Financial Roles and Terms Paper

Financial Terms and Roles

Fin/370

Financial Terms and Roles

Finance- Finance is made up of financial institutions, business finance and investments. Finance can also be defined as the study of money being managed and the process that is used to get acquired funds. It is providing funding, money, capital or other resources that may be needed in order to obtain a sale or loan. According to our text, financial executives aim to maximize a firm’s value in finance. Finance can be used in the world of business to transfer money from an investor to a business that may need funds.

Efficient market- Efficient markets are markets in which all necessary or needed information is readily available to all participants at the same time, which enables prices to respond immediately based on the information given. Securities prices reflect all of the information that is available in an efficient market. An example of an efficient market would be a stock market. Under the efficient market hypothesis the market can’t be beat on a consistent basis. This hypothesis implies that all information is taken into account by the stock market, which is relevant to a company when stocks are being priced. In other words, prices of stocks are fair all the time.

Primary market- A primary market is where securities are first created, bought and sold. Primary markets can also be known as an issue market. Companies that issue securities get the cash proceeds in primary markets and use it to fund other operations. Primary markets play an important role in finance because they allow firms to raise capital by way of the sale of financial assets. They also assist in making financial assets more liquid. Liquidity allows companies to raise capital more easily.

Secondary market- In secondary markets, investors buy securities directly from each other. Secondary markets also are known as the after markets. Securities that are issued in the primary markets are then moved to...