Business - Chapter 15

  1. Money
    • Any object generally accepted by people as payment for goods and services.
    • - Portable
    • - Divisible
    • - Durable
    • - Stable
  2. Money (Functions)
    • Medium of exchange
    • Store of value
    • Unit of Account
  3. Money Supply
    • Buyers and sellers must agree on the value of money.
    • The value of money depends on its supply.
    • As supply goes up, value goes down
    • As supply goes down, value goes up
  4. M1
    Only the most liquid forms of money (currency and demand deposit (money in chequing account))
  5. M2
    M1 + Saving deposits, time deposit, money market mutual funds
  6. Time Deposit
    A deposit that requires prior notice to make a withdrawal: cannot be transfer to others by cheque.
  7. Money Market Mutual Funds
    Funds operated by investment companies that bring together pools of assets from many investors to buy short-term, low-risk financial securities.
  8. Chartered Banks
    A privately owned, profit-seeking firm that serves individuals, non-business organizations and businesses as a financial intermediary.
  9. Trust Services
    The management of funds left in the bank's trust
  10. Eletronic Funds Transfer
    A combination of computer and communications technology that transfers funds or information into, from, within, and among financial institutions.
  11. Automated Banking Machines
    Eletronic machine that allows bank customers to conduct account-related activities.
  12. Smart Card
    A credit card-sized computer that can be programmed with "eletronic $"
  13. Ecash
    Money that moves along customers and businesses via digital eletronic transmission.
  14. Bank Loans
    Major source of short term financing
  15. Prime rate of interest
    • The lowest rate charged to borrowers.
    • Bank rate + 2%
  16. Bank of Canada
    What they do?
    • Formed in 1935. Governor is Mark Carney.
    • - Sets bank rate
    • - Sets monetary policy of Canada
  17. How does the BOC control money supply?
    • Treasury bonds
    • Bank Rates
  18. Trust Company
    Safeguards funds and estates entrusted to it
  19. Credit Union
    Co-operative savings and lending association formed by a group with common interest.
  20. Life insurance Companies
    A mutual or stock company that shares risk with its policyholders for payment of premium.
  21. Factoring companies
    Buys a/r from a firm from less than their face value
  22. Sales Finance Company
    Specialized in financing instalment purchases made by individuals or firms.
  23. Consumer Finance Company
    Makes personal loans to consumers
  24. Venture Capital Firm
    Provides funds for new and expanding firms thought to have significant potential
  25. Law of one price
    The principle that identical products should sell for the same price in all countries.
  26. Canada is exporting more products than it is importing...
    A trade surplus occurs
  27. Canada is importing more products than it's exporting...
    A trade deficit occurs
  28. International Payment Process
    • 1: Local banks convert the $ to the currency required by trade associates.
    • 2: Local bank sends payment in foreign currency, to the foreign trade partner.
    • 3: The foreign trade partner deposits the payment in his or her own foreign-based bank.
  29. Credit Union vs Bank
    • Bank is a corporation
    • f you are a member of a credit union, you are part owner, can participate in policies/directions
  30. Securities
    Stock and bonds (which represent a secured-asset-based claim) and mutual funds that can be bought and sold.
  31. Par Value (stocks)
    an arbitrary value set by the issuing company's board of directors
  32. Market Value
    current price of a share.
  33. Market Capitalization
    market value of a firm's stock listed on a stock exchange
  34. Book Value
    Shareholders' equity divided by the number of shares of common stock standing.
  35. Preferred Shares
    Issued with a stated par value - They are paid first. No voting rights - some are callable
  36. Stock Exchange
    Organization of individuals formed to provide an institutional setting in which stocks can be bought and sold.
  37. Primary Security Market
    Market in which new stocks and bonds are bought and sold.
  38. Secondary Securities market
    The sale and purchase of previously issued stocks and bonds.
  39. Brokers
    individuals licensed to buy and sell securities for customers in the secondary market.
  40. Stock Exchange largest
    • NYSE
    • TOKYO
    • NASDAQ
  41. Full- Service Brokeage
  42. Discount Brokeage
    Limited service
  43. On-Line Trading
    Self-service, no advice offered.
  44. Over the Counter (OTC)
    Many securities not listed on stock exchange
  45. Bond
    A written promise that the borrower will pay the lender, at a states future date. Principal + stated rate of interest.
  46. What affects bond price?
    interest rate + risk of company
  47. Bond - Format
    Face Value - int % - Maturity Term - Yield % - MKT price
  48. Security Bonds
    bonds issued by borrowers who pledge assets as collateral.
  49. Convertible Bonds
    Any bond that offer bondholders the option of accepting common stock instead of cash in repayment
  50. Mutual Funds
    Any company that pools the resouces of many investors and uses those funds to purchase various types of financial securitites. - Diversification
  51. No-load fund
    No sales commission charged
  52. Load fund
    Sales commission is charged when buy into or sell out the fund.
  53. Ethical Funds
    Mutual funds that stress socially responsible investing
  54. Hedge funds
    Private pools of money that try to give investors a positive return regardless of stock market performance.
  55. Commodities
    • Future Contracts (agreements to purchase a specified amount of commodity at a given price on a set date in the future)
    • food shortage drive commodity prices up
    • quite risky
  56. Margin (commodities)
    The percentage of the total sales price a buyer must put up to place an order for stock or a futures contract.
  57. Stock option - Call Option - Put Option
    • The purchased right to buy or sell a stock
    • the purchased right to buy a particular stock at a certain price until a specified date
    • The purchases right to sell a particular stock at a certain price until a specified date.
  58. Market Index
    A measure of the market value of stocks
  59. Bull Market
    A period of rising stock prices
  60. Bear Market
    A period of falling stock prices
  61. Don Jones Industrial Average
    Market Index based on the prices of 30 of the largest firms listed on NYSE
  62. Margin Trading
    The investor makes a down payment in a portion of the price with the rest financed by the broker
  63. Short Sale
    An investor "borrows" shares from the broker and sells them
  64. Blue-sky laws
    Laws regulating how corporations must back up securities
  65. Prospectus
    A detailed registration statement about a new stock
  66. Market order - limit order - stop order - round lot - odd lot
    an oder to a broker to buy or sell a certain security - only if its price is less than or equal to a given limit - if its price falls to a certain level or below - units of 100 shares - different than 100 shares
Card Set
Business - Chapter 15
Kwantlen University