Page 82 - CAPE Financial Services Syllabus Macmillan_Neat

WORDS/TERMS DEFINITIONS/MEANINGS
Foreign Exchange
Forward contracts This is the exchange of one currency for another or the conversion of
one currency into another currency. Foreign exchange also refers to the
Future contracts global market where currencies are traded virtually around the clock.
GAAP
These are private agreements between two parties and are not as rigid
Hedge in their stated terms and conditions. Because forward contracts are
Holding Period private agreements, there is always a chance that a party may default
Holding Period Return on its side of the agreement.
Holding Period Yield
Income Statement These are standardised instruments traded on an exchange, it is an
instrument agreed now that give the holder the right AND obligation to
Income Tax buy or sell a commodity in the future at an agreed price.
Incorporation
Inspection Generally Accepted Accounting Principles – are a common set of
Insurance accounting principles, standards and procedures that companies use to
compile their financial statements. These principles are usually created
by a private sector organisation and given legal merit by the
government.

A hedge is an investment to reduce the risk of adverse price movements
in an asset. Normally a hedge consists of taking an offsetting position in
a related security such as a futures contract.

The time that has elapsed between date of purchase of a asset and date
of sale of asset.

The return received from holding a security or portfolio or securities
over a period of time.

The rate of return received from holding a security or investment over
of time.

This is a financial statement that measures a company’s financial
performance over a specific accounting period. Financial performance
is assessed by giving a summary of how the business incurs its
revenues and expenses through both operating and non-operating
activities.

This is a tax imposed on income earned by companies and individuals.

This is the process of legally declaring a corporate entity as separate
from its owners.

These are special audits conducted by regulatory agencies to determine
level of compliance.

This is a hedge against potential future risks. Different products are
created to address different needs.

CXC A38/U2/16 77