Financial Terms

Financial Terms

FIN/370 Finance for Business

September 21, 2011

Jerry Caldwell

1. Finance- The study of the management of funds. The role of finance in finance is to grow an organization with expense control which ultimately makes a company run smoothly. Without finance a company is not able to sustain.

2. Efficient market - An efficient market is characterized by a large number of profit-driven individuals who act independently (Keown, Martin, & Petty, "The Corporation and the Financial Markets: The Interaction," 2005). An efficient market has important information that is accessible to a group of people with the same intentions. Efficient market gives individuals the opportunity to make decisions at the same time. Strong, semi-strong, and weak are three levels of efficient markets.

3. Primary markets are those in which securities are offered for the first time to potential investors (Keown, Martin, & Petty, "The Corporation and the Financial Markets: The Interaction," 2005). Buyers and sellers in the primary market are able to do transactions directly and negotiate with each other.

4. Secondary market is when new stock is issued and begins trading .Newly released stocks and securities are sold in the secondary market. The New York stock exchange is a secondary market.

5. Risk -The possible loss of value in investments. Companies have to take risks that may potentially hurt or help the organization financially.

6. Security- Security is a financial instrument that represents ownership interest. Securities are warrants, bonds, options, shares, etc. Securities can be traded, sold or bought on financial markets or stock exchange.

7. Stock- Stock is a specified company shares that increase company’s assets. Individuals purchase stocks to invest in a company, especially when the stocks are low in price.

8. Bond- a debt investment that shows proof of a debt. A bond is an issued document to obtain funds. Bonds are used to...