Money Market vs Capital Market

What is Money Market?

A random course of financial institutions, bill brokers, money dealers, banks, etc., wherein dealing on short-term financial tools are being settled is referred to as Money Market. These markets are also called a wholesale market.

What is Capital Market?

A kind of financial market where the company or government securities are generated and patronised for the intention of establishing long-term finance to coincide the capital necessary is called as Capital Market.

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This article is a ready reckoner for all the students to learn the Difference between Money Market and Capital Market.

Basis

Money Market

Capital Market

Meaning

A random course of financial institutions, bill brokers, money dealers, banks, etc., wherein dealing on short-term financial tools are being settled is referred to as Money Market.

A kind of financial market where the company or government securities are generated and patronised for the intention of establishing long-term finance to coincide the capital necessary is called as Capital Market.

Nature of Market

Informal

Formal

Financial Tools

Commercial Papers, Treasury Certificate of Deposit, Bills, Trade Credit, etc.,

Bonds, Debentures, Shares, Asset Securitization, Retained Earnings, Euro Issues, etc.,

Organizations

Commercial bank, bill brokers, non-financial institutions, the central bank, acceptance houses, and so on.

The stock exchange, Commercial banks, non-banking organisations like insurance companies etc.,

Risk Factor

Low

High

Liquidity

High

Low

Purpose

To achieve short term credit requirements of the trade.

To achieve long term credit requirements of the trade.

Time Horizon

Within a year

More than a year

Merit

Rises liquidity of capitals in the market.

Mobilization of Economies in the market.

Return on Investment

Less

High

The above mentioned is the concept, that is elucidated in detail about ‘Difference Between Money Market and Capital Market’ for the Commerce students. To know more, stay tuned to BYJU’S.

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