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Intro to Business > Chapter 18 > Flashcards

Chapter 18 Flashcards

1
Q

why is money important in the economy?

A

to promote economic growth and the creation of jobs

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2
Q

what is money?

A

anything that people accept as payment for goods and services

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3
Q

what is bartering?

A

barter is the direct trading of goods and services for other goods and services

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4
Q

what are the 5 characteristics of a good money system?

A

portability
divisibility
stability
durability
uniqueness

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5
Q

what is electronic money?

A

a newer form of money so you can make payments online using PayPal, google wallet or your banks website

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6
Q

what is digital currency?

A

electronic money not available as bills or coins

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7
Q

what are cryptocurrencies?

A

a type of digital currency created using computer algorithms

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8
Q

what are 5 disadvantages to digital currencies?

A

not legal tender in canada
hard to exchange for cash or goods and services

vulnerable to fraud and theft
transactions are not reversible
risky investments

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9
Q

what does the value of a dollar depend on?

A

a relatively strong economy

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10
Q

when the economy is weak the demand for dollars decline, how does this effect the value of the dollar?

A

it will lower the value of the dollar both in the global exchange and lower the amount of goods and services you can buy with it

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11
Q

when the economy is strong the demand for dollars is is high, how does this effect the economy and the value of the dollar?

A

it will raise the value of the dollar both in the global exchange and raise the amount of goods and services you can buy with it

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12
Q

what are the four ways the bank of canada promotes economic and financial welfare of Canada?

A

conducting monetary policy
promoting the safety and efficiency of Canadas financial system

providing efficient and effective funds management services

communicating our objectives openly and effectively

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13
Q

why does money supply need to be controlled?

A

to manage the price of goods and services (inflation) and to make sure employment levels stay stable

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14
Q

what three groups comprise the canadian financial system?

A

financial institutions
financial markets
clearing and settlement systems

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15
Q

why is Canadas financial system heavily regulated?

A

to ensure the integrity, safety and soundness of the financial institutions and protect investors, depositors and shareholders

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16
Q

what level of government regulates banks?

A

federal

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17
Q

what level of government regulates securities dealers, credit unions and caisses popularies?

A

provincial

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18
Q

how does the CIDC affect the canadian financial system?

A

they provide deposit insurance and stability to the canadian financial system

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19
Q

what level of government regulates insurance, trust, loan companies and co-operative credit associations?

A

can be federal or provincial, depending on which jurisdiction the company is registered or incorporated under

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20
Q

how much does the CIDC ensure up to?

A

deposits up to 100,000

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21
Q

is there a single body that regulates the canadian financial system?

A

no, it is regulated by multiple bodies

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22
Q

the responsibility of regulating the canadian financial system is shared by who?

A

the federal and provincial government

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23
Q

what does CIDC stand for?

A

canada deposit insurance corporation

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24
Q

originally the canadian financial system was a four pillar system, what were those four pillars?

A

banks
trust companies
insurance companies
securities dealers

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25
Q

what three service industries make up Canadas financial system?

A

traditional banks (commercial banks)
credit unions and trust companies
non banks

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26
Q

what is a commercial bank?

A

a profit seeking organization that receives deposits from individuals and businesses in the form of chequing and saving accounts

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27
Q

what are the two types of customers commercial banks have?

A

depositors and borrowers

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28
Q

how do commercial banks make a profit?

A

by efficiently using depositors funds as as inputs to invest in interest bearing loans to other customers

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29
Q

name nine of ten services commercial banks offer?

A

chequing account
saving accounts
credit card
loans
life insurance
brokerage services
financial counselling
registered retirement saving accounts
travellers cheques
safe deposit boxes

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30
Q

what are credit unions?

A

non-profit, member owned financial co-operatives

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31
Q

what are 5 services that credit unions offer?

A

interest bearing chequing accounts
short term loans at low rates
financial counselling
life insurance
home mortgage loans

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32
Q

what is a trust company?

A

a financial institutions that conducts activities like a bank

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33
Q

what are some services that a trust company offers that a bank cannot?

A

with its fiduciary role (trustee) a trust company can administer estates, pension plans and agency contracts

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34
Q

what is a non-bank?

A

a financial organization that accept no deposits but offer many services provided by a regular bank

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35
Q

what are some examples of non-banks?

A

pension funds
insurance companies
commercial finance companies
consumer finance companies
brokerage houses

36
Q

what are pension funds?

A

amounts of money put aside by corporations, non-profit organizations or unions to cover part of the financial needs of their members when they retire

37
Q

what is a electronic fund transfer (EFT) system?

A

messages about one transaction are sent from one computer to another

38
Q

what is a debit card?

A

serves the same function as a cheque, it with draws funds from a chequing account

39
Q

what is a smart card?

A

is an electronic transfer funds tool that combines a credit card, debit card, phone card and drivers licence

40
Q

what are the five things the canadian financial market consist of?

A

money
bonds
equities
derivatives
foreign exchange

41
Q

what is a security?

A

a negotiable financial instrument that represents some type of financial value (a transferable certificate of ownership of a stock or bond)

42
Q

what is a securities dealer?

