Financial Terms and Roles

Financial Terms and Roles

Catherine Smith

FIN/370

July 10, 2013

Kimberly Millier

Financial Terms and Roles

Finance: The system of money, funds or the provision of funds.

Financing is important for those who want to acquire products, property and services. A finance company or department will facilitate in the purchasing of such products, property and services.

Efficient Market: A market in which security prices reflect all available information and adjust instantly to any new information. When the information that investors needs to make investment decisions is widely available, thoroughly analyzed and regularly used, the result is an efficient market. The efficient market theory states it is impossible to beat the market. If one seeks a higher return, they must purchase higher risk investments.

Primary Market: A market in which buyers and sellers negotiate and transact business directly without any intermediary such as re sellers. Companies introduce their shares to the primary market thorough an initial profit offering. It is the first time a company sells its stock or securities to investors directly. Primary markets also act as a source of information. An investor seeking new opportunities can get information on the primary market before a company makes its initial profit offering. The investor then can decide if such an investment is worth it or not.

Secondary Market: A market where investors purchase securities or assets from other investors rather than the company itself. Finance involves the management of financial resources, including capital raised through financial markets especially for long term growth and investments.

Risk: The possibility that shareholders will lose money when they invest in a company that has debt. There is a chance that an investment’s actual return will be different than expected. Sometimes the return is beneficial....