Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What is one of the main functions of capital markets?

1. Offering property leasing

2. Facilitating long-term capital raising

3. Performing consumer credit assessments

4. Conducting tax audits

The correct answer is: Facilitating long-term capital raising

Capital markets play a crucial role in the economy by facilitating long-term capital raising for businesses and governments. This function allows entities to secure funding for expansion, innovation, and operational needs by issuing stocks and bonds. Investors participate by providing the necessary capital in exchange for potential returns through dividends, interest, or capital appreciation. This long-term financing is essential as it enables companies to plan for future growth and take on larger projects that require significant investment. In contrast, the other options listed pertain to activities that do not align with the primary function of capital markets. For instance, property leasing refers to real estate transactions and does not involve raising capital for long-term projects; performing consumer credit assessments pertains to determining the creditworthiness of individuals, which is a financial service but does not involve capital markets; and conducting tax audits is a regulatory function rather than a capital market activity. Thus, the facilitation of long-term capital raising is a fundamental aspect of capital markets, making it the correct choice.