AFM132 - FINAL EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS GRADED A++ LATEST UPDATE
Bonds
Loans issued by a corporation that must be repaid. When a company issues a bond, it
essentially grants an IOU ("I owe you") to a borrower with a promise to repay (principal
and interest) by a specific date.
Common shares
A class of shares that allow the shareholder to become part owner of the company, and
are granted a right to vote on issues that may impact the future direction of the
company.
Compound interest
The principle where the interest you earn also earns interest, so the larger your balance
gets, the bigger those numbers become.
Covenants
An agreed upon condition that must be maintained. Covenants can be financial or non-
financial requirements. If the borrower at any time does not meet the conditions of the
covenant, the lender can demand that the loan must be paid back in full immediately.
Interest
A charge, typically a percentage, on the principal amount borrowed. Interest can be
fixed at a specific rate or variable.
Principal
,The original amount borrowed on a loan.
Secured loan
A loan backed by assets (e.g., personal or business assets) that a borrower puts up as
collateral, so in the event that a loan is not repaid, the lender can take ownership of the
collateral.
Term
The time period for a loan, which may be short-term (borrowed and repaid within 1 year)
or long-term (borrowed for more than 1 year, and typically repaid over time with regular
ongoing monthly installments).
Unsecured loan
A loan not backed by collateral, so typically only granted to highly regarded customers
that have a strong financial history, and may also have higher interest rates or shorter
repayment terms as the lender is taking on additional risk.
Financial literacy
Having the knowledge, skills, and confidence to make informed financial decisions, and
plays an important role in managing money as well as planning/saving for the future.
Initial Public Offering (IPO)
The first time shares of a company are sold to the public.
Line of credit
Access to a pre-approved amount of money from a lender, which can be accessed and
repaid at any time.
Preferred shares
, A class of non-voting shares that give the shareholder priority to dividends over
common shareholders. And should a company be forced out of business; preferred
shareholders get priority claim to the liquidated assets of the company before common
shareholders.
Prospectus
A document made available to potential investors which summarizes details about their
business, financial information, and the shares being offered.
Term loan
An amount borrowed from a lender and paid off at fixed intervals (e.g., weekly, bi-
weekly, monthly) over a specified period of time (or "term").
Time value of money
Recognizes the investment potential of money received today compared to receiving it
in the future.
Undercapitalization
When a company does not have enough capital to support its operations, which can be
common and problematic for small businesses that are just starting.
Balance of trade
The relationship between importing and exporting.
Favourable balance of trade (trade surplus)
When exports are greater than imports.
Unfavourable balance of trade (trade deficit)
When imports are greater than exports.
Business
COMPLETE SOLUTIONS GRADED A++ LATEST UPDATE
Bonds
Loans issued by a corporation that must be repaid. When a company issues a bond, it
essentially grants an IOU ("I owe you") to a borrower with a promise to repay (principal
and interest) by a specific date.
Common shares
A class of shares that allow the shareholder to become part owner of the company, and
are granted a right to vote on issues that may impact the future direction of the
company.
Compound interest
The principle where the interest you earn also earns interest, so the larger your balance
gets, the bigger those numbers become.
Covenants
An agreed upon condition that must be maintained. Covenants can be financial or non-
financial requirements. If the borrower at any time does not meet the conditions of the
covenant, the lender can demand that the loan must be paid back in full immediately.
Interest
A charge, typically a percentage, on the principal amount borrowed. Interest can be
fixed at a specific rate or variable.
Principal
,The original amount borrowed on a loan.
Secured loan
A loan backed by assets (e.g., personal or business assets) that a borrower puts up as
collateral, so in the event that a loan is not repaid, the lender can take ownership of the
collateral.
Term
The time period for a loan, which may be short-term (borrowed and repaid within 1 year)
or long-term (borrowed for more than 1 year, and typically repaid over time with regular
ongoing monthly installments).
Unsecured loan
A loan not backed by collateral, so typically only granted to highly regarded customers
that have a strong financial history, and may also have higher interest rates or shorter
repayment terms as the lender is taking on additional risk.
Financial literacy
Having the knowledge, skills, and confidence to make informed financial decisions, and
plays an important role in managing money as well as planning/saving for the future.
Initial Public Offering (IPO)
The first time shares of a company are sold to the public.
Line of credit
Access to a pre-approved amount of money from a lender, which can be accessed and
repaid at any time.
Preferred shares
, A class of non-voting shares that give the shareholder priority to dividends over
common shareholders. And should a company be forced out of business; preferred
shareholders get priority claim to the liquidated assets of the company before common
shareholders.
Prospectus
A document made available to potential investors which summarizes details about their
business, financial information, and the shares being offered.
Term loan
An amount borrowed from a lender and paid off at fixed intervals (e.g., weekly, bi-
weekly, monthly) over a specified period of time (or "term").
Time value of money
Recognizes the investment potential of money received today compared to receiving it
in the future.
Undercapitalization
When a company does not have enough capital to support its operations, which can be
common and problematic for small businesses that are just starting.
Balance of trade
The relationship between importing and exporting.
Favourable balance of trade (trade surplus)
When exports are greater than imports.
Unfavourable balance of trade (trade deficit)
When imports are greater than exports.
Business
