Difference Between Money Markets and Capital Markets
| Finance |
|---|
Financial markets
|
Financial instruments
|
Corporate finance
|
Personal finance
|
Public finance
|
Banks and banking
|
Financial regulation
|
Standards
|
Economic history
|
The Money markets are used for the raising of short term finance, sometimes for loans that are expected to be paid back as early as overnight. Whereas the Capital markets are used for the raising of long term finance, such as the purchase of shares, or for loans that are not expected to be fully paid back for at least a year.
Funds borrowed from the money markets are typically used for general operating expenses, to cover brief periods of illiquidity. For example a company may have inbound payments from customers that have not yet cleared, but may wish to immediately pay out cash for its payroll. When a company borrows from the primary capital markets, often the purpose is to invest in additional physical capital goods, which will be used to help increase its income. It can take many months or years before the investment generates sufficient return to pay back its cost, and hence the finance is long term.
Together, money markets and capital markets form the financial markets as the term is narrowly understood.
Read more about this topic: Capital Market
Famous quotes containing the words difference between, difference, money, markets and/or capital:
“I know not anything more pleasant, or more instructive, than to compare experience with expectation, or to register from time to time the difference between idea and reality. It is by this kind of observation that we grow daily less liable to be disappointed.”
—Samuel Johnson (1709–1784)
“[Oliver North is a] document-shredding, Constitution-trashing, Commander in Chief-bashing, Congress-thrashing, uniform-shaming, Ayatollah-loving, arms-dealing, criminal-protecting, résumé-enhancing, Noriega-coddling, Social
Security-threatening, public school-denigrating, Swiss-banking-law-breaking, letter-faking, self-serving, election-losing, snake-oil salesman who can’t tell the difference between the truth and a lie.”
—Charles S. Robb (b. 1939)
“When all who had money and leisure
Grew rural o’er ices and wines,
All pleasantly toiling for pleasure,
All hungrily pining for pines,
And making of beautiful speeches,
And marring of beautiful shows,
And feeding on delicate peaches,
And treading on delicate toes.”
—Winthrop Mackworth Praed (1802–1839)
“When the great markets by the sea shut fast
All that calm Sunday that goes on and on:
When even lovers find their peace at last,
And Earth is but a star, that once had shone.”
—James Elroy Flecker (1884–1919)
“Many of us do not believe in capital punishment, because thus society takes from a man what society cannot give.”
—Katharine Fullerton Gerould (1879–1944)