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 tragedy and comedy is the difference between experience and intuition. In the experience we strive against every condition of our animal life: against death, against the frustration of ambition, against the instability of human love. In the intuition we trust the arduous eccentricities we’re born to, and see the oddness of a creature who has never got acclimatized to being created.”
—Christopher Fry (b. 1907)
“About the only difference between the poor and the ritch, is this, the poor suffer mizery, while the ritch hav tu enjoy it.”
—Josh Billings [Henry Wheeler Shaw] (1818–1885)
“Seeing is believing, and if an American success is to count for anything in the world it must be clothed in the raiment of property. As often as not it isn’t the money itself that means anything; it is the use of money as the currency of the soul.”
—Lewis H. Lapham (b. 1935)
“A free-enterprise economy depends only on markets, and according to the most advanced mathematical macroeconomic theory, markets depend only on moods: specifically, the mood of the men in the pinstripes, also known as the Boys on the Street. When the Boys are in a good mood, the market thrives; when they get scared or sullen, it is time for each one of us to look into the retail apple business.”
—Barbara Ehrenreich (b. 1941)
“The basis of world peace is the teaching which runs through almost all the great religions of the world. “Love thy neighbor as thyself.” Christ, some of the other great Jewish teachers, Buddha, all preached it. Their followers forgot it. What is the trouble between capital and labor, what is the trouble in many of our communities, but rather a universal forgetting that this teaching is one of our first obligations.”
—Eleanor Roosevelt (1884–1962)