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CS Executive · Capital Market and Securities Laws · Basics of Capital Market

Sunrise Textiles Ltd. needs funds to finance a new plant over the next ten years and also wants to meet a short-term need to pay suppliers within 60 days. Which pairing of instruments and markets is most appropriate?

Long-term debentures through the capital market for the plant, and commercial paper through the money market for the 60-day supplier payments. The capital market handles long-term funds, while the money market deals in short-term instruments maturing within a year.

  1. ALong-term debentures through the capital market; commercial paper through the money marketCorrect
  2. BCommercial paper through the capital market; long-term debentures through the money market
  3. CTreasury bills for the plant; equity shares for the supplier payments
  4. DCall money for the plant; debentures for the supplier payments

Explanation

Long-term needs are met through capital market instruments such as debentures or equity, while instruments maturing within one year, such as commercial paper, belong to the money market. Option B reverses this classification, which is the key error.

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