Capital and the production of goods and services. In many developing nations, limited financial markets, instruments, and financial institutions, as well as poorly defined legal systems, may make it costlier to raise capital and may lower the retum on savings or investments. They also help to facilitate the intemational flow of funds between countries. Indian financial market consists of two major segments: (a) Money Market; and (b) Capital Market. While the money market deals in short-term credit, the capital market handles the medium term and long-term credit. Q7. (Case Study Problem) Financial sector plays a crucial role in the accumulation of The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It should be noted that money market does not deal in cash or money as such but simply provides a market for credit instruments such as bills of exchange, promissory notes, commercial paper, treasury bills, etc. These financial instruments are close substitute of money. These instruments help the business units, other organisations and the Government to borrow the funds to meet their short-term requirement. The Indian money market consists of Reserve Bank of India, Commercial banks, Co-operative banks, and other specialised financial institutions. The Reserve Bank of India is the leader of the money market in India. Some Non-Banking Financial Companies (NBFCS) and financial institutions like LIC, GIC, UTI, etc. also operate in the Indian money market Capital Market may be defined as a market dealing in medium and long-term funds. It is an institutional arrangement for borrowing medium and long-term funds and which provides facilities for marketing and trading of securities, So, it constitutes all long-term borrowings from banks and financial institutions, borrowings from foreign markets and raising of capital by issue various securities such as shares debentures, bonds, etc. The market where securities are traded known as Securities market, It consists of two different segments namely primary and secondary market. The primary market deals with new or fresh issue of securities and is, therefore, also known as new issue market; whereas the secondary market provides a place for purchase and sale of existing securities and is often termed as stock market or stock exchange. In the backdrop of the above excerpt, answer the following questions: a. X Co. Ltd. is a ieading manufacturer of aluminum products. Currently, it requires short- term funds and has approached you for advice; you - as a financial advisor - have suggested that the company raise funds by issuing commercial papers. In this backdrop, you are required to discuss the important benefits of commercial papers in raising short term funds. (5 Marks) b. FlowerPower Limited is a US based company and is a famous manufacturer of electric appliances. The Board of Directors of FlowerPower Company decided to expand the company market area and decided to enter new markets such as India and other south Asian countries and Latin American countries. The company decided to incorporate a company in India named FlowerPower India Limited. FlowerPower India Limited decided to raise money from Indian market. The company has two options i.e. to raise money through private placement of shares or to raise money from public issue. Evaluate the two options available to the company and give your report containing the comparative of advantages and disadvantages of both options so as to enable the company to take appropriate decision.