Defining Finacial Terms

Defining Financial Terms

Jessica Pritt

FIN/370

Oct. 24, 2011

Nicole L. Givens

• Finance: Finance is conceptualized, structured, and regulated by a complex system of power relations within political economies across state and global markets.

• Efficient market: is a mechanism that allows people to by and sell financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect the efficient market hypothesis. In finance, financial markets facilitate: the raising of capital, the transfer of risk, the transfer of liquidity, and international trade.

• Primary market: is part of the capital markets that deals with the issuance of new securities.

• Secondary market: also called the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, potions, and futures are bought and sold.

• Risk: is the potential that a chosen action or activity will lead to a loss. This plays a role in finance because you always take a risk when you are messing with stocks because you never know what they will do.

• Security: is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into debt, equity, and derivative.

• Stock: is of the stock of a business entity represents the original capital paid into or invested in the business by its founders.

• Bond: is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and to repay the principal at a later date. A bond is formal contract to repay borrowed money with interest at a fixed intervals.

• Capital: refers to the funds provided by the lenders to businesses to purchase real capital equipment for producing goods or services.

• Debt: is an obligation owed by one party to a second party. In...