a) What is the difference between primary and secondary markets?
Primary market is where securities are issued/traded in the first instance e.g.
new co-share issues.
Secondary market deals with subsequent trading of securities
which have already been issued. Comprises bulk of trading in
b) Outline 2 benefits of each.
Primary Market –
• Direct Fund raising for companies
• Strict Corporate Governance procedures for initial listing
• A capital market for the trading of marketable securities
• Strict Corporate governance procedures for companies listed in a
c) Identify 3 types of finance that a firm could use to fund a new project.
d) Identify and explain 1 benefit and 1 disadvantage for two types of finance
for either the firm or the investor.
Debentures • Tax deduction of
• No dilution of
• Increases Financial
Preference Shares • Security over
ordinary shares as
• Can be no
therefore no claim
on profit above
Ordinary Shares • Reduces Financial
• Dividends no
• Dilution of
• No tax Shield
Any other type of debt