BU111 Lecture Notes - Retained Earnings, Commercial Paper, Toronto Stock Exchange

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Published on 16 Oct 2011
L2 BU111 12/10/2011
The Economic Environment: Canadian Capital Markets
Factors of Production
The basic resources that a country’s business use to produce goods and services
There are five factors of production:
oCapital: the financial resources needed to operate a business
oLabour: the mental and physical factors of production
oNatural Resources: physical resources such as land, minerals & water
oEntrepreneurs: people who accept the risks involved in creating and
operating a business
oInformation Resources: information such as economic data, market
information, various measures of performance (sales, costs, etc.) and the
means whereby this information can be quickly summarized, retrieved,
and used by managers
We will begin by examining how firms and government raise the capital (money)
necessary to operate
Money that is required
Internal vs. External Financing
Internal: within corporation, reinvesting profits (retained earnings)
oGovn’t: taxes revenues
External: going out into capital market
External Financing
Places where people or institutions with money to invest (lender/savers) are
brought together with those who require capital (borrower/spenders)
Capital markets may be actual physical places (i.e. Toronto stock Exchange, TSX)
Capital markets may also be virtual markets with no real physical location (i.e.
virtual location and network that links the players in the capital market, The Bond
Market, The Money Market)
Users of Capital (Borrower/Spenders)
Large Public Corporations
oFor capital expansion projects, acquiring new productive capacity
oTo fund the start-up of a new business
All levels of Government
oFederal, Provincial, Regional, Municipal
oTo fund the provision of infrastructure
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