Defining Finance Terms

FIN/370

Defining Financial Terms

1. Finance-is the study of how people and business evaluate investment and raise capital to fund them

2. Efficient Market-market where all pertinent information is available to all participate at the same time, and where prices respond immediately to available information.

3. Primary Market- is a market in which new, as opposed to previously issued, securities are bought and sold for the first time.

4. Secondary Market- is where all subsequent trading of previously issued securities takes place.

5. Risk- a probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action.

6. Security- is a negotiable instrument that represents a financial claim.

7. Stock-equity capital raised through sale of shares.

8. Bond-a written and signed promise to pay a certain sum of money on a certain date, or on fulfillment of a specified condition. All documented contracts and loan agreements are bonds.

9. Capital-wealth in the form or assets, taken as a sign of the financial strength of an individual organization, or nation, and assumed to be available for development or investment.

10. Debt- a duty or obligation to pay money, deliver goods, or render service under an express or implied agreement.

11. Yield- the annual income earned from an investment, expressed usually as a percentage of the money invested.

12. Rate of return- is the amount that lenders require and the firm’s cost of borrowing.

13. Return on investment- return on invested capital, the amount, expressed as a percentage that is earned on a company’s total capital.

14. Cash flow- incomings and outgoings of cahs, representing the operating activites of an organization.