Swott

Defining Financial Terms

Victor Torres

Finance 370

April 3, 2012

Tania Say

Finance- Is the study of how businesses and people evaluate investments and raise the capital to fund them (Titman 2011). It’s important to know finance because you apply it all the time in your personal life or your professional career.

Efficient Market- Is where all information is available to all participants but at the same time, and where prices respond immediately to available information. One example of Efficient Market is the stock markets (Titman 2011).

Primary Market- A market that issues new securities on an exchange. Primary markets are issued by underwriting groups, and consist of investment banks that will set a beginning price for a security and then oversee the sale directly to investments (Titman 2011).

Secondary Market- A market where investors buy securities or assets from other investors rather than going straight to companies. Examples are the New York Stock Exchange and the NASDAQ (River 2011).

Risk – Is the chance that a negative outcome will occur when investing.

Security- Is a financial instrument that can represent debt (Bonds) or equity (Stocks). These are sold to investors who are looking to make a return on the purchase price. With securities there is a connection between the corporation and the investor (Titman 2011).

Stock- Stocks represent ownership in a company, and are considered equity securities. In a company, the board of directors will determine a number of shares to be authorized and they have voting rights. Investors usually buy shares when they think price will increase, and sell shares when they think price will decrease (Titman 2011).

Bond- A bond is a debt security, where the entity who issues the bond becomes indebted to the purchaser. The issuer is obligated to pay the bond back at a later date along with interest. These are usually sold by corporations and governments (River 2011).

Capital- Is the money used by businesses...