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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
what three service industries make up Canadas financial system?
traditional banks (commercial banks) credit unions and trust companies non banks
26
what is a commercial bank?
a profit seeking organization that receives deposits from individuals and businesses in the form of chequing and saving accounts
27
what are the two types of customers commercial banks have?
depositors and borrowers
28
how do commercial banks make a profit?
by efficiently using depositors funds as as inputs to invest in interest bearing loans to other customers
29
name nine of ten services commercial banks offer?
chequing account saving accounts credit card loans life insurance brokerage services financial counselling registered retirement saving accounts travellers cheques safe deposit boxes
30
what are credit unions?
non-profit, member owned financial co-operatives
31
what are 5 services that credit unions offer?
interest bearing chequing accounts short term loans at low rates financial counselling life insurance home mortgage loans
32
what is a trust company?
a financial institutions that conducts activities like a bank
33
what are some services that a trust company offers that a bank cannot?
with its fiduciary role (trustee) a trust company can administer estates, pension plans and agency contracts
34
what is a non-bank?
a financial organization that accept no deposits but offer many services provided by a regular bank
35
what are some examples of non-banks?
pension funds insurance companies commercial finance companies consumer finance companies brokerage houses
36
what are pension funds?
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
what is a electronic fund transfer (EFT) system?
messages about one transaction are sent from one computer to another
38
what is a debit card?
serves the same function as a cheque, it with draws funds from a chequing account
39
what is a smart card?
is an electronic transfer funds tool that combines a credit card, debit card, phone card and drivers licence
40
what are the five things the canadian financial market consist of?
money bonds equities derivatives foreign exchange
41
what is a security?
a negotiable financial instrument that represents some type of financial value (a transferable certificate of ownership of a stock or bond)
42
what is a securities dealer?
a firm that trades securities for its clients and offers investment services
43
what are 2 other terms for a securities dealer?
investment dealer brokerage dealer
44
what is a securities market?
financial market places for stocks, bonds and other investments
45
what are the 2 major functions of securities markets?
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
what is the primary market?
the market for the sale of new securities (IPOs)
47
what is the secondary market?
the market for the trading (reselling) of a stock previously sold on the primary market
48
what must a company before seeking public financing (looking to sell IPOs)?
a prospectus
49
what is a prospectus?
a condensed version of economic and financial information that a company must make available to investors
50
who needs to approve company issued prospectus?
the securities commission
51
what is the securities commission?
a government agency that administers provincial securities legislation
52
what does the securities commission do?
ensure securities companies are complying to the legislation and regulations
53
what is a stock exchange?
an organization whose members can buy and sell (exchange securities) securities for companies and investors
54
what is a stockbroker (investment advisor)?
a registered representative who works as a market intermediary to buy and sell securities for clients
55
what are online brokers?
an online trading service to buy and sell stocks and bonds instead of using a traditional broker
56
what is a robot-advisor?
automated online tools that use advanced algorithms to make investment suggestions
57
what are the five key criteria when selecting investment options?
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
what is a bull market?
when the stock prices are rising in the market
59
what is a bull investor?
an investor that buys stock in the anticipation that it is going to increase in price
60
what is a bear market?
what the stock prices are declining
61
what is a bear investor?
someone who sells stock in anticipation that it is going to decline in price
62
what does the market price and growth potential of most stocks heavily depend on?
the corporation meeting its business potential
63
what is capital gain?
the positive difference between the price at which you bought you bought a stock and what you sell it for
64
what can be a good way to estimate how a companies stock is going to do?
watch the businesses financial and growth projections
65
what opportunity does buying a stock provide for an investor?
an opportunity to participate in the success of emerging or expanding companies if the share price rises
66
what is a stock split?
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
what are stock indexes?
stock indexes measure the trend of different stock exchanges
68
what are some Canadian stock exchanges?
canadian stock exchange (CSX) Toronto stock exchange (TSX)
69
what is buying a stock on margin?
buying stock on the margin is when you borrow some of the stocks purchase cost from the brokerage firm
70
what is the benefits of investing in government bonds?
low risk and guaranteed return
71
why do government bonds have a guaranteed return?
because they have the financial baking and full faith and credit of the government
72
what is a mutual fund?
a fund that buys a variety of securities and then sells units of ownership in the fund to the public
73
what is a mutual fund company?
similar to an investment fund company a mutual fund company pools investors money to buy stocks or bonds with
74
what are the 3 benefits to investing in a mutual fund?
diversification more buying power no load (they do the research you don't have to)
75
what is diversification in investing?
buying several different investment alternatives to spread the risk of investing
76
what are different securities you can invest in?
stocks bonds ETFs
77
are mutual funds traded on the stock exchange?
no
78
what is an ETF?
they are collection of stocks, bonds, and other investments that are traded on securities exchanges
79
what is the difference between mutual funds and ETFs?
ETFs are traded on securities exchanges and mutual funds are not
80
what is a financial market infrastructure (FMI)?
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
what is another term for a financial market infrastructure (FMI)?
clearing and settlement system
82
how does a financial market infrastructure work?
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
what are the three types of FMIs?
payment systems central counterparties (CCPs) securities settlement systems
84
what does the payment systems FMI do?
facilitate the transfer of funds
85
what does the central counterparties (CCP) FMI do?
ensure that all obligations will be met on all contracts if someone fails to meet an obligation on their end of the contract
86
what does the securities settlement system FMI do?
facilitate the transfer of securities and other financial assets

Intro to Business (25 decks)

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