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:
“The difference between people isn’t in their class, but in themselves. Only from the middle classes one gets ideas, and from the common people—life itself, warmth. You feel their hates and loves.”
—D.H. (David Herbert)
“When a man’s partner is killed he’s supposed to do something about it. It doesn’t make any difference what you thought of him. He was your partner, and you’re supposed to do something about it.”
—Dashiell Hammett (1894–1961)
“I hate him for he is a Christian;
But more, for that in low simplicity
He lends out money gratis, and brings down
The rate of usance here with us in Venice.”
—William Shakespeare (1564–1616)
“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)
“If Los Angeles has been called “the capital of crackpots” and “the metropolis of isms,” the native Angeleno can not fairly attribute all of the city’s idiosyncrasies to the newcomer—at least not so long as he consults the crystal ball for guidance in his business dealings and his wife goes shopping downtown in beach pajamas.”
—For the State of California, U.S. public relief program (1935-1943)