Financial Terms and Roles

Financial Terms and Roles

Stephani Calabrese

February 10, 2014

FIN/370

Matthew Tanzer

Financial Terms and Roles

Create a list of definitions for the following terms and identify their roles in finance.

Finance: Finance or financing is the study of how people/businesses evaluate investments, raising money for the investments. Finance is a broad word with many facets. When reading the chapters I recognize finance as a learned talent. Knowing when to invest, strive ahead, or taking a chance. Business finance can be divided into three divisions; capital budget, capital structures, and working capital management. It is the management of money and the management information and how information is interpreted, both personally and in business.

Efficient market: “Market where all pertinent information is available to all participants at the same time, and where prices respond immediately to available information. Stock markets are considered the best examples of efficient markets” (Business Dictionary, 2013 p. 1.)

· Primary Market: A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors.

Secondary Market: A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The national exchanges - such as the New York Stock Exchange and the NASDAQ are secondary markets. Secondary markets exist for other securities as well, such as when funds, investment banks, or entities such as Fannie Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash proceeds go to an investor rather than to the underlying company/entity directly.

Risk: The uncertainty associated with any...