Premium Essay

Defining Financial Terms

In: Business and Management

Submitted By lakeshow2414
Words 600
Pages 3
FIN/370
Week One: Defining Financial Terms

1. Finance: Is the study of how people and businesses evaluate investments and raise capital to fund them. The role of finance is to assist the corporation in money management. 2. Efficient Market: Is a hypothesis that suggests that market is fair in their pricing. The role of an efficient market is to make it so no person can make a huge return without being risker in their initial investment. 3. Primary Market: A primary market issues new securities on an exchange. The role of the primary market is for the issuing companies or group to receive cash proceeds from the sale, which is then used to fund operations or expand their business. 4. Secondary Market: Is the market where investors purchase securities or assets from other investors. NASDAQ is an example of a secondary market. Unlike the primary market, the cash proceeds in the secondary market go to the investor rather than the underlying company or entity directly. 5. Risk: Is the chance that an investor’s return will be different than expected. An investor is taking a risk when he/she is involved in investments that can possibly lost money. Knowing your risk is one of the most important things to know when investing your time and money in a business. 6. Security: Is a contract that represents ownership, a debt agreement, or the rights to ownership. Value can be assigned to a security such as; bond, stock, or/and note. 7. Stock: Is a form of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. Common and preferred are types of stocks. The role of the common stock is to allow owners of the stock to vote at shareholder’s meeting. A preferred stock holder has a higher claim on assets and earning but does not have the right to vote unlike common stock holders. 8.

Similar Documents

Premium Essay

Defining Financial Terms

...Defining Financial Terms Finance – Built upon a combination of both economic and accounting principles. Finance creates a value of wealth and aims to maintain that value of wealth in the market. Finance investigates everything that has to do with money or the value of wealth in the market. The role of finance is to help management deal with financial issues a corporation may encounter. Efficient market – The stock prices reflect available and relevant information therefore the value of assets and securities at any instant is the same. Available information is public therefore profit-driven individuals cannot profit from public information because the price is right. The role of efficient market is to present quick information with precise prices. Primary market – A market that offers new securities for the first time to potential new investors (Keown, Martin, Petty, & Scott, 2005). For example a new issue of common stock by a company is considering a primary market transaction. The role of the primary market in finance is creating new markets or channels for investors. Secondary market – A market were previously issues stock is sold or traded among investors rather than from the companies that originally issue the stock. For example the New York Stock Exchange is a secondary market. The role of the secondary market is to allow investors to resale or exchange the stock. Risk – The possibility that the return on an investment will be different from what an...

Words: 593 - Pages: 3

Premium Essay

Defining Financial Terms

...Defining Defining Financial Terms 1. Finance – a discipline that explains the ability to manage money, credit banking, assets and investments. Finance looks at money and anything that is related to money in the market. The purpose of finance is to aid any company with an ability to manage money. 2. Efficient Market – the level in where the stock prices will reflect all of the available and significant information. The three different levels of market efficiency are ; weak, semi-strong, and strong. This level of market efficiency can suggest that stock prices are directly connected and will respond to the level of relevant information. 3. Primary Market – This market issues new securities on an exchange market. The primary market can also be called a “new issue market” or (NIM). The primary market is compiled of a group of underwriters that are part of investment banks and they will set the price range for a number of specific securities and will directly oversee the sales to investors. 4. Secondary Market – In this market investors will purchase securities or assets from other investors as opposed to purchasing them from the corporations that issue them. NASDAQ and The New York Stock Exchange are the primary examples of a secondary market.  5. Risk – the gamble that the return on an investment will be different than the original projected return. 6. Security – This is a instrument that represents ownership (stocks), the right to ownership (derivatives), or a debt agreement...

