Keywords: financing, debt, money capital, stock market.
A company or corporation must have a certain amount of cash or cash capital, which is mainly generated at the expense of profit and use transactions, to carry out its production activities. Initially, when economic entities are created, capital serves as a source for the purchase of production funds (equipment), intangible assets, working capital, conditions are provided for conducting business at the expense of capital. Then, in the course of production, performance and service, a new value is created, which is determined by the cost of the produced product, work and services. After the finished product (works, services) is delivered, the receipt (income) appears, which also comes to the settlement account of the enterprise.
The increase in the amount of money capital has led to the growth of the debt capital market, which represents a system in which debt capital flows from one person to another through the influence of supply and demand. The money capital released during production is channeled through the market in the form of loan capital, and then returns to the lender. The loan capital market promotes the increase of production and turnover, the movement of capital within the country, the conversion of saved money into investments, scientific and technical progress, and the renewal of fixed capital. One of the main functions of debt capital is to convert the funds of enterprises, the population, and the state into debt capital by directing them to investments. The structure of the debt capital market consists of two main elements, i.e. the credit and financial institutions and the securities market.
Financial institutions collect money raised by individuals, businesses and governments and use it to make loans and buy securities. Currently, three securities markets are involved in financing the economy — the over-the-counter, treasury (stock) and street markets. The over-the-counter securities market is an important element of the upstream part (superstructure) of the credit-financial system, as it covers new issues of securities and mainly provides financing for continuous production.
The stock market deals with the circulation of previous issues of securities; and at the same time there is a redistribution of control to enterprises. Partial financing of enterprises is also carried out through the stock market. Recently, the street market has also been actively involved in such financing. The process of renewal of capital led to the demand for new issues of securities (bonds and stocks). These methods are widely used in the USA, Canada, Great Britain, Germany, Japan and several other countries. The main type of securities used in the over-the-counter market are bonds, although stocks are also traded. Investment banks, banking houses, and specialized brokerage and brokerage firms act as intermediaries in the over-the-counter market.
The stock market serves as an additional source of financing the economy. The subject of the market includes private entrepreneurs, the state and private individuals, whose work determines its fluctuation depending on the price of securities and market conditions, that is, an increase in demand increases the price and decreases the supply, and vice versa, an increase in the supply over demand decreases the price.
The work of the stock market is carried out through the movement of securities, that is, fictitious capital. The investor presents his borrowed capital as a desire for profit, which is provided by the possibility of converting it into cash capital 19 through the sale of securities. Thus, the circulation of capital is completed by the conversion of fictitious capital into monetary capital through the treasury market. The equity type of investment assumes an income not lower than the average amount of loan interest, which allows it to be used independently of the producer who issued the equity, because the shareholder has the opportunity to convert his fictitious capital into money at any time. In modern conditions, the role of the securities market in accumulating money and saving funds is increasing, that is, the securities market is becoming an additional source of financing the economy.
The stock market functionally belongs to the debt market and is closely related to it. In addition, the slowdown (acceleration) of securities market operations affects the movement of debt capital, its structure and behavior.
As economic conditions change, the balance between internal and external sources of financing changes. No matter how the economy changes, companies can't afford not to issue securities dominated by bonds, as per Rule 20.
One of the important ways to invest in production through the stock market is to issue corporate bonds, which attract capital for a period of more than 5 years. The peculiarity of lending with the help of bonds, compared to other securities, is their high stability, low dependence on market conditions, the fact that it is determined by the difference in interest rates between the yield of government bonds and the yield of corporate bonds, which is related to the risk of solvency, and their reliability. The relationship between internal and external resources may not vary based on cyclical perceptions alone. For example, in countries with state and mixed forms of ownership, funding from the budget is available along with the specified means of financing. In addition, budgetary resources may arise in the event of deterioration in the solvency of heavily indebted enterprises.
In such cases, in western countries, the government provides them with temporary assistance from the budget. At the same time, the company itself is trying to quickly eliminate financial problems that damage its reputation in the market. For example, in the 1980s, assistance was given to the Chrysler automobile corporation from the US federal budget. This practice is widely used in Western Europe and Japan. This is where securities are issued. Another important feature of the relationship between funds obtained from internal sources of finance and funds obtained from the securities market is the sectoral approach. For example, domestic resources (70–80 %) dominate in the manufacturing sector, while in the extractive industry (70–80 %) resources are dominated, of which 50–60 % are accounted for by the issuance of securities (mainly bonds), which is part of the economy. confirms the high role of securities in financing the real sector.
References:
- «Regulations of exchange trading of currency at the Bank of Turkmenistan currency exchange». «Turkmenistan» newspaper, May 30, 2008.
- Law of Turkmenistan. «About regulation of currency operations», «Turkmenistan» newspaper, November 30, 1993.
- Law of Turkmenistan. «About securities and stock exchanges in Turkmenistan». «Turkmenistan» newspaper, January 18, 1994