A

a firm that trades securities for its clients and offers investment services

43
Q

what are 2 other terms for a securities dealer?

A

investment dealer
brokerage dealer

44
Q

what is a securities market?

A

financial market places for stocks, bonds and other investments

45
Q

what are the 2 major functions of securities markets?

A

provide businesses with long term funding to finance capital needs

platform for private investors to buy and sell securities to build their financial future

46
Q

what is the primary market?

A

the market for the sale of new securities (IPOs)

47
Q

what is the secondary market?

A

the market for the trading (reselling) of a stock previously sold on the primary market

48
Q

what must a company before seeking public financing (looking to sell IPOs)?

A

a prospectus

49
Q

what is a prospectus?

A

a condensed version of economic and financial information that a company must make available to investors

50
Q

who needs to approve company issued prospectus?

A

the securities commission

51
Q

what is the securities commission?

A

a government agency that administers provincial securities legislation

52
Q

what does the securities commission do?

A

ensure securities companies are complying to the legislation and regulations

53
Q

what is a stock exchange?

A

an organization whose members can buy and sell (exchange securities) securities for companies and investors

54
Q

what is a stockbroker (investment advisor)?

A

a registered representative who works as a market intermediary to buy and sell securities for clients

55
Q

what are online brokers?

A

an online trading service to buy and sell stocks and bonds instead of using a traditional broker

56
Q

what is a robot-advisor?

A

automated online tools that use advanced algorithms to make investment suggestions

57
Q

what are the five key criteria when selecting investment options?

A

investment risk
yield (expected rate of return)
duration (length of time your money is committed to that investment)

liquidity ( how quickly you can get your funds back if you need them)

tax consequences

58
Q

what is a bull market?

A

when the stock prices are rising in the market

59
Q

what is a bull investor?

A

an investor that buys stock in the anticipation that it is going to increase in price

60
Q

what is a bear market?

A

what the stock prices are declining

61
Q

what is a bear investor?

A

someone who sells stock in anticipation that it is going to decline in price

62
Q

what does the market price and growth potential of most stocks heavily depend on?

A

the corporation meeting its business potential

63
Q

what is capital gain?

A

the positive difference between the price at which you bought you bought a stock and what you sell it for

64
Q

what can be a good way to estimate how a companies stock is going to do?

A

watch the businesses financial and growth projections

65
Q

what opportunity does buying a stock provide for an investor?

A

an opportunity to participate in the success of emerging or expanding companies if the share price rises

66
Q

what is a stock split?

A

when a high per-share stock splits their stocks so it does not impact value for previous shareholders but increases the demand for potential investors due to the lower price

67
Q

what are stock indexes?

A

stock indexes measure the trend of different stock exchanges

68
Q

what are some Canadian stock exchanges?

A

canadian stock exchange (CSX)
Toronto stock exchange (TSX)

69
Q

what is buying a stock on margin?

A

buying stock on the margin is when you borrow some of the stocks purchase cost from the brokerage firm

70
Q

what is the benefits of investing in government bonds?

A

low risk and guaranteed return

71
Q

why do government bonds have a guaranteed return?

A

because they have the financial baking and full faith and credit of the government

72
Q

what is a mutual fund?

A

a fund that buys a variety of securities and then sells units of ownership in the fund to the public

73
Q

what is a mutual fund company?

A

similar to an investment fund company a mutual fund company pools investors money to buy stocks or bonds with

74
Q

what are the 3 benefits to investing in a mutual fund?

A

diversification
more buying power
no load (they do the research you don’t have to)

75
Q

what is diversification in investing?

A

buying several different investment alternatives to spread the risk of investing

76
Q

what are different securities you can invest in?

A

stocks
bonds
ETFs

77
Q

are mutual funds traded on the stock exchange?

A

no

78
Q

what is an ETF?

A

they are collection of stocks, bonds, and other investments that are traded on securities exchanges

79
Q

what is the difference between mutual funds and ETFs?

A

ETFs are traded on securities exchanges and mutual funds are not

80
Q

what is a financial market infrastructure (FMI)?

A

a financial market infrastructure (FMI) is a system that facilitates the clearing, settling or recording of payments, securities, derivatives or other financial transactions among participating entities

81
Q

what is another term for a financial market infrastructure (FMI)?

A

clearing and settlement system

82
Q

how does a financial market infrastructure work?

A

at the end of the day if a commercial bank only had $300,00 worth of deposits but they had $500,000 worth of withdrawals they would have to borrow from other banks or the BoC and balance their deposits and withdrawals

83
Q

what are the three types of FMIs?

A

payment systems
central counterparties (CCPs)
securities settlement systems

84
Q

what does the payment systems FMI do?

A

facilitate the transfer of funds

85
Q

what does the central counterparties (CCP) FMI do?

A

ensure that all obligations will be met on all contracts if someone fails to meet an obligation on their end of the contract

86
Q

what does the securities settlement system FMI do?

A

facilitate the transfer of securities and other financial assets

Intro to Business (25 decks)

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