TYPES OF FINANCIAL ASSETS

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Presentation transcript:

TYPES OF FINANCIAL ASSETS

Distinguish between stocks and bonds

OBJECTIVES: Explain the meaning of financial assets Establish the difference between stocks and bonds

DEFINITION Financial ASSETS A financial asset is an intangible (NON PHYSICAL)asset Examples include bank deposits, bonds, and stocks.

FINANCIAL ASSETS are usually more liquid than tangible (fixed) assets, such as land or real estate (property)

FINANCIAL ASSETS

TASK STOCKS? Explain the difference between these 2 financial assets BONDS?

STOCKS CHARACTERISTICS

STOCKS Stocks offer part ownership in a company, stocks are considered riskier and more unstable than bonds Mine…mine…mine

STOCKS ARE EQUITY Stockholders own a share of the business.

Stockholders have voting rights

Stocks: Buying part ownership in a corporation EXAMPLE [STOCKS] Stocks: Buying part ownership in a corporation

RETURN / YIELD dividend PROFIT

What does this diagram represent? Explain….. Where would you find this data?

BONDS CHARACTERISTICS

BONDS Bonds are simply loans They are a form of debt appear as liabilities in the organization's balance sheet.

BONDS Bonds are issued by: companies, municipalities, states foreign governments to finance a variety of projects and activities.

BONDS the “company” borrows the funds for a defined period of time at a fixed interest rate.

BONDS Loans must be paid back! “DEBT Obligation”

BONDS The maturity date is the date in the future on which the investor's principal will be repaid

Bonds are also traded on exchanges, but often have a lower volume (quantity) of transactions than stocks.

BONDS: Making a loan to a corporation EXAMPLE BONDS: Making a loan to a corporation

YIELD = RETURN “INTEREST” …usually paid every 6 months

QUESTION SO… …..what are the differences between STOCKS & BONDS Draw a table and list the differences

WHY? COMPANY BALANCE SHEET ASSETS LIABILITIES FIXED ASSETS (eg property, equipment) CURRENT ASSETS (eg trading stock, cash) LONG TERM Long term loans (BONDS) SHORT TERM OWNERS EQUITY STOCKS

BANK’S BALANCE SHEET ….. Is it the SAME?

BANK’S BALANCE SHEET OWES OWNS

Which is better (stocks or bonds) ??? QUESTION Which is better (stocks or bonds) ???

Yield financial asset Dividend interest NEW WORDS obligation stock bond Dividend interest obligation Yield financial asset

Business’s finance their transactions with financial assets CONCLUSION Business’s finance their transactions with financial assets