Chapter One Flashcards Preview

Business Management > Chapter One > Flashcards

Flashcards in Chapter One Deck (30)
Loading flashcards...
1
Q

Define Gambling:

A

No knowledge of the outcome

2
Q

Define Speculation:

A

Promise of great return over very short period

3
Q

Define Investment:

A

Reasonable return over a reasonable period

4
Q

Define Financial Instruments:

A

All tradable assets, with emphasis on the tradability

5
Q

Define Financial Securities:

A

A financial instrument that emphasizes the guarantee function, such as shares, bonds, gilts, and debentures

6
Q

Name 5 reasons by people invest:

A

Speculation, income, capital growth, takeovers/mergers, and control over raw material/distribution channels

7
Q

What is a Securities Exchange?

A

Platform for buyers/sellers of shares

8
Q

What is the main function of Strate (Pty) Ltd.?

A

Perform transfers of ownership of shares

9
Q

Define the Money Market:

A

Total market for all short-term funds

10
Q

Define the Capital Market:

A

Total market for all long-term funds

11
Q

Define the Primary Market:

A

Exchange of first-time securities at the average issue price

12
Q

Define the Secondary Market:

A

Exchange of non-first-time shares at market price

13
Q

What is a Prospectus?

A

Document that contains information on a new listing, also serving as a buying invitation

14
Q

Differentiate between the three different share prices:

A

Bid: highest price a buyer is willing to pay
Offer: lowest price a seller is willing to accept
Market: last traded price

15
Q

Define Blue Chips:

A

Ordinary shares in companies with elite investment status

16
Q

Define Portfolio:

A

Composition of a person’s investments

17
Q

Define Diversification:

A

Investing in different companies, countries, sectors, etc.

18
Q

Define Risk:

A

Possibility that actual return will be smaller than expected return

19
Q

What are Institutional Investors?

A

Enterprises with large amounts of capital

20
Q

Define Unit Trusts:

A

Pooling of money of individuals/enterprises, managed by professionals

21
Q

Define Arbitrage:

A

Buying on the cheaper market; selling on the more expensive market

22
Q

What is a Bull Market?

A

Period of continuous price increases over a long period; a strong buying pressure is present

23
Q

What is a Bear Market?

A

Period of mostly price decreases over a long period

24
Q

Name 4 Mandatory Corporate Actions:

A

Dividends, capitalisation issues, stock-splits, and share consolidations

25
Q

Name 3 Voluntary Corporate Actions:

A

Rights issues, underwriting, and share buy-backs

26
Q

What 2 things are affected by a Capitalisation Issue, and how are they affected?

A

Increases shareholder’s equity

Decreases reserves

27
Q

What 1 thing is affected by a Stock-Split, and how is it affected?

A

Increases/decreases the number of ordinary shares issued

28
Q

What 1 thing is affected by a Share Consolidation, and how is it affected?

A

Increases/decreases the number of ordinary shares issued

29
Q

What 3 things are affected by a Rights Issue, and how are they affected?

A

Increases/decreases the number of ordinary shares issued
Increases share capital
Increases shareholder’s equity

30
Q

Name 3 requirements for Share Buy-Backs:

A

May not exceed 20% per period
Announcement must be made every 3% regarding quantity and price
Buy-back price may not exceed a weighted average market price