Business Finance & Financial Markets

Flashcards covering concepts on business finance, short-term vs. long-term loans, financial institutions, stock exchange operations, speculation, BISX, and share pricing concepts.

What is business finance?

Business finance is how a company gets, handles, and spends its money to run day-to-day operations and grow.

What are the four main reasons why firms need finance?

Firms need finance for Working Capital, Business Expansion, Asset Acquisition, and Cash Flow Management.

What is the main purpose of working capital in business finance?

To pay everyday expenses like wages, rent, and utility bills.

How do short-term loans and long-term loans compare in duration?

Short-term loans typically last less than $1\,\text{year}$ ($3$ to $18\,\text{months}$), whereas long-term loans last more than $1$ to $5+\text{years}$.

How do interest rates and approval speeds differ between short-term and long-term loans?

Short-term loans feature higher APR / interest rates and fast approval (often within a day), while long-term loans have lower overall interest rates and slower approval requiring detailed credit evaluations.

What is the primary purpose of a long-term loan?

Buying large capital assets, property, or plant expansion.

What is the definition of financial institutions?

Financial institutions are companies and organizations that handle money, provide loans, accept deposits, and manage investments for individuals and businesses.

What are the primary functions of Central Banks in the Bahamas?

Central Banks oversee monetary systems, control inflation, and regulate commercial banking standards.

What is the key difference between Depository and Non-Depository Institutions?

Depository Institutions accept customer deposits, manage checking and savings accounts, and provide loans. Non-Depository Institutions do not take traditional public deposits, but raise money through fees, insurance premiums, or selling securities.

How do credit unions differ from retail and commercial banks?

Credit unions are member-owned, non-profit groups that focus on member benefits with lower fees and better rates, whereas retail and commercial banks are for-profit companies that offer checking, savings, loans, and credit cards.

What is the role of investment banks?

Investment banks are specialized financial organizations that help corporations and governments raise capital, issue stock, and complete mergers.

What is a stock exchange?

A stock exchange is a regulated marketplace where buyers and sellers trade shares of stock, bonds, and other financial instruments.

What are the main functions of a stock exchange?

The main functions of a stock exchange are Raising Capital, Fair Pricing, Liquidity, and Safety.

What is speculation in financial markets?

Speculation is the act of buying and selling financial assets to profit from short-term price movements rather than long-term fundamental value.

What key roles does speculation play in a market ecosystem?

Speculation provides Price Discovery, Risk Absorption, and influences Market Volatility.

Which terms represent the two opposing forces driving price movements based on investor sentiment?

Bull and Bear.

When was the Bahamas International Securities Exchange (BISX) established and under whose oversight does it operate?

BISX was established as a private, for-profit company in September $1999$ and operates under the oversight of the Securities Commission of The Bahamas.

What financial instruments are listed and traded on BISX?

BISX lists and trades Equities (common and preference shares), Debt Securities (corporate bonds and Bahamas Government Registered Stock [BGRS]), and Mutual Funds & Investment Funds.

What are the market trading hours for BISX?

Trading takes place Monday through Friday from $10:00\,\text{a.m.}$ to $3:00\,\text{p.m.}$

How do individuals place buy or sell orders on BISX, and how is overall market health tracked?

Orders must be placed through a licensed BISX Broker-Dealer Member, and market health is tracked using the BISX All-Share Index.

What is the difference between nominal price and market price of a share?

Nominal price (par value) is the value printed on paper or share certificates, while market price is determined by supply and demand (selling at a premium if higher than nominal price, or at a discount if lower).

How are dividends expressed and calculated?

Dividends are expressed as a percentage of nominal value (e.g., a $25\%$ dividend on a $\pounds 1$ ordinary share pays $25\text{p}$ per share).

How is the yield of a share calculated?

Yield represents the actual return on money paid for shares and is calculated by expressing the money value of the dividend as a percentage of the market price.