Define Gambling:
No knowledge of the outcome
Define Speculation:
Promise of great return over very short period
Define Investment:
Reasonable return over a reasonable period
Define Financial Instruments:
All tradable assets, with emphasis on the tradability
Define Financial Securities:
A financial instrument that emphasizes the guarantee function, such as shares, bonds, gilts, and debentures
Name 5 reasons by people invest:
Speculation, income, capital growth, takeovers/mergers, and control over raw material/distribution channels
What is a Securities Exchange?
Platform for buyers/sellers of shares
What is the main function of Strate (Pty) Ltd.?
Perform transfers of ownership of shares
Define the Money Market:
Total market for all short-term funds
Define the Capital Market:
Total market for all long-term funds
Define the Primary Market:
Exchange of first-time securities at the average issue price
Define the Secondary Market:
Exchange of non-first-time shares at market price
What is a Prospectus?
Document that contains information on a new listing, also serving as a buying invitation
Differentiate between the three different share prices:
Bid: highest price a buyer is willing to pay
Offer: lowest price a seller is willing to accept
Market: last traded price
Define Blue Chips:
Ordinary shares in companies with elite investment status
Define Portfolio:
Composition of a person’s investments
Define Diversification:
Investing in different companies, countries, sectors, etc.
Define Risk:
Possibility that actual return will be smaller than expected return
What are Institutional Investors?
Enterprises with large amounts of capital
Define Unit Trusts:
Pooling of money of individuals/enterprises, managed by professionals
Define Arbitrage:
Buying on the cheaper market; selling on the more expensive market
What is a Bull Market?
Period of continuous price increases over a long period; a strong buying pressure is present
What is a Bear Market?
Period of mostly price decreases over a long period
Name 4 Mandatory Corporate Actions:
Dividends, capitalisation issues, stock-splits, and share consolidations
Name 3 Voluntary Corporate Actions:
Rights issues, underwriting, and share buy-backs
What 2 things are affected by a Capitalisation Issue, and how are they affected?
Increases shareholder’s equity
Decreases reserves
What 1 thing is affected by a Stock-Split, and how is it affected?
Increases/decreases the number of ordinary shares issued
What 1 thing is affected by a Share Consolidation, and how is it affected?
Increases/decreases the number of ordinary shares issued
What 3 things are affected by a Rights Issue, and how are they affected?
Increases/decreases the number of ordinary shares issued
Increases share capital
Increases shareholder’s equity
Name 3 requirements for Share Buy-Backs:
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