freedom of Altering: While selecting the agents, this fact too must be kept into
mind that in case of need, there must be the liberty of changing or replacing
the agents (middlemen).
5. (a) What is stock
exchange? Explain its various functions.
Answer: Meaning of Stock
Exchange
Stock
exchange is a specific place, where trading of the securities, is arranged in
an organized method. In simple words, it is a place where shares, debentures
and bonds (securities) are purchased and sold. The term securities include equity
shares, preference shares, debentures, government bonds, etc. including mutual
funds.
According
to the Securities Contracts (Regulation) Act 1956, the term 'stock exchange' is
defined as ''An association, organization or body of individuals, whether incorporated
or not, established for the purpose of assisting, regulating and controlling of
business in buying, selling and dealing in securities."
Presence
and vibrant functioning of a stock exchange is necessary for a developing
economy. It reflects healthy financial and investment conducive atmosphere in
the economy. The Indian securities market is considered as one of the most
promising emerging markets. It is one of the top eight markets of the world.
The stock exchange plays a vital role in the process of raising resources for
the development of corporate sector. In the absence of the stock exchange it
would be impossible for private enterprises, industries and entrepreneurs to
survive and grow.
Functions
of stock exchange in capital market
Presence
and vibrant functioning of a stock exchange is necessary for a developing
economy. It reflects healthy financial and investment conducive atmosphere in
the economy. The Indian securities market is considered as one of the most
promising emerging markets. It is one of the top eight markets of the world.
The stock exchange plays a vital role in the process of raising resources for
the development of corporate sector. In the absence of the stock exchange it
would be impossible for private enterprises, industries and entrepreneurs to
survive and grow. A stock exchange plays a significant role in a capital market
which is mentioned below:
Primary Functions:
a) Encourages
capital formation: A common
investor is attracted to capital market. Today investor prefers to divert his
surplus and savings in the securities like shares, debentures, mutual funds
etc. As a result new capital formation is speeded up.
b) Resource
Mobilsation: Due to
continuous buying and selling of the securities the resources of the economy
flow from one company to other company giving comparatively higher returns.
This helps mobilisation of resources.
c) Flexibility
in investments: The stock
exchanges provide liquidity to the investment made in the securities. As there
are multiple options, investors can flexibly go on switching their investment
where it is more beneficial?
d) Value
addition to the securities: Listing
of shares on a stock exchange adds to the prestige and reputation to companies.
With the advantage of listed shares it can raise loans from corporate sector.
e) Protects
investor’s interest: All the
transactions in the stock exchanges are effected and controlled by the
Securities Control (Regulation) Act 1956. The stock exchanges protect the
interests of the investors through the strict enforcement of their rules and
regulations. The malpractices of the brokers are punishable with heavy fine,
suspension of their membership and even imprisonment.
Secondary Functions
a)
Motivation to Management: A stock exchange allows the trading
of listed securities only. Listing procedure requires complying with certain
guidelines for protecting the interests of investors and obviously is under
strict supervision of stock exchange. If companies do not comply with the rules
and regulations of the exchange, the shares of a company can be delisted. To
avoid such unfavorable and undesirable consequences every company manages its
affairs more cautiously and effectively.
b)
Best utilization of capital: The stock
exchange regulates and controls the flow of investment from unproductive to
productive, uneconomic to economic, unprofitable to profitable enterprises.
Thus, savings of the people are channelized into industry yielding good returns
and underutilization of, capital is avoided. As the stock exchange provides an
account of price variations of the securities listed on it (upward or downward
fluctuations) it would be an opportunity for the investors to switch their
investments. This would, keep companies performing in the best possible
way.
c)
Help in repaid economic development: The stock exchanges help in the
process of rapid economic development by speeding up the process of capital
formation and resource mobilization. It helps in raising the medium and long
term capital for the development and expansion of the companies. New industries
and commercial enterprises easily get capital funds through a stock
exchange.
(b) “There is no
difference between money market and capital market”. Comment upon the
statement. (10+10)
Ans: Capital Market and
Money Market: Capital
Market is generally understood as the market for long-term funds. This market
supplies funds for financing the fixed capital requirement of trade and
commerce as well as the long-term requirements of the Government. The long-term
funds are made available through various instruments such as debentures, preference
shares, and common shares.
The money market is the centre for dealing
mainly of short character, in monetary assets; it meets the short term
requirements of borrowers and provides liquidity or cash to the lenders. It is
a place where short term surplus investible funds at the disposal of financial
and other institutions and individuals are bid by borrowers, again comprising
institutions and individuals and also by the government."
Distinction between Capital Market and Money
Market
The capital market should be distinguished from money market. The
capital market is the market for long-term funds. On the other hand money
market is primarily the market for short-term funds. However, the two markets
are closely related as the same institution many a times deals in both types of
funds, i.e. short-term as well as long-term. The main points of distinction
between the two markets are as under:
|
Capital Market
|
Money Market
|
|
1. It provides finance/money capital for
long-term investment.
|
1. It provides finance/money for short-term
investment.
|
|
2. The finance provided by the capital
market may be used both for fixed and working capital.
|
2. The finance provided by money market is
utilized, usually for working capital.
|
|
3. Mobilisation of resources and effective
utilization of resources through lending are its main functions.
|
3. Lending and borrowing are its principal
functions to facilitate adjustment of liquidity position.
|
|
4. It’s one of the constituents, Stock
Exchange acts as an investment market for buyers and sellers of securities.
|
4. It does not provide such facilities. The
main components include call loan market, collateral loan market, and bill
market and acceptance houses.
|
|
5. It acts as a middleman between the
investor and the entrepreneur.
|
5. It acts as a link between the depositor
and the borrower.
|
|
6. Underwriting is one of its primary
activities.
|
6. Underwriting is a secondary function.
|
|
7. Its investment institutions raise capital
from public and invest in selected securities so as to give the highest
possible return with the lowest risk.
|
7. It provides outlets to commercial banks,
business corporations, non-bank financial concerns and other for their
short-term surplus funds.
|
|
8. It provides long-term funds to Central
and State Governments, public and local bodies for development purposes.
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8. It provides short-term funds to
Government by purchasing treasury bills and to others by discounting bills of
exchange etc.
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