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Business Administration > Ch14 > Flashcards

Ch14 Flashcards

1
Q

money

A

any object generally accepted by ppl as payment for goods and services
- anything that is portable, divisible, durable, and stable

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2
Q

barter economy

A

one in which goods are exchanged directly for one another

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3
Q

three functions of money

A
  1. it is a medium of exchange
  2. it is a store of value
  3. it is a unit of account
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4
Q

M-1

A

only the most liquid forms of money (currency and demand deposits (chequing accounts))

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5
Q

currency

A

paper money and coins issued by government

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6
Q

cheque

A

order instructing the bank to pay a given sum to a specified person or company

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7
Q

demand deposits

A

money in chequing accounts

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8
Q

M-2

A

everything in M-1 plus savings deposits, time deposits, and money market mutual funds

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9
Q

time deposit

A

deposit that requires prior notice to make a withdrawal; cannot be transferred to others by cheque

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10
Q

money market mutual funds

A

funds operated by investment companies that bring together pools of assets from many investors to buy short-term, low=risk financial securities

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11
Q

four legal pillars of financial community in Canada

A
  1. chartered banks
  2. alternate banks (trust companies, credit unions, etc)
  3. life insurance companies and other specialized lending/saving intermediaries (pensions, mutual funds, etc)
  4. investment dealers
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12
Q

changes in financial institutions

A
  • banks can own securities dealers, establish subsidiaries to sell mutual funds, andsell commercial paper
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13
Q

chartered bank

A

privately owned, profit-seeking firm that serves individuals, non-business organizations, and businesses as a financial intermediary
- main source of short-term loans for businesses

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14
Q

schedule I banks

A

Canadian-owned and have no more than 10% of voting shares controlled by a single interest

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15
Q

schedule II banks

A

may be domestically owned, but do not meet the 10% limit or are foreign-controlled

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16
Q

trust services by bank

A

trust department will (in exchange for fees) perform tasks such as making ur monthly bill payments and managing your investment portfolio
- also manage estates of deceased persons

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17
Q

international services offered by banks

A

currency exchange, letters of credit, and banker’s acceptances

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18
Q

letter of credit

A

promise by a bank to pay money to a business firm if certain conditions are met

19
Q

banker’s acceptance

A

a promise that a bank will pay a specified amount of money at a future date

20
Q

electronic funds transfer (eft)

A

provides for payments and collections by transferring financial info electronically

21
Q

automated banking machines (ABM)

A

electronic machines that enable bank customers to conduct account-related transactions any time

22
Q

direct deposits and withdrawals

A

enable user to authorize, in advance, specific, regular deposits and withdrawals

23
Q

point-of-sale transfers

A

permits consumers to pay for retail purchase with debit card

24
Q

debit card

A

card which immediately reduces the balance in user’s bank account upon use and transfers it to store’s account

25
Q

smart cards

A

credit-card-sized computer that can be programmed with electronic money (ex. phone card)

26
Q

mobile (digital) wallet

A

credit card and debit card info are embedded in smartphones so that u can pay using smartphone

27
Q

prime rate of interest

A

lowest rate charged to borrowers

28
Q

reserve requirement

A

requirement (until 1991) that banks keep a portion of their chequable deposits in vault cash or as deposits with the Bank of Canada

29
Q

changes in banking

A

no reserve requirement, deregulation (allows banks to provide more products and services), customer demands (finding new ways to find clients), and international banking (increased competiton from foreign banks)

30
Q

bank of canada

A

canada’s central bank

increase money supply: buying government securities (ppl who sell the bonds deposit proceeds into banks, which makes banks more willing to make loans) – or lower bank rates

decrease money supply: sell government securities (ppl spend money to buy bonds, and the withdrawals from banks reduce banks’ willingness to make loans) – or increase bank rate

31
Q

bank rate (rediscount rate)

A

rate at which chartered banks can borrow from Bank of Canada

32
Q

trust company

A

safeguards funds and estates entrusted to it – may also serve as trustee, transfer agent, and registrar for corporations

33
Q

credit unions (caisses populaires)

A

cooperative savings and lending association formed by a group with common interests

34
Q

life insurance company

A

mutual or stock company that shares risk with its policyholders for payment of premiums

35
Q

factoring company (or factor)

A

buys accounts receivable from a firm for less than their face value and then collects the face value of the receivables

36
Q

sales finance company

A

specializes in financing installment purchases made by individuals or firms (ex. GMAC)

37
Q

consumer finance company

A

makes personal loans to consumers

  • smaller loans often made with no collateral
  • these companies do not make loans to businesses (ex Household Finance Corporation)
38
Q

venture capital firm

A

provides funds for new or expanding firms thought to have significant potential

  • often ask for above average return on investment and may ask for other things (such as a seat on board of directors)
  • venture capital firms get funding from initial capital subscriptions, loans from other financial intermediaries, and retained earnings
39
Q

pension fund

A

accumulates money that will be paid out to plan subscribers in the future

40
Q

investment dealers (stockbrokers or underwriters)

A

primary distributors of new stock and bond issues

41
Q

Export Development Corporation (EDC)

A

finances and insures export sales for Canadian companies

- Canadian Mortgage and Housing Corporation is involved in providing and guaranteeing mortgages

42
Q

law of one price

A

principle that identical products should sell for the same price in all countries

43
Q

World Bank

A

United Nations agency that provides a limited scope of financial services, such as making loans to fund national improvements in undeveloped countries (building schools, roads, etc)

44
Q

International Monetary Fund (IMF)

A

United Nations agency consisting of 188 nations that have combined resources to promote stable exchange rates, provide temporary short-term loans, and serve other purposes

Business Administration (14 decks)

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