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Chapter 1 Flashcards

1
Q

Financial Planning Activities

A

Those activities relating to managing money

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2
Q

Financial Markets

A

Markets used to transfer financial assets between borrowers and investors

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3
Q

Real assets

A

Assets that are tangible, such as land, buildings and machinery

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4
Q

Financial assets

A

Securities issued by a corporation or economic unit for purchase by another individual or corporate investor

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5
Q

Time value of money

A

The concept that a dollar owned today is worth more than the same dollar would be worth in the future

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6
Q

Risk

A

The variability of returns resulting from an investment

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7
Q

Securities

A

Financial instruments used to finance an organisations operations

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8
Q

Financial instruments

A

Instruments, such as convertible debt or preference shares, that allow funds to be transferred between investors (or lenders) and borrowers

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9
Q

Lender

A

Person who grants the use of money or any other asset to another for a set period of time and receives income in return

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10
Q

Borrower

A

An individual, or organisation, who obtains or receives something such as money, temporarily from another individual or organisation, with the intention of repaying it

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11
Q

Finance

A

The allocation of scarce resources, such as money, over time

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12
Q

Shares

A

Entitlement to a proportion of the ownership of a company or firm

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13
Q

Bonds

A

Fixed-interest investments whereby the individual receives a number of payments at fixed intervals until the bond is repaid. They represent the long term debt obligations of a company or government

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14
Q

Invest

A

To apply or put money to some use in order to defer consumption and receive a return in the future

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15
Q

Return

A

Gains or losses received from the investment of funds for a given period of time

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16
Q

Company

A

A legal entity that operates and functions independently from its owners and, as such, is responsible for all debts incurred in the course of business

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17
Q

Asset

A

A commodity or quality that is useful or valuable

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18
Q

Financial system

A

A network which operates via a set of financial markets, bringing together investors and borrowers who buy and sell both real and financial assets; includes financial intermediated, individuals, corporations, regulatory bodies and financial service organisations

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19
Q

Market

A

A network whereby buyers and sellers are able to come together, either physically or through communication channels, to trade goods and/or services

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20
Q

Foreign exchange

A

The process of converting New Zealand dollars into the currency of another country

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21
Q

Financial institutions

A

Banks, insurance companies and other organisations that facilitate the flow of funds between investors and borrowers

22
Q

Investors

A

Individuals who acquire the financial assets of corporations or other organisations in order to receive compensation for the loan of their funds

23
Q

Investment

A

The activity of investing in real and/or financial resources

24
Q

Accrual

A

Accrual accounting records cash and credit transactions as they are incurred and not when the cash flows arise

25
Profit
Excess of income over expenses. Alternatively referred to as net profit, net income or net earnings
26
Cash flows
The inflow (receipts) and outflow (disbursements) of funds
27
Monetary policies
The management of a nation’s money supply, and how this relates to interest rates to interest rates, prices and other economic variables
28
Currency
An exchange medium within a country; that is, money
29
Marginal analysis
Technique used in managerial finance whereby a proposal is accepted is only when the added benefits exceed the added costs
30
Shareholder
Any individual or entity owning shares in a company
31
Stakeholders
Groups such as investors, suppliers, regulators, employees, customers and the public with interests in a firm
32
Finance company
Finance companies lend the funds they have raised in the markets to people and businesses who need money to finance the purchase of durables, such as equipment, cars and home improvements. They normally charge higher interest rates to compensate for the riskier lending
33
Financial crises
Major disturbances in financial markets typified by steep declines in asset prices and widespread company failures
34
Global financial crisis
A worldwide financial crisis that occurs when financial-market participants recognise the risk and over inflated values of financial contracts, leading to a severe contraction in the flow of funds and rapidly declining asset values
35
Act
A codified decision provided by a legislative body
36
Prospectus
A document required by law to inform prospective investors in a firm of the details of the security and the firm’s financial position
37
Dividends
The portion of a company’s net profit paid to its shareholders (owners)
38
Unlimited liability
The state of being personally liable for all debts and monies owed by a business or organisation
39
Limited liability
The set of being liable for all debts and monies owed up to a pre-defined amount
40
Debt
An obligation of one party (the borrower) to repay a specified amount of money to another party (the lender)
41
Equity
Money, in the form of shares, supplied to a company or organisation by its owners
42
Liquidation
The process of winding up the assets of an organisation and distributing the funds to creditors and owners
43
Ethics
The ability to know the difference between right and wrong
44
Agency problems
Issues that arise when managers, who are hired as agents of a company, work in their own interests rather than in those of the shareholders
45
Conflicts of interest
Issues that arise when a manager, or director, uses company information to benefit themselves or another organisation
46
Pure market system
A system in which all scarce resources are freely allocated so that the maximum benefit is received by everyone as a result of the allocation
47
Efficient market
This market exists when the price of any good (asset) fully reflects all information associated with it
48
Homogeneous
Something that is of a similar kind of nature
49
Public goods
Goods or services, such as education, provided by the government for use by members of its society
50
Externalities
Influences on the activities of an individual or business that are not controlled by the individual or business
51
Budget
A forecast of expected future income and expenses that will assist the planning and control of an individuals, or organisations, financial management

Finance (13 decks)

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