Study Guides (238,202)
Canada (115,009)
Business (1,198)
BU111 (269)

Final Notes.docx

8 Pages
Unlock Document

Wilfrid Laurier University
Laura Allan

Economic Factors Four pillars of Canadian financial system Chartered banks - Privately owned, publicly traded, profit seeking - Largest and most important institution - Concentrated and highly regulated industry - Serve individuals, business, and others - Major source of short-term loans for business - Expand money supply through deposit expansion Alternate banks - ex. Trust companies & Credit unions Life insurance companies - ex. Insurance co., venture capital firms, pension funds Investment dealers - Facilitate trade of stocks, bonds and other products in Securities Markets Changes in the Banking Industry 1. Deregulation (reduction of government power) 2. Changes in consumer demands 3. Competition from foreign banks (foreign banks are allowed to do business in Canada, so to respond Canadian banks are trying to merge with one another Bank of Canada - Canada’s central bank - Manages economy and regulates aspects of chartered bank operations - Manages money supply by using 2 tools 1. Open market operations (buying government securities = increase / selling = decrease) 2. Bank rate (lower bank rate = more loans / higher bank rate = fewer loans) Bonds (legal, binding agreement) Characteristics Return: fixed rate of return (often paid semi-annually) Term: fixed term – principal repaid at maturity Priority over stakeholders: yes Types - Secured (borrowers use collateral in the event of a non-payment) vs. Unsecured (opposite) - Registered (names of holders are registered with the company) vs. Bearer (bondholders must clip coupons from certificates and send them to the issuer to receive interest payments) Features (in terms of maturity dates, there are 3 types of bonds…) - Callable: issuer has the right to call the bonds in and pay them at any time - Serial: firm retired portions of the bond issue at different predetermined dates - Convertible: can be converted into common stock Factors affecting price - Relationship between coupon rate & prevailing rates of interest - Changes in credit rating - Economic/Market Risk - Inflation Relationship between prevailing interest rates and bond prices - Prevailing interest rates have the biggest impact on bond prices and in turn, bond yeilds Stocks Characteristics of Common Stocks Characteristics of Preferred Stocks - Return/dividends: not necessarily - Yes, after interest paid - Term: no fixed term - no fixed term - Priority in bankruptcy situations: paid after - paid after debt holders preferred - Voting rights: yes - no Factors affecting price - demand and supply of stock due to negative or positive perceptions/facts - primary factors (earnings, market condition, speculation) - Undervalued issue - offers higher return than stocks of similar risk - Price of a security is a collective expressions of all opinions of those who are buying and selling Leverage Concept - engaging in a transaction whose value is greater than the actual dollars you have available - creates potential to make a larger return or loss than indicated by the investment you have made Rewards Risks Market Conditions Bull Vs. Bear - market is up + investor confidence = bull market - market is down + investors anticipate losses = bear market Appropriate investing strategies Margin Buying Concept - put up only part of purchase price - broker lends remainder (with interest) Rules - must qualify for margin account - must sign “Margin Account Agreement Form” - must pay interest on loan - investors margin must always be larger than minimum margin requirement When does it make sense? Potential Losses Potential Gains Short Selling Concept - buy low, sell high = sell high, buy low - sell shares you don’t own - borrow from broker Rules - short deposit must be 150% CMV at all times - agreement may be terminated by either party at any time - forced to cover / “buy-in” - short sale price governed by ‘last sale’ rule - dividends declared are the responsibility of the seller When it makes sense Potential Losses - unlimited losses - forced to cover short at disadvantageous price - dividends may be declared that you must cover - short calls Potential Gains Technological Factors Opportunities and Threats of Technology Opportunities 1. Improved products – innovation, uniqueness, and value 2. Improved competitiveness – creates barriers to entry (e.g. patents, lockout and switching costs), and also using cooperation (e.g. inventory systems where supplies track inventory and are ready to send immediately, thus reducing handling/inventory costs) 3. Improved communication and information within firm and with customers – improves employee commitment since they have info to serve customers, and customer information can be kept track of (i.e. virtual salesman idea) which increases sales/profits 4. Customization - being able to produce in mass, but customize to the wants/needs of customers, enables companies to integrate what is available in other companies, therefore gain more customers Threats 1. Imitation - Information costly to develop but cheap to share, can easily happen with no patents 2. New technologies in unfamiliar areas - Disruptive technologies challenge the value of organizational capabilities and resources; If you are not aware of new technologies it will challenge your resources and capabilities, can make you less competitive or put you out business 3. Unpredictable evolution - Hard to know what will do well in the market, it’s not always the best product/idea that wins – it’s about who can convince the most number of users to use their product (good marketing) 4. Need for constant learning and scanning - It is easy to fall behind on new technologies 5. Information overload - How do you filter through all of the data? How do you make the info available, useful for you? 6. Greater independence of company & workplace - less control of employees, not having the discipline is difficult(if employees working at home for ex.), lose connection/interaction with your colleagues, loose interest in your job, disconnect with what the company wants Retail Mission - right product, right place, right price, right time Historical Patterns of Disruption 1. Department store (were able to provide a larger range of products, finding multiple things at a good price, carry products that are familiar) – smaller stores not as common 2. Mail order (catalogue shopping) (Sears was one of the first to do it – this catered to consumers in rural areas + elderly, this moved into the mainstream, this did not eliminate competition) – can compare to online shopping 3. Discount department store (low income customers, they are located in the suburbs usually, through the quantity of items they are selling – they are still making money) Trends in Internet Retailing Strengths: do it at any time, can buy stuff from anywhere, able to customize Weakness: service aspect, not being able to see/try on your items before purchasing, shipping/delivery can be d
More Less

Related notes for BU111

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.