Chapter One Flashcards
What are the 3 characteristics off capital?
Mobile, sensitive and scarce
Name the 6 country risk evaluations?
- Political environment
- Economic trends
- Fiscal policy
- Monetary policy
- Investment opportunity and labour force
What happens if capital investment is in adequate? Name 4.
- Insufficient output,
- Declining productivity
- Rising unemployment
- Decreasing competitiveness
basically lowest standard of living
What is the only source of capital?
Savings
Who are the 3 significant sources off investment capital?
Retail, institutional, foreign
Who are retail investors?
Individuals who buy sell securities for their own account
Who are institutional investors?
Organizations such as pension funds, mutual fund companies basically they trade in large volumes and typically have a steady flow of money to invest.
What does foreign direct investment tend to focus on?
Manufacturing, petroleum, gas, mining, smelting
Who are the 3 users of capital?
Individuals, businesses, governments
Who do you businesses usually borrow from?
Short term money market paper, medium and long-term debt and preferred and common shares
What do you federal governments issue?
T-bills, marketable bonds, Canada savings bonds, Canada premium bonds
What do you provincial governments issue?
Bonds, borrow from CPP, short time T-bills and savings bonds
What do municipal governments issue?
Installment debentures or serial debentures
What are securities?
Formal legal documents which sets out rights and obligations of the buyers and sellers
What are the three key components of the securities industry?
Financial instruments, financial markets, financial intermediaries
What are financial instruments?
Debt, equity, investment funds, derivatives, other such as linked notes and exchange traded funds
What is an investment fund?
It is a company or trust that manages investments for clients the common form is open end fund also known as mutual fund
Who are derivatives suited for?
Sophisticated investors
What are derivatives and provide an example?
Products based on or derived from an investment such as a stock or index, common derivatives are options and forwards
Provide the six means by which private equity investors finance firms.
- Leveraged buyout
- Growth capital
- Turnaround
- Early-stage venture capital
- Late stage venture-capital 6. Distressed debt.
Who typically are private equity investors? Name 5
- Public pension plans
- Private pension plans
- Endowments
- Foundations
- High net worth investors
What is the capital/securities market made up off? Name the 3.
Stock markets, bond markets, money markets
What is the primary market?
New securities are sold on the primary market the company issues stock for the first time as initial public offering.
What is an auction market?
Buyers enter bids and sellers enter offers for stock
What is a bid?
Highest price a buyer is willing to pay
What is an ask or offer?
Lowest price a seller will accept