Lesson Notes By Weeks and Term - Senior Secondary 2

Methods of raising funds from the capital market

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  4. Methods of raising funds from the capital market

Term: 3rd Term

Week: 4

Class: Senior Secondary School 2

Age: 16 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Financial accounting

Topic:-       Methods of raising funds from the capital market

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. Define capital market
  2. State the functions of capital market
  3. List four methods of raising funds from the capital market

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on financial system

Students pay attention

STEP 2

EXPLANATION

She defines capital market and its functions

 

Students pay attention and participates

STEP 3

DEMONSTRATION

She lists and explains four methods of raising funds from the financial market

Students pay attention and participate

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

CAPITAL MARKET

Capital market can be defined as the for long term finances/ loans.

Capital market can also be defined as a financial market in which long-term debt or equity-backed securities are bought and sold.

 

TYPES OF CAPITAL MARKET

PRIMARY MARKET: the primary market is also known as New Issue Market. Primary market deals with the issue of new securities/ shares.

SECONDARY MARKET: the secondary market is also known as stock market or stock exchange. This is the market for trading already existing securities.

 

FUNCTIONS OF CAPITAL MARKET

  1. It makes trading of securities easier for investors and companies.
  2. It helps minimize transaction costs and information costs.
  3. It mobilizes the savings of parties from cash and other forms to financial market.
  4. It offers insurance against market risk. They achieve this by offering insurance against market or price threat, through imitative trading.

 

METHODS OF RAISING FUNDS FROM THE CAPITAL MARKET

The following are methods by which a company can raise funds;

  1. Offer through Prospectus: prospectus is a document used by companies to invite

Members of the public/investors to invest in their company. It is a method used in the

 

primary market to raise funds. After a prospectus is issued, the public subscribes to shares, debentures, etc.

  1. Offer for sale: by this method, issue of shares is allotted to an issuing house which offers the securities to the public by means of a document called; offer for sale. The issuing house(s) can be finance house(s) or merchant bank.
  2. Rights issue: a company can raise further funds by issuing shares to existing members(shareholders) on favourable terms.
  3. Private Placement: Under private placement, the company will sell its shares to financial institutes, banks, insurance companies and some select individuals.
  4. By Introduction: a company can apply to the stock exchange for sale of its shares to the public. The offer for a new issue of shares will be done through the stock

exchange.

 

EVALUATION:    1. What is capital market?

  1. Mention two types of capital market.
  2. State four functions of capital market.
  3. List four methods of raising funds from the capital market.
  4. State four differences between debentures and shares.
  5. State four features of capital market.

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively