Chapter 1 Flashcards
Financial Planning Activities
Those activities relating to managing money
Financial Markets
Markets used to transfer financial assets between borrowers and investors
Real assets
Assets that are tangible, such as land, buildings and machinery
Financial assets
Securities issued by a corporation or economic unit for purchase by another individual or corporate investor
Time value of money
The concept that a dollar owned today is worth more than the same dollar would be worth in the future
Risk
The variability of returns resulting from an investment
Securities
Financial instruments used to finance an organisations operations
Financial instruments
Instruments, such as convertible debt or preference shares, that allow funds to be transferred between investors (or lenders) and borrowers
Lender
Person who grants the use of money or any other asset to another for a set period of time and receives income in return
Borrower
An individual, or organisation, who obtains or receives something such as money, temporarily from another individual or organisation, with the intention of repaying it
Finance
The allocation of scarce resources, such as money, over time
Shares
Entitlement to a proportion of the ownership of a company or firm
Bonds
Fixed-interest investments whereby the individual receives a number of payments at fixed intervals until the bond is repaid. They represent the long term debt obligations of a company or government
Invest
To apply or put money to some use in order to defer consumption and receive a return in the future
Return
Gains or losses received from the investment of funds for a given period of time
Company
A legal entity that operates and functions independently from its owners and, as such, is responsible for all debts incurred in the course of business
Asset
A commodity or quality that is useful or valuable
Financial system
A network which operates via a set of financial markets, bringing together investors and borrowers who buy and sell both real and financial assets; includes financial intermediated, individuals, corporations, regulatory bodies and financial service organisations
Market
A network whereby buyers and sellers are able to come together, either physically or through communication channels, to trade goods and/or services
Foreign exchange
The process of converting New Zealand dollars into the currency of another country