Financial Market

Financial system of a country plays an important role in the its economic development. It is the financial system that helps transfer finance from surplus sector to the sector where it is needed the most. Financial system has three main organs: Financial Market, Financial Institution and Financial Securities. It is the financial market that plays an important role in transferring funds from one sector to the other.

A business needs finance from the time an entrepreneur makes the decision to start it. It needs finance both for working capital requirements such as payments for raw materials and salaries to its employees, and fixed capital expenditure such as purchase of machinery or building or to expand its production capacity. A business can raise these funds from various different sources and in different ways through financial markets

A financial market consists of two major segments – (i) Money Market and (ii) Capital Market. The market that deals in short-term securities is called money market and the market that deals in long-term securities is called capital market.
Financial markets are the crucial link in the saving investment process. They serve to transfer money capital or financial resources from savers to the entrepreneurial borrowers.