Financial

Financial Terms and Roles

Finance, stocks, bonds, return of investment are just some terms that you hear in the finance world. In this paper, we are going to take a look at some business terms and what their roles are in the finance world. The first term is in fact finance. Finance is the works of the financial system that would include private and government spaces. Also with the study of finance and the financial instruments this means that it can relate to countless assets and liabilities.

Next, we have an efficient market. Efficient market is a business where the prices respond quickly with announcements about new information. Now this is not to get confused with the primary and secondary market. The primary business, “is part of a financial market where new security issues are initially bought and sold.” (Titman, Firms and the Financial Market, 2011) And the secondary market is a “financial market where previously issued securities such as stocks and bonds are bought and sold.” (Titman, Firms and the Financial Market, 2011)

Here now is risk. Risk is something that is changed on such as an investment with an actual return and it was expected to have a different outcome. With most risk, there is a possibility of losing some or all investments but of course we do not want that outcome. Here we now have security. Security is looked at as a negotiable instrument that represents a financial claim which has value.

Stock is an instrument that signifies ownership positions within a corporation. Now with stocks there are bonds. Bonds are long term promissory note that is issued by the borrower. The terms would be that it would pay the owner of the security a predetermined amount of interest each year. Taking a look at capital that is the financial asset of the financial value of assets such as cash.

From capital, we have debt. As we all know debt is money that is borrowed and must be paid back. This would include loans, bonds and banks to name a few. Now the next...