Introduction
Financial markets provide a pool for people who need to save money with other individuals or companies who wish to raise funds. The stock and bond markets are the two main categories of financial markets. This paper aims at discussing the importance of stocks and bonds in financing growth and the main external finance sources for companies.
Utilization of stocks and bonds in financing growth
Stocks issued in the primary market raise money that is used mainly in funding the growth of the business and also in payment of initial investors of the company. Further sales of the stock occur in the secondary market, which consists of the stock exchanges. Through this, entrepreneurs sell shares and get profits to expand their businesses ( Marks, 2013).
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Bonds are another means of raising money for the companies, and also a saving avenue for investors. The company invests the funds acquired from the selling of the bonds to the entrepreneurs hence its growth. Also, the corporation can use the funds from the issue of the bonds to fund projects and pay the investors with interest after a specified duration.
Major sources of external financing for companies
External finance sources are sources that come from outside the business. They include savings, shares, and term loans. Individuals save some money from their salaries, and these savings assist the company in further investment. Also, Company investors can acquire finance from a lending institution, friends, and relatives where the loan provided is due to a specified period. Finally, the company can obtain capital from funds collected by issuing shares to the public.
Conclusion
Shares and bonds are resourceful means that help companies grow and fund critical public projects. The companies also can grow using external finance sources such as shares, savings, and term loans. All these sources are incorporated to ensure the total growth of the company.
References
Marks, H. (2013). The most important thing illuminated: Uncommon Sense for the thoughtful investor .
