Financial markets and Financial assets pt2

Question 1

Narrow money

Answer 1

The most liquid part of the money supply e.g. cash and easily accessible bank and building society deposits

Question 2

Broad money

Answer 2

Narrow money plus more illiquid assets e.g. deposits that are harder/take more time to turn back into cash

Question 3

Liquidity

Answer 3

The ease with which an asset can be turned into cash without loss of value

Question 4

Assets

Answer 4

The economic resources belonging to a business or individual e.g. money, property, stock for sale. Assets are what you own

Question 5

Liabilities

Answer 5

The debts owed by the individual or firm. The main types are creditors, bank overdrafts or bank loans. Liabilities are what you owe.

Question 6

Equity

Answer 6

In assets, it is a measure of wealth. It is the difference between the value of assets and the cost of liabilities.

Question 7

Bills

Answer 7

A form of short term finance. They are short dated financial assets or securities.

Question 8

Bonds

Answer 8

Long dated loans. You are effectively lending money and in return, receiving interest and the bond issuer promises to pay back the loan at a given date.

Question 9

Shares

Answer 9

They represent a small amount of ownership in a company and therefore gives you entitlement to a proportion of its assets and profits. Shares are undated.

Question 10

Securities

Answer 10

Includes shares and bonds. These are real or virtual certificates that secures the owner’s claim to part ownership of a company in the case of a share.