Flashcards on Investment Securities and Financial Concepts
Investment Securities & Financial Concepts: Student Guide
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Investment securities overview
81 cards
Card 1
Question: How does investment risk typically change with investment period length?
Answer: Risk is lower over a longer term/period and higher over the short term.
Card 2
Question: Why does diversification across sectors/companies reduce risk?
Answer: Because investments are made in various sectors/companies, spreading risk and allowing better management by the portfolio manager.
Card 3
Question: What can negatively impact portfolio value in the short term when money is invested in the capital market?
Answer: Unforeseen circumstances may impact negatively on the value of the portfolio in the short term, causing high short-term risk.
Card 4
Question: What are shares and why do companies issue them?
Answer: Shares are portions of company ownership sold to shareholders on the open market to obtain capital/funds to operate the business.
Card 5
Question: What rights do ordinary shareholders typically have?
Answer: One vote per share and the right to receive a dividend (a portion of the profit).
Card 6
Question: Do companies have to repay share capital to shareholders?
Answer: No. Companies do not have to repay share capital, making it risk-absorbing capital for the company.
Card 7
Question: Where are shares of listed companies traded?
Answer: Shares of listed companies are traded on the JSE.
Card 8
Question: How are shares bought or sold by investors?
Answer: Through stock/share brokers, who charge a brokerage/fee paid by the investor.
Card 9
Question: How do different types of shares vary?
Answer: They differ with respect to claims to profits/dividends, voting rights, and claims to assets if the company is liquidated.
Card 10
Question: Give examples of ordinary share categories mentioned.
Answer: Blue chip, bonus, growth, income, and defensive shares.