Financial Terms

Financial Terms and Roles

Kate Kondas

FIN / 370

June 5, 2012

Edward Vargas

Financial Terms and Roles

1. Finance - The science of the management of money and other assets.

2. Efficient Market – A market that the values of securities at any given time fully reflect all of the available information, which results in the market and intrinsic value being identical. The role is to have a lower spread and the lowest volatility of the market.

3. Primary Market – A market that the securities are offered for the first time to potential investors. The role of this market in finance is a way for an emerging firm to create large amounts of capital for expansion and growth.

4. Secondary Market – This type of market represents a transaction in currently outstanding securities. The role is to connect investors’ favoritism for liquidity with the capital users’ wishes of using their capital a longer period of time.

5. Risk – The common and likely variability associated with expected revenue or income streams. Risk’s role is the basis for evaluating any given investment. Time and risk are the foundation and basic concepts of finance. The greater the risk, the greater the expected return.

6. Security – The return line that reflects the attitudes of the investors regarding the minimal acceptable return for a given level of systematic risk.

7. Stock – A distribution of shares of up to 25% of the number of total shares currently outstanding, issues on a pro rate basis to the current stockholders.

8. Bond – A specific type of debt or long-term promissory note, issued by the borrower, promising to pay its holder a predetermined and fixed amount of interest per year. The role of a bond is to help lower costs of infrastructure renovations and replacement for public works as well as for new and expanding businesses.

9. Capital – Any type or form of wealth capable of being employed in the production of more wealth.

10. Debt – Sources of credit...