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14 Cards in this Set

  • Front
  • Back
What Is Investment Capital
capital is wealth – both real, material things such as land and buildings, and
representational items such as money, stocks and bonds.
Characteristics of Capital
Capital has three important characteristics. It is mobile, sensitive to its environment and scarce.
Characteristics of Capital
Capital has three important characteristics. It is mobile, sensitive to its environment and scarce.
The only source of capital is savings.
why corporations are not important providers of permanent funds to others in the capital market.
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.
are governments important source of investment?
Both federal and
provincial governments, until recently, have been running deficits and, therefore, have not been
significant suppliers of investment capital.
are individuals a significant source of investment capital?
Individual or retail investors are a significant source of investment capital.
Retail investors
Retail investors are
individual investors who buy and sell securities for their own personal accounts, and not for
another company or organization.
Institutional investors
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.
investors have three primary
investment objectives
(1) Safety of Principal, (2) Income and (3) Growth of Capital
investors have two
secondary objectives
(4) Liquidity and (5) Tax Minimization.
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.
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.
Many investors, particularly those in high tax brackets, seek capital gains over investment income
because they receive more favourable tax treatment.