Finance Terms

Finance - The study of how people and businesses evaluate investments and raise capital to fund them. The management of revenues; the conduct or transaction of money matters generally, especially those affecting the public, as in the fields of banking and investment.

Efficient Market – A market in which new information is immediately available to all investors and potential investors. A market in which all information is instantaneously assimilated and therefore has no distortions. Since this definition clearly shows the importance to investors and helps them to raise capital it is a vital part of finance.

Primary Market – (1) For producers, their major purchaser of commodities; (2) in commercial marketing channels, an important center at which spot commodities are concentrated for shipment to terminal markets; and (3) to processors, the market that is major supplier of their commodity needs. The primary market in finance helps understand how transactions of money are conducted within this specific market.

Secondary Market – The market for all investors in a security, except for the ones to whom a new issue of a security is sold. The secondary market consists of all sellers and buyers, except for the issuer and the first group of investors who bought the issue. The secondary market is often less volatile than the primary market because it is easier to determine the underlying value of a security after if has already began trading. Nearly all trading of a security occurs on the secondary market. The secondary market in finance helps understand how transactions of money are conducted within this specific market. \

Risk- The uncertainty associated with any investment. That is, risk is the possibility that the actual return on an investment will be different from its expected return. A vitally important concept in finance is the idea that an investment that carries a higher risk has the potential of a higher return. In finance risk evaluates the worthiness of...