Words: 633 - Pages: 3

Premium Essay

Defining Financial Terms

...Individual Assignment: Defining Financial Terms Resource: Financial management Create a list of definitions of the following terms and identify their roles in finance: • Finance – is any aspect of a business that involves the payment or receipt of money. It is how people and business evaluate investments and raise capital to fund future investments. • Efficient market – is where prices of securities are reflected on expected cash flows based upon information available to investors. Prices of securities respond to information quickly, regardless if the information is the truth or a lie, the action of the investors determines the prices of the security. • Primary market – is when a company offers securities for sale for the first time. Firms selling the securities receive the money raised and are able to finance additional company projects or investments. • Secondary market – is the trading of previously issued securities. The issuing firm does not receive any new financing. The securities are being traded from one investor to another; the benefit is the liquidity of the security for the trader. • Risk – the possibility of loss or gains that are different than expected from original investment. Economic changes can affect the market, thus diversifying throughout the market to lessen the loss of the original investment. • Security –A negotiable instrument that represents a financial claim, this can be stock ownership or a debt agreement. The securities markets allow businesses...

Words: 593 - Pages: 3

Premium Essay

Defining Financial Terms

...Defining Financial Terms 1. Finance Finance is a discipline that deals with issues related to money and markets. According to Keown, Martin, Petty, and Scott (2005) “The financial management is concerned with the maintenance and creation of economic value or wealth” (p. 5). On the other hand, Mayo (2007) states that finance is the study of money and its management as well as the allocation of resources in the world of uncertainty. Finance also deals with the decision-making process whose primary goal is to create wealth. 2. Efficient market Efficient market is one of the 10 simple principles that is necessary to understand in order to understand finance. According to Keown, Martin, Petty, and Scott (2005) the efficient market is characterized by “a large number of profit-driven individuals who act independently. Under the efficient market hypothesis, information is reflected in security prices with such speed that there are no opportunities for investors to profit from publicly available information” (p. 17). Likewise, Mayo (2007) is in support of this by stating “An important implication of this theory of efficient markets is that you cannot consistently beat the market; rather, you will earn a return consistent with the market return and the amount of risk you bear” (p. 45). 3. Primary Market According to Keown, Martin, Petty, and Scott (2005) primary markets are markets in which securities are offered to first time potential investors “A primary market is a market...

Words: 876 - Pages: 4

Premium Essay

Defining Financial Terms

...Name: Walter Chisholm Date: August 1, 2011 Course: FIN/370 Finance for Business Topic: Defining Financial Terms Instructor: Rodney Nelsestuen Financial Management: Principals and applications. Define the following terms and identify their roles in finance: Finance - Financial management is concerned with the maintenance and creation of economic value or wealth. Consequently, this course focuses on decision making with an eye toward creating wealth. As such, we will deal with financial decisions such as when to introduce a new product, when to invest in new assets, when to replace existing assets, when to borrow from banks, when to issue stocks or bonds, when to extend credit to a customer, and how much cash to maintain. (Arthur J. Keown, John D. Martin, J. William Petty, and David F. Scott, Jr.-2005) Efficient market- is a market in which the values of all assets and securities at any instance in time fully reflect all available public information. An efficient market is characterized by a large number of profit-driven individuals who act independently. In addition, new information regarding securities arrives in the market in a random manner. Given this setting, investors adjust to new information immediately and buy and sell the security until they feel the market price correctly reflects the new information. ( Author J. K. et all- 2005) Primary market is a market in which new, as opposed to previously issued, securities are traded. This is the only...

Words: 1378 - Pages: 6

Premium Essay

Defining Financial Terms

...Defining Financial Terms 1. Finance: Finance is the science of the management of money and other assets. This is essential for businesses with importance to capital and holdings. (Titman, Keown, & Martin, 2011) 2. Efficient Market: Efficient market is defined as a price where the holdings show both current as well as relevant figures; the assets fundamentally have their actual prices. The affiliation to finance is that the statement of information efficiency is operating in asset management with respect to their assessments. 3. Primary Market: Primary market is defined as a market relating to new securities where the securities are sold first (Titman, Keown, & Martin, 2011) . The securities are directly purchased from the issuer. This is important in finance ability as an importance of the fact that the growth of long-term capital through the issuance of securities is a necessary issue in finance. 4. Secondary Market: Secondary market is defined as where securities are traded that has earlier been issued within the primary market (Titman, Keown, & Martin, 2011). Usually, the securities are issued in either public offering or private. This is necessary within finance because these markets provide liquidity to stake holders. 5. Risk: Risk is defined as a possibility when the investment might potentially be unsuccessful to receive the expected returns, which may result in the loss of the original investment. It is very important within finance to assess...

