Capital and New Issue Markets
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The essential advantage of the corporation over other forms of business organization lies in its ability to bring together large amounts of capital. This is especially true of those corporations, which are publicly held or widely held. The small family-held, closely held, or closed corporation has basically the same financial sources as other business forms, i.e., trade credit, the banks, and the resources of family and friends willing to invest in the business. A widely held corporation, although it will also finance through trade creditors and banks, has the additional ability to tap the flow of investment funds available in the security markets, the market for stocks and bonds. The security market, alternately called the investment, financial, or capital market, comprises the group of institutions through which old corporate securities are traded and new issues of securities are floated. These markets have provided a significant part of the capital that has nourished the growth of corporate enterprise. Thus, to understand the birth of new corporations and the growth of established firms, it is necessary to understand the functions of the security markets.
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