Ratio Analysis

Financial Terms and Roles

Dirk Hopstein

University of Phoenix

Finance for Business

FIN/370

John Rapa

February 08, 2012

Financial Terms and Roles

a. Finance- “The study of how people and businesses evaluate investments and raise capital to fund them” (Titman, Martin, & Keown, 2011, Chapter 1). In order to be successful in your line of work, one must have a strong understanding of how the principles of finance come into play. Financing is the ability to take care of your money and investments based on what you know at the time. “A key component of finance is the management and interpretation of information” (Titman, Martin, & Keown, 2011, Chapter 1).

b. Efficient Market- To have an efficient market, all key components must have all the same and necessary information to agree on a fair price. Without a fair and efficient market place, all financial institutions and the economy would eventually corrupt it and become one sided. “Market where all pertinent information is available to all participants at the same time, and where prices respond immediately to available information” (BusinessDictionary.com).

c. Primary Market- The primary market is the realm where new and first time security issues are introduced. Firms use this market to generate funds to further their investments and raise capital. “A part of the financial market where new security issues are initially bought and sold” (Titman, Martin, & Keown, 2011, Chapter 2).

d. Secondary Market- After a security is innately introduced into the financial market; it may be resold and bought. When it is resold or put up on the market for sell, then it is in the secondary market. The secondary market is the no rookie’s league in a way. “The financial market where previously issued securities such as stocks and bonds are bought and sold” (Titman, Martin, & Keown, 2011, Chapter 2).

e. Risk- With all things in the financial market, there is a degree of risk. The chance and...