Financial Terms

Financial Terms and Roles

Financial Terms and Roles

* Finance- Finance is the study of how people and businesses evaluate investments and raise capital to fund them. (Titman, Keown, & Martin,  2011).

Finance is used to make the correct decisions when investing money into something.

* Efficient market- The price of the particular product is determined by a consensus in the marketplace. (Schroeder, Clark, & Cathey, 2005).

An efficient market is used to ensure fair trading in the market.

* Primary market- Market for the sale of new securities by corporations. (Brealey, Myers, & Marcus,  2003).

The primary markets role in business is to make the initial sale of securities.

* Secondary market- Market in which previously issued securities are traded among investors. (Titman, Keown, & Martin,  2011).

The role of the secondary market is to trade the initial securities.

* Risk- The chance that an investment's actual return will be different than expected.

The role of risk is to identify the actual return so one will know what can be with an investment.

* Security- A negotiable instrument that represents a financial claim that has value. (Titman, Keown, & Martin,  2011).

A security shows what amount of value something has.

* Stock- An instrument that signifies an ownership position in a corporation. (Titman, Keown, & Martin,  2011).

Role of the stock is to offer individuals an opportunity to buy in as a part of the owners of an organization.

* Bond- A long-term (10-year or more) promissory note issued by a borrower, promising to pay the owner of the security a predetermined amount of interest each year.

The bond offers a set amount of cash plus interest as the years pass. The interest can more than double the amount of the initial amount in some cases.

* Capital- Financial assets or the financial value of assets, such as cash. 

* Debt- Money that has been borrowed and must be repaid. This includes such things as bank...