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14 Cards in this Set
- Front
- Back
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What Is Investment Capital
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capital is wealth – both real, material things such as land and buildings, and
representational items such as money, stocks and bonds. |
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Characteristics of Capital
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Capital has three important characteristics. It is mobile, sensitive to its environment and scarce.
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Characteristics of Capital
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Capital has three important characteristics. It is mobile, sensitive to its environment and scarce.
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SOURCES OF CAPITAL
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The only source of capital is savings.
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why corporations are not important providers of permanent funds to others in the capital market.
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Non-financial corporations internally generated funds are usually available only for internal
use by the corporation and are not normally invested in other companies’ stocks and bonds. |
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are governments important source of investment?
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Both federal and
provincial governments, until recently, have been running deficits and, therefore, have not been significant suppliers of investment capital. |
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are individuals a significant source of investment capital?
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Individual or retail investors are a significant source of investment capital.
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Retail investors
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Retail investors are
individual investors who buy and sell securities for their own personal accounts, and not for another company or organization. |
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Institutional investors
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Institutional investors are organizations, such as a pension fund
or mutual fund company, that trade large volumes of securities and typically have a steady flow of money to invest. |
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investors have three primary
investment objectives |
(1) Safety of Principal, (2) Income and (3) Growth of Capital
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investors have two
secondary objectives |
(4) Liquidity and (5) Tax Minimization.
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SAFETY
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If an investor requires the highest degree of safety, it may be obtained by accepting a lower rate of
income return and giving up much of the opportunity for capital growth. |
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INCOME
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An investor seeking to maximize the rate of income return must usually give up some safety if he
or she purchases corporate bonds or preferred shares with lower investment ratings. |
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GROWTH OF CAPITAL
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Many investors, particularly those in high tax brackets, seek capital gains over investment income
because they receive more favourable tax treatment. |
