Question

Explain the following as factors affecting Long-Term Investment decision :
(i) Cash flows of the project and
(ii) The investment criteria involved

Answer 1

Distinction between Capital Market and Money Market

Basis of Difference	Capital Market	Money Market
(i) Participants	Individuals, corporate entities, institutional investors, and governments	Reserve Bank of India (RBI), commercial banks, financial institutions, and large companies
(ii) Investment Outlay	Requires large investment; suitable for long-term investors	Generally involves smaller amounts; suitable for short-term fund requirements
(iii) Expected Return	Higher returns due to long-term investment in equity and bonds	Lower returns due to short-term and highly liquid nature

Conclusion: Both markets are vital for financial system functioning, but they differ in terms of duration, participants, return expectations, and investment scale.