CSC Chapter 1 Questions and Answers
What is Capital?
Are materials used by businesses, such as land & building, or financial assets, like bonds & stocks.
What are the 2 ways capital can be utilized?
Direct investment: used to invest in a home, highway
Indirect investment: used to invest ...
CSC Chapter 1 Questions and Answers
What is Capital? - answer Are materials used by businesses, such as land &
building, or financial assets, like bonds & stocks.
What are the 2 ways capital can be utilized? - answer Direct investment: used to
invest in a home, highway
Indirect investment: used to invest in stocks, bonds that cannot be touched. Its used to
finance direct investment
What are the 3 characteristics of capital? - answer Capital is MOBILE, SENSITIVE &
SCARCE
Why do individuals uses capital? - answer Use capital to finance housing, consumer
goods & financial consumption
Why do businesses uses capital? - answer Use capital to finance its operations,
maintain plant & equipment, or expand. Capital is generated by profits or issuing
securities
Why do Federal Government uses capital? - answer Borrow capital to finance
deficits & expenditures. They issue T-bills, Marketable bonds, CSB & CPB
Why do Provincial Government uses capital? - answer Borrow capital to finance
expenditures, like health care. They issue non-marketable bonds, borrow from CPP or
issue bonds & debentures
Why do Municipal Government uses capital? - answer Require capital to finance
expenditures on streets, sewers, police. They issue instalment debentures
What are debentures? - answer Bonds that are not secured by assets. They're
backed up by credit. Governments & corporations uses debentures to secure their
capital.
What are debt securities? - answer Used mainly for loans. It provides a return on a
fixed-payments until maturity. Includes bonds, debentures, T-bills & GIC
What are equity securities? - answer Allow investors to have a share in the
company. Investors are able to participate in the company & can receive dividends.
Includes preferred & common shares, and restrictive shares
What are restrictive shares? - answer Have limited to non-voting rights
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