CSC Chapter 1 Questions and Answers

CSC Chapter 1 Questions and Answers What is Capital? Are materials used by businesses, such as land & building, or financial assets, like bonds & stocks. What are the 2 ways capital can be utilized? Direct investment: used to invest in a home, highway Indirect investment: used to invest in stocks, bonds that cannot be touched. Its used to finance direct investment Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:00 / 0:15 Full screen Brainpower Read More What are the 3 characteristics of capital? Capital is MOBILE, SENSITIVE & SCARCE Why do individuals uses capital? Use capital to finance housing, consumer goods & financial consumption Why do businesses uses capital? Use capital to finance its operations, maintain plant & equipment, or expand. Capital is generated by profits or issuing securities Why do Federal Government uses capital? Borrow capital to finance deficits & expenditures. They issue T-bills, Marketable bonds, CSB & CPB Why do Provincial Government uses capital? Borrow capital to finance expenditures, like health care. They issue non-marketable bonds, borrow from CPP or issue bonds & debentures Why do Municipal Government uses capital? Require capital to finance expenditures on streets, sewers, police. They issue instalment debentures What are debentures? Bonds that are not secured by assets. They're backed up by credit. Governments & corporations uses debentures to secure their capital. What are debt securities? Used mainly for loans. It provides a return on a fixed-payments until maturity. Includes bonds, debentures, T-bills & GIC What are equity securities? Allow investors to have a share in the company. Investors are able to participate in the company & can receive dividends. Includes preferred & common shares, and restrictive shares What are restrictive shares? Have limited to non-voting rights What are investment funds? A pool of money that dealers manages investment for their clients, like mutual funds What is an Open-end fund? Mutual funds that does not have restrictions on the amount of shares owned. What are derivative securities? A contract between 2 parties on an agreement on a price from an underlying asset. The value of a derivative depends on the fluctuations in the underlying asset What is an underlying asset? A financial instruments, like stocks, futures, commodity, index that derivatives are depended on What is an ETF? Exchange-Traded fund are like mutual funds that purchases a pool of investments. But ETF's have a lower cost & tax effective than mutual funds. What is an venture capital? Is an private equity investor firm that provides funds to new start-up or small businesses that do not have much capital.