Podcast
Questions and Answers
Who are the real owners of a company?
Who are the real owners of a company?
Which group of stockholders benefits from excess profits during profitable periods?
Which group of stockholders benefits from excess profits during profitable periods?
In which market do users of funds issue new securities through public offerings or private placements?
In which market do users of funds issue new securities through public offerings or private placements?
Which market involves the sale of previously owned securities?
Which market involves the sale of previously owned securities?
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What is the first offering of stock called in a public setting?
What is the first offering of stock called in a public setting?
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Where does the sale of new securities take place for one investor or a group of investors?
Where does the sale of new securities take place for one investor or a group of investors?
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Which financial instrument evidences a residual interest in the assets of an entity?
Which financial instrument evidences a residual interest in the assets of an entity?
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What is a characteristic of debt instruments?
What is a characteristic of debt instruments?
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In what market is an initial public offering (IPO) conducted?
In what market is an initial public offering (IPO) conducted?
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Which type of financial instrument typically provides higher interest rates than Treasury bonds?
Which type of financial instrument typically provides higher interest rates than Treasury bonds?
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What do returns from equity instruments primarily come from?
What do returns from equity instruments primarily come from?
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In a liquidation scenario, who has the priority over assets of a company?
In a liquidation scenario, who has the priority over assets of a company?
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What is the main purpose of mutual funds?
What is the main purpose of mutual funds?
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Which financial institution invests payments from employees on their behalf?
Which financial institution invests payments from employees on their behalf?
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What is a characteristic of a financial asset according to IAS 32.11?
What is a characteristic of a financial asset according to IAS 32.11?
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What is the primary characteristic of a financial liability?
What is the primary characteristic of a financial liability?
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In which market are financial instruments initially issued?
In which market are financial instruments initially issued?
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What do equity instruments represent in the context of financial markets?
What do equity instruments represent in the context of financial markets?
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Study Notes
Financial Instruments and Markets
- Financial instruments can be exchanged with another entity under unfavorable conditions.
Debt and Equity Instruments
- Debt instruments have fixed returns due to fixed interest rates.
- Examples of debt instruments: Treasury Bonds and Treasury Bills (low interest rates, low risk of default), Corporate Bonds (higher interest rates, higher risk).
- Equity instruments have varied returns based on company performance.
- Returns from equity instruments come from dividends or stock price appreciation.
- Types of equity instruments: Preferred Stock (priority over common stock in asset claims, fixed dividend rate), Common Stock (real owners of the company, benefit from company growth).
Financial Markets
- Financial market: a marketplace for creating and trading financial assets (e.g., shares, debentures, bonds, derivatives, currencies).
- Classified into: Primary vs. Secondary Markets, Money Markets vs. Capital Markets.
Primary and Secondary Markets
- Primary Market: raises money by issuing new securities (debt or equity) through public offerings or private placements.
- Secondary Market: suppliers of funds sell previously owned securities.
Financial Institutions
- Mutual Funds: owned by investment companies, enabling small investors to invest in diversified portfolios.
- Pension Funds: receive payments from employees and invest on their behalf (e.g., GSIS, SSS).
- Other financial institutions: unit investment trust fund (UITF), investment banks, and credit unions.
Financial Assets and Liabilities
- Financial Instrument: a document representing a legal agreement involving monetary value.
- Financial Asset: cash, equity instrument of another entity, contractual right to receive cash or another financial asset, or exchange instruments under favorable conditions.
- Examples: Notes Receivable, Loans Receivable, Investment in Stocks, Investment in Bonds.
- Financial Liability: a contractual obligation to deliver cash or another financial instrument to another entity.
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Description
Learn about equity instruments such as common stock, and understand the role of common stockholders in a company's growth and dividends. Explore the concept of financial markets as marketplaces for creating and trading financial assets.
