chapter 1- the city as a market Flashcards
what 3 types of people does the market have?
customers - companies and governments
stallholders- banks
wholesalers- institutional investors
what are the 2 different types of money?
debt and equity
governments use debt, companies can use both debt and equity
how is debt provided?
- by commercial banks in the form of loans
- banks lend money to companies and governments (borrowers) in return for interest
what is equity and how is it provided?
- shares issued in a company
- company shares are bought by institutional investors
- as shareholders, they are the owners of the company and are said to have an equity interest in it
what is London also known as in business terms and why?
- the square mile as it is roughly the area that it occupies
- has its own government and police service
what is the principal amount/ principal?
the repayment of the full amount borrowed
with equity, what is the return that investors are interested in?
they are interested in an increase in
1) value of the company- this would be reflected in their share trading at a higher price
2) dividends- what companies decide to pay out of their profits however they don’t have to so this makes things uncertain for investors as the money could be spent back into the company
what is the difference between a lender and an investor?
- more security
- where an investor doesn’t know if they will be paid dividends, a lender knows that provided the borrower doesn’t become insolvent, the lender will get the principal repaid and in the meantime receive interest
where can governments source their money from?
- tax
- borrowing
who is the biggest borrower in the world?
the US
not necessarily about how much is spent, but more so about how fast debt is increasing (how fast is it getting spent ((budget deficit))
how can a profitable business go bust?
due to multiple upfront cost factors such as:
- development
- manufacturing
- marketing
- distribution
all factors that include money before the product even lands in the consumers hands
what must money be invested in for a company to get bigger and better
research and development manufacturing marketing or distribution
what is a double coincidence of wants?
economic phenomenon where two parties each hold an item that the other wants, so they exchange these items directly without any monetary medium.
why is money better than a situation of double coincidence of wants?
as money is a store of value
what Latin word did the word salary come from?
salt money
