NETA PowerPoint
Presentations to accompany
The Future of
Business
Fourth Edition
Adapted by
Norm Althouse,
University of Calgary
Copyright © 2014 by Nelson Education Ltd.
Understanding Money and the
Canadian Financial System
Chapter 17
Copyright © 2014 by Nelson Education Ltd.
Making the Connection
Copyright © 2014 by Nelson Education Ltd.
Learning Outcomes
1.
2.
3.
4.
5.
4
Understand the characteristics of money and its
functions.
Describe the basic functions of the Bank of Canada, and
how it manages the Canadian money supply.
Identify the key financial institutions, and the role they
play in the process of financial intermediation.
Outline how the Canada Deposit Insurance
Corporation protects depositors’ funds.
Summarize the role of Canadian banks in the
international marketplace.
Copyright © 2014 by Nelson Education Ltd.
Learning Outcomes (cont’d)
6.
7.
8.
9.
10.
5
Distinguish between common shares and preferred
shares.
Understand the investment advantages and
disadvantages of bonds.
List other types of securities available to investors.
Describe the function of the securities markets.
List some of the trends that are reshaping the financial
industry.
Copyright © 2014 by Nelson Education Ltd.
Understand the characteristics of money and
its functions.
6
Copyright © 2014 by Nelson Education Ltd.
Characteristics of Money
Scarcity
Durability
Money
Portability
Divisibility
7
Copyright © 2014 by Nelson Education Ltd.
Functions of Money
Medium of Exchange
Money
Standard of Value
Store of Value
8
Copyright © 2014 by Nelson Education Ltd.
Basic Terms
Currency – Bank notes and coins.
Demand deposits – Money kept in an account that can
be withdrawn on demand.
Time deposits – Money invested for a specific period.
Term deposits – Are paid interest but cannot be
withdrawn on demand.
9
Copyright © 2014 by Nelson Education Ltd.
Exhibit 17.1: Three Measures of
Money Stock for the Canadian Economy
10
Copyright © 2014 by Nelson Education Ltd.
Describe the basic functions of the Bank of
Canada and how it manages the Canadian
money supply.
11
Copyright © 2014 by Nelson Education Ltd.
The Bank of Canada Activities
Conducts monetary policy.
Supplies quality bank notes.
Promotes the safety and efficiency of our financial system.
Provides funds-management services.
Communicates its objectives openly and effectively.
12
Copyright © 2014 by Nelson Education Ltd.
Security of Bank Notes
The New $100 Bank Note (Late 2011))
13
Copyright © 2014 by Nelson Education Ltd.
Monetary Policy
Open Market Operations
Tools
Target for the
Overnight Rate
14
Copyright © 2014 by Nelson Education Ltd.
The Bank of Canada’s Monetary Tools and
Their Effects
15
Copyright © 2014 by Nelson Education Ltd.
Identify the key financial institutions and the role
they play in the process of financial
intermediation.
16
Copyright © 2014 by Nelson Education Ltd.
Exhibit 17.4: The Financial
Intermediation Process
17
Copyright © 2014 by Nelson Education Ltd.
Financial Institutions
Depository:
• chartered banks
• trust companies
• credit unions/caisses populaires
Non-Depository:
• insurance companies
• pension funds
• brokerage companies
• finance companies
18
Copyright © 2014 by Nelson Education Ltd.
Outline how the Canada Deposit Insurance
Corporation protects depositors’ funds.
19
Copyright © 2014 by Nelson Education Ltd.
Insuring Deposits
Canada Deposit Insurance Corporation (CDIC)
Federal Crown corporation
Accountable to Canada’s Parliament > minister of finance
Insures eligible deposits to the value of $100,000
20
Copyright © 2014 by Nelson Education Ltd.
Summarize the role of Canadian banks in the
international marketplace.
21
Copyright © 2014 by Nelson Education Ltd.
International Banking
Provides Loans




Offer Trade-Related
Services
Provides global cash management services.
Helps companies manage cash flows.
Improves payment efficiency.
Reduces exposure to operational risks.
22
Copyright © 2014 by Nelson Education Ltd.
Distinguish between common shares and
preferred shares.
23
Copyright © 2014 by Nelson Education Ltd.
Shares and Bonds
Securities
24
Investment certificates that
represent either equity or debt.
Shares
Common and preferred
Bonds
Corporate and government
Copyright © 2014 by Nelson Education Ltd.
Shares
Common
• Voting rights
• May pay dividends
Preferred
• Dividends set at issuance
• No voting rights
25
Copyright © 2014 by Nelson Education Ltd.
Understand the investment advantages and
disadvantages of bonds.
26
Copyright © 2014 by Nelson Education Ltd.
Bonds
Long-term debt obligations
Bonds
Principal – Par value
Interest – Coupon rate
27
Copyright © 2014 by Nelson Education Ltd.
Corporate Bonds

High-yield (junk) bonds – High risk/high return.

Mortgage bonds – Secured by property.

Debentures – Unsecured bonds.

Convertible – Option to convert to shares.
28
Copyright © 2014 by Nelson Education Ltd.
Moody’s and Standard & Poor’s Bond
Ratings
29
Copyright © 2014 by Nelson Education Ltd.
List other types of securities available to
investors.
30
Copyright © 2014 by Nelson Education Ltd.
Other Types of Securities

Mutual funds – Financial services company that pools
investors’ funds to buy a selection of securities.

Futures contracts – Legally binding obligations to buy
or sell commodities or financial instruments at a later
date.

Options – Entitles holders to buy or sell specified
quantities of financial instruments at a set price during a
specified time.
31
Copyright © 2014 by Nelson Education Ltd.
Describe the function of the securities
markets.
32
Copyright © 2014 by Nelson Education Ltd.
Securities Markets

Investment bankers – Help companies raise long-term
financing (a process called underwriting).

Stockbroker – A person licensed to buy and sell
securities on behalf of clients.

Online investing – Improvement in Internet technology.
33
Copyright © 2014 by Nelson Education Ltd.
Markets
Primary
Secondary
34
New securities are sold to the public.
Old (already issued) securities are
traded among investors.
Copyright © 2014 by Nelson Education Ltd.
Types of Markets
Organized
(broker markets)


TSX, NTSE
Dealer

35
RICHARD DREW/AP PHOTO

NASDAQ,
over-the-counter
Copyright © 2014 by Nelson Education Ltd.
List some of the trends that are reshaping
the financial industry.
36
Copyright © 2014 by Nelson Education Ltd.
The Future of the Financial Industry

Changing the way we bank.

Increased financial responsibilities.
37
Copyright © 2014 by Nelson Education Ltd.