FINANCIAL MANAGEMENT

Assignment # 1

Farrukh Fayyaz Bba-192037

Question no 1:
The stock market is a component of a free-market economy. It allows companies to raise
money by offering stock shares and corporate bonds and allows investors to participate in the
financial achievements of the companies, make profits through capital gains, and earn income
through dividends. The stock market works as a platform through which the savings and
investments of individuals are efficiently channeled into productive investment opportunities
and add to the capital formation and economic growth of the country. It plays a vital role in
facilitating the smooth operation of capitalist economies by allocating resources and creating
liquidity for businesses and entrepreneurs. Without financial markets, capital could not be
allocated efficiently, and economic activity such as commerce and trade, investments, and
growth opportunities would be greatly diminished.
Stock markets provide a secure and regulated environment where market participants can
transact in shares and other eligible financial instruments with confidence, with zero to low
operational risk. Operating under the defined rules as stated by the regulator, the stock
markets act as primary markets and secondary markets. companies list their shares and they
are bought and sold by traders and investors. Stock markets, or equities markets, are used by
companies to raise capital via an initial public offering (IPO), with shares subsequently traded
among various buyers and sellers in what is known as a secondary market.
The major players in the stock market include investors and traders, as well as market makers
(MMs) and specialists who maintain liquidity and provide two-sided markets. Brokers are third
parties that facilitate trades between buyers and sellers but who do not take an actual position
in a stock.
Question no 2:
A public limited company refers to a company that is listed on a recognized stock exchange and
its securities traded publicly in an open market. On the other hand, a private limited company is
not listed on a stock exchange, as its stock is held privately by the members.
Public Limited Companies in Pakistan
1. Associated Press of Pakistan
2. Attock Refinery Ltd.
3. Capital Development Authority
4. Civic Centers Company (Pvt) Ltd.
5. Civil Aviation Authority
6. Cotton Trading Corporation of Pakistan (Pvt) Ltd.
7. Export Processing Zones Authority
8. Federally Administered Tribal Areas Development Corporation (FATA)
9. FATA – Mohmand Glass Factory
10. GCP- Kohinoor Oil Mills Ltd.
Private Limited Companies in Pakistan
1. F. Ferguson & Co.
2. Adamjee Group
3. Aero Asia
4. Air Indus
5. Airblue
6. Aisha Steel Mills
7. Bahria Town
8. Bank Al Habib
9. Dalda Foods
10. EFU Life

Question no 3:
During March 2020, Trading at the Pakistan Stock Exchange was paused for 45 minutes on
Monday, seven minutes after the opening bell, after the benchmark index dropped 2,106
points.
“The market dropped due to lower regional markets, lower commodity prices, and unforeseen
circumstances and threats to Pakistan’s economy from coronavirus,” said AHL Head of Research
Samiullah Tariq. This is not the first time PSX crashed and to counter losses, a spokesperson of
the Securities and Exchange Commission of Pakistan said a market halt rule had been
introduced by the SECP a few months ago "to deal with such panic situations”. SECP is
monitoring the situation to ensure fair and transparent trading, he added. He said the break-in
trading gives companies time to collect margins and settle trade. "It also gives companies and
investors a cooling period to settle down. After margins have been collected successfully,
trading session is resumed."
Question no 4:
Treasury Bills are short-term obligations, unlike most other debt securities, issued at a discount
from par. Rather than making regular cash interest payments, the return on a T-Bill is the
difference between the price the investor pays and the par value received when the bill
matures.
T-bills are issued by the State Bank of Pakistan on behalf of the Government of Pakistan and are
backed by its full faith and credit. Treasury bills are usually sold through auctions on a discount
basis with a yield equal to the difference between the purchase price and the maturity value.
Treasury bills are financial tools to maintain and control liquidity in economies. Liquidity has
implications on business activities and therefore has considerable importance for economic
growth. T-bills, help the government raise short-term funds. Otherwise, to fund projects, the
government will have to print more currency or take loans leading to inflation in the economy.
Hence it is also responsible for controlling inflation.