MGTA01H3 Chapter Notes - Chapter 9: Investment Banking, Financial Intermediary
●Finance
○All the activities that involve locating, collecting, packaging, and redistributing
capital
●Assumptions of finance
○There are people who have ideas and ambitions, plans and projects that they
would undertake, if only they had the capital
○There are people who have capital, but for the time being, have no immediate
need or desire to spend it
●Consumption
○Using up your money by making a final purchase
●Investment
○A decision not to spend one’s capital for immediate consumption, but to put it to
work so that it might produce more capital in the future
●Investor
○An individual or organisation that provides the capital to finance enterprise in the
expectation that the enterprise will return more capital in the future
●Financial Intermediary
○A business which acts as a go-between, finding, collecting, packaging, and
redistributing money from those with spare capital who want to put it to use, to
those with ideas and ambitions who need capital
○Banks are the best known financial intermediaries
●Loan Capital or Debt Capital
○Money that is lent to a business or an individual. A loan must be repaid, usually
with interest
●Equity Capital
○Money that is given to a business in exchange for a share of the ownership and a
share of any profits
●Services provided by banks
○Deposit taking institution
■Any business, like a bank, that accepts deposits of money from its
customers
○Deposit
■To hand over for safekeeping
○Interest
■The fee paid to the lender of money for the right to use that money until it
is repaid
○Return on investment
■The benefit or gain which comes to savers or investors from putting their
spare capital into a particular investment
●Net interest
○The difference between the interest that a bank collects from borrowers, and the
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MGTA01H3 Full Course Notes
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Document Summary
All the activities that involve locating, collecting, packaging, and redistributing capital. There are people who have ideas and ambitions, plans and projects that they would undertake, if only they had the capital. There are people who have capital, but for the time being, have no immediate need or desire to spend it. Using up your money by making a final purchase. A decision not to spend one"s capital for immediate consumption, but to put it to work so that it might produce more capital in the future. An individual or organisation that provides the capital to finance enterprise in the expectation that the enterprise will return more capital in the future. A business which acts as a go-between, finding, collecting, packaging, and redistributing money from those with spare capital who want to put it to use, to those with ideas and ambitions who need capital. Banks are the best known financial intermediaries.
