Cash & Cash Equivalents Flashcards
What is Inverse Cash Rate?
Earning Money for having Cash tied Up longer.
Difference between Gross and Net?
Gross = Before deductions
Net = After Deductions
What are the Tax Rates for:
Basic, Higher, Additional
Basic = 20%
Higher = 40%
Additional = 45%
Personal Savings Allowance for Interest:
Basic, Higher, Additional
Basic = £1,000
Higher = £500
Additional = £0
What is the role of the Prudential Regulation Authority?
A subsidiary of BoE & is responsible for the supervision of banks
What is the role of the FCA?
It is responsible for ensuring the markets function properly & protect consumer interest
What is the maximum payout for the Financial Services Compensation Scheme?
£85,000
What is the Financial Ombudsman Service & max award?
If a deposit taker gives a poor service and £375,000
What is a Money Market Account?
It is a premium account or high-interest savings account
A financial institution invests into low risk, short-term investments
Define Constant Net Asset Value
Shares issues with unchanging face value.
Define Accumulating Net Asset Value
Income that is reflected by an increase in the value of the funds units/shares
Define Front ended loads and Back Ended Loads
Front ended - Cost added at the beginning
Back ended - cost added at end of investment period
Define Peer to Peer lending
Lending without using a financial intermediary
Define Fixed Income Securities
Type of bond refers to a loan which represents a promise to repay a loan with a certain amount of interest
Define Eurobonds
Denominated in a currency other than the home currency of the country or market in which the bond is issued
Define Nominal Value
Bonds are issued at Face Value
Define Coupon
Amount of interest that an investor will earn each year on the nominal value
What are Floating Rate Notes?
These coupons are tied to a short-term market rate of interest
Define Zero Coupon Bonds
Bonds that are issued at a discounted rate to their face value and redeemed at par on pre-specified date
What are Convertible Gilts?
Owners are able to convert the gilt into pre-defined amount of a different gilt in the future
What is a gilt
Government Bond
Conversion Price Formula
Current Market Price per £100 nominal / Number of shares that can be acquired for that nominal
What is Sukuk?
Bond like an instrument of equal value representing a common share of an underlying asset
Define Running Yield
It is an expression of income received as a % of an investor’s outlay
Running Yield formula
Gross Coupon / Market Price
Holding Period Return Formula
(Price Received @ Maturity -Price Purchased) / Price purchased
What does an inverse yield relationship mean
As price of interest rates rise the price of a bond will fall
What are Equities?
Shares
What are Dual Class Shares
Various types of shares issued by a company
Define Mezzanine Capital
Subordinated debt or preferred equity securities often represent the most junior portion of company’s capital structure
What are bonus Issues
No. of shares in issue will increase but no new capital raised, reducing share price
What are Rights Issues?
A method used to raise capital by asking shareholders to subscribe for a new tranche of shares
What is the order in which investors are paid
Secured Bondholders
Unsecured Bondholder
Preference shareholders
Ordinary Shareholders
Gross Dividend Yield Formula
Gross Dividend Paid in Yr / Current Market Price of Share
Earnings Per Share Formula
Profit Attributable to Ordinary Shares / No. of ordinary Shares in issue
Earning Yield (%) Formula
Earnings Per Share (gross) / Market Price of Share
Price/Earnings Ratio Formula
Current Market Price of Share / EPS
High P/E Ratio Means…
Low perception of risk or expectation of good profit growth
Define the price to cash formula
assesses market expectations or prospects about company’s financial health
Price to Cash flow Formula
Share Price / Operating Cash Flow Per share
Return on Equity % formula
Profit after tax & preference dividends / capital & Reserves
Return on Capital Employed % Formula
Profits before interest & tax / capital employed
Define Direct & Indirect Investing
Direct - Investing in Shares
Indirect - Investing through Funds
Features of residential Property
Typically short renewable leases
Repairs are responsible by landlord
Features of Commercial Property
Tenancies are long term in excess of 10 years
Repairs responsible by tenant
SLDT Rate for threshold - up to £125,000
0%
SLDT Rate for threshold - £125,000 - £250,000
2%
SLDT Rate for threshold - £250,000 - £500,000
5%
SLDT Rate for threshold - £925,000 - £1.5m
10%
SLDT Rate for threshold - £1.5m +
12%
First time buyers SLDT for:
- Up to 300k
- 300k - 500k
- 500k +
- 0%
- 5%
- Normal rates
Define Open Ended Investment Companies (OEICs)
Allow you to pool your money with other investors, so you can access assets which would be difficult to invest in on your own
What is the annual equivalent rate
Used to show what you would earn in a savings account over the course of a year
What is the clean and dirty price
Clean price = quotes price and excluded the accrued interest that is due to the seller
Dirty Price = total price payable by the buyer and is clean price plus accrued interest
What are floating rate gilts
They pay variable coupons and pay four times a year instead of semi annually
What are supranational bonds
Entities formed by multiple countries to promote economic development of the members.
What is secured and unsecured debt
Secured debt involves identification of issuers assets incase of a default on issue
Unsecured debt leaves the investor with no certainty of payment of interest or repayment of capital
What are differed dividend shares
Dividends are payed to these shareholders after certain conditions are met and usually trade at a lower price
What is a cumulative preference shareholder
If the company cannot pay dividends during the year the unpaid dividends is accumulated and payed out when it can
What are non-cumulative shareholders
Any unpaid dividends is not accumulated and they must wait until the next collection to receive anything
