CIA-finance

=Unit 2: Business Financial Management=

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Forms of Business Ownership

 * 1. Sole Proprietorship**
 * One Owner
 * Low start up costs
 * High risk: Unlimited Liability*
 * Complete control of owner


 * 2. Partnership**
 * Two or more people
 * Easy to start up: Partnership Agreement
 * More sources to capital
 * High risk: Unlimited Liability*
 * Hard to find partners to work with


 * 3. Corporation**
 * Owned by large amounts of share holders
 * Low risk: Limited Liability*
 * Easy to raise capital
 * Expensive start up costs
 * High regulation
 * Multiple taxation: Corporation considered a legal entity as such is taxed once coming from subsidiaries, and then again going to shareholders.

//* Unlimited Liability: There is no protection for the owners if the business goes bankrupt. The owner may lose everything to pay off the debt.// //(e.g. their house)// //*Limited Liability: Protection for owners, if the business were to go bankrupt. The owners will only loose the amount that they invested//

**What is financing? What is it important?**
This is important because without said funds, businesses would not be able to run their day-to-day operations, as well as reach their long-term goals (such as expansion).
 * Financing:** the act or process of providing funds for a business venture. (websters dictionary).

**Equity vs. Debt securities**
(Dividends are not mandatory) ||= High priority of payment in event of bankruptcy. ||
 * = **Equity** ||= **Debt** ||
 * = No required fee on borrowing money. ||= Must pay interest. ||
 * = Ownership of company changes. ||= No change in ownership of company. ||
 * = Taxed at lowest possible bracket. ||= Fully taxable. ||
 * = Low priority of payment in event of bankruptcy.

Capital Market Definitions
P/E ratio = stock price/ earnings per share
 * __52-week hi and low__ -** indicates the highest price and the lowest price a stock has gone in the past 52 weeks
 * __Ask__ -**The lowest price at which someone is willing to sell a security.
 * __Beta__** - A measure of a security's systematic or market risk. While most stocks move in in the same direction as the stock market, the level of the beta indicates the degree of correlation between a security and the market. The market is the benchmark and has a beta of 1.
 * __Bid__ -**The highest price a person is willing to pay for a security.
 * __Bond Rating__** - A rating that assesses the safety and security of a bond investment. This rating is usually given by a rating company.
 * __Bond Yield__ -** The return an investor would earn if a bond was purchased and held to maturity. Usually, the longer the term of a bond, the higher the interest rate that's paid to the holder, compensating for the inflation risk of having money tied up for a long time. To determine the yield, divide the interest rate by the purchase price of the bond.
 * __Bonds__ -** A certificate which is evidence of a debt on which the issuer promises to pay the holder a specified amount of interest for a specified length of time, and to repay the loan on its maturity. Strictly speaking, assets are pledged as security for the loan, except in the case of government bonds, but the term is often loosely used to describe any debt issue. Bonds are issued by corporations and by federal, provincial and municipal governments. Bond holders are first in line before shareholders to claim any of a company's assets in the event of liquidation.
 * __Commercial Paper__ -** Shortterm negotiable debt securities issued by non-financial corporations with terms of a few days to a year.
 * __Common Stock__ -** A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure.
 * __Dividend__ -** an amount of money declared to shareholders out a company’s retained earnings. Paid quarterly in the form of cash or stocks.
 * __EPS__ -** Earnings per Share
 * __Face Value__ -** The value of a security stated by the issuer. For stocks, it is the original cost of the stock shown on the certificate. For bonds, it is the amount paid to the holder at maturity. Also known as "par value" or simply "par".
 * __FTSE__ -** 100, or Footsie Financial Times Stock Exchange index. FTSE 100 (top 100 companies), FTSE 250 (midcaps), FTSE All Share (whole market).
 * __GICs__** - guaranteed investment certificate are generally a safe investment because the interest rate paid is guaranteed. Often bought for retirement plans.
 * __IPO__ -** Inital Public Offering
 * __Margin__ -** credit from the investment dealer to buy a security.
 * __Market Capitalization__ -** Also known as market cap, it is the total market value of a company (number of shares outstanding multiplied by the price of the stock). A company with 1 million shares outstanding and a stock price of $10 would have a market capitalization of $10 million.
 * __Maturity__ -**The date on which a loan or a bond or debenture comes due and is to be paid off.
 * __Mutual Fund__ -**A fund comprising the investments of many clients; it is invested in the share of other companies and managed by professional managers(broker)
 * __NASDAQ__ -** National Association of Securities Dealers Automated Quotations, a computerized data system to provide brokers with price quotations for securities traded over the counter.
 * __NYSE__ -** New York Stock Exchange.
 * __OSC__ -** The Ontario Securities Commission administers and enforces securities legislation in the Province of Ontario. They provide protection to investors from unfair, improper or fraudulent practices; and foster fair and efficient capital markets and confidence in capital markets.
 * __P/E Ratio__ -** Price earnings ratio is the relationship between the prices paid for a share and its per-share earnings. The formula to calculate P/E ratio is

 A high P/E ratio indicates an expected higher growth earning and visa verse for a lower P/E ratio. Also since companies with a high P/E have higher expectations therefore making them more risky in comparison to a low P/E ratio.

__**Preferred Stock**__ -A class of stock that entitles the owners to a stated dollar value per share in liquidation (paid after bondholders) and a fixed dividend paid ahead of the company's common shares. Preferred shares usually only have voting rights when a stated number of dividends have been missed. Preferred shares are generally considered income investments. __**Profit Margin**__ **-** Profit margin, Net Margin or Net Profit Ratio all refer to a measure of profitability. It is calculated using a formula and written as a percentage or a number. __**Put & Call Options**__ **-** An option which gives the holder the right, but not the obligation, to sell a fixed amount of a certain stock at a specified price within a specified time. Puts are purchased by those who think a stock may go down in price. Real Return __**Redeemable/Callable**__ **-** Securities which may be redeemed upon due notice by the security's issuer. In the case of bonds, issuers of bonds may reserve the right to pay off the bond before maturity to take advantage of lower interest rates. __**ROE**__ **-** Return on Equity __**SEC**__ **-** Securities Exchange Commission, a federal body established by the United States Congress as a national U.S. regulatory authority. In Canada there is no national regulatory authority because securities legislation is provincially administered. __**Short & Long Positions**__ **-** __**Stock Yield**__ **-** The annual dividend as a percentage of the price of the stock. __**T-Bills**__ **-** Common term for a government treasury bill, which is a short-term government debt issue __**Term -**__ a length of time, eg. long-term vs. short-term __**TSX**__ **-** Toronto Stock Exchange. The largest stock exchange in Canada. __**Volume**__ **-** The amount of shares bought and sold on a stock exchange