Words: 650 - Pages: 3

Premium Essay

Defining Financial Terms * Finance

...Defining Financial terms * Finance * Finance is the study of how people and businesses evaluate investments and raise capital to fund them. Our interpretation of an investment is quite broad. * Business use finance to study every decision they make from investing in a product to market short term or long term, and if the ROI is worth-while or not. Firms must also use this study when recruiting vendors, sub-contractors, and even fresh new employees all of these are investments that need to have a positive ROI in the eyes of the company. * Efficient market * An efficient market is 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. * No insider trading or information. Information is available publicly and traded shares are traded based on equal footing. * Primary market * A part of the financial market where new security issues are initially bought and sold for the first time. * This gives companies the opportunity to raise money for the company. * Secondary market * The financial market where previously issued securities such as stocks and bonds are bought and sold. * This is where investors trade their securities. Companies do not receive any additional money in these transactions it is the profit or loss of the investor. * Risk * The chance that an investment's actual return...

Words: 295 - Pages: 2

Premium Essay

Fin 370 Week 1 Individual Assignment Defining Financial Terms

...FIN 370 Week 1 Individual Assignment Defining Financial Terms Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/fin-370-week-1-individual-assignment-defining-financial-terms/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Finance System including circulation for money, grant of credit, investment opportunities, and banking faculties Without finance, there would be no resource allocations for operating or functional expenditures. Efficient market Efficient market, information is simultaneously available with corresponding funds example – stock market To make intellectual and well-intended fiscal decisions, information pertaining to funds must be readily accessible and available to provide insight and information for clients/investors/brokers. Primary market A market where the security is purchased directly from the issuer by the investor The primary market allows companies to offer bonds and stock to the public for the first time. It is closely related to the secondary market dependent upon one another to be most effective. Secondary market The transactions of stock from investors and dealers without the involvement of the company This market allows for the trading and selling of shares in stock. Without this market, the stock market would not exist...

Words: 3811 - Pages: 16

Premium Essay

Movement of Political

...Defining Financial Terms 1 University of Phoenix Inthiravanh Amphonephong Defining Financial Terms FIN/370 Jason Bruno May 11, 2011 Defining Financial Terms 2 Financial Terms 1. FINANCE: A branch of economic that deals with resource management ROLE: Finance is any area of study that helps get manage or invest the money. There is business finance, investment finance, home finance, car finance, and many other types. For most people managing their own money, personal finance is the most important type of finance. 2. Efficient Market: Market efficiency has varying degrees: strong, semi-strong, and weak stock prices in a perfectly efficient market reflect all available information. These differing levels, however, suggest that the responsiveness of stock prices to relevant information may vary. Essentially, it means that the market is performing as anticipated and has been not been effected by current news reports. This is good news for investors as it allows some level of predictability. ROLE: Last week’s report on the U.S. increased unemployment rate had an impact on stock performance. 3. Primary Market: The primary markets are where investors can get first crack at a new security issuance. The issuing company or group receives cash proceeds from the sale, which is then used to fund operations or expand the business. Exchanges have varying levels of requirements which must be met before a security can be sold. Defining Financial...

Words: 1615 - Pages: 7

Free Essay

Finances

...FINAL 1. Financial Planning What are the three most valuable concepts you learned about the financial planning process? What actions will you take in your personal life based on what you have learned? Financial planning is a systematic process that considers the important Elements of an individual’s financial affairs in order to fulfill financial goals (Pg.5). The financial planning process involves six steps translating Personal financial goals into specific plans and strategies, and implements them and then uses budgets and financial statements to monitor and evaluate and revise plans and strategies as needed. The three most valuable concepts that I learned about the financial planning process include defining goals, creating a plan, implementing plan through action, and evaluation. They that time that it is impossible to an actively manage your Financial Resources without financial goals. Defining goals is Crucial after defining these goals you must formulate and develop plans and strategies in order to reach these goals. These plans goals strategies all need to remain realistic and attainable. It’s important to consider priorities and can raise them into long-term and short-term goals. Ann’s and strategies which to me is the most difficult because it requires control and monitoring. Spending