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Financial Definitions

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Financial Definitions
Michelle Burrows
FIN/370
July 8, 2013
Frank Roberts

Financial Definitions

1. Finance: Finance is the study of how people and businesses evaluate investments and raise capital to fund them. 2. Efficient market: A market in which all the available information is fully incorporated into securities prices and the returns investors will earn on their investments cannot be predicted. Efficient markets role in finance is how the flow goods and reduce the inefficiencies of information for the entire market as a whole. 3. Primary market: is market in which new, as opposed to previously issued, securities are bought and sold for the first time. Primary market role in finance is the market of newly issued financial assets 4. Secondary market: is where all subsequent trading of previously issued securities take place. Secondary markets role in finance has to do with long-term growth and investment. 5. Risk: The chance that an investment actual return will be different than expected. The role of risk would be the basis for evaluating any kind of investment. 6. Security: negotiable instrument that represents a financial claim that has value.. 7. Stock: a security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. Stocks both capital and simple serves as a financial security to creditors 8. Bond: debt investment in which an investor loans money to an entity that borrows funds for a defined period of time at a fixed interest rate. 9. Capital: financial assets or the financial value of assets, such as cash. Capital is important in finance without it businesses would not be able to purchase products that are needed to run the business. 10. Debt: amount of money borrowed by one party from another. Businesses usually need to have both short-term and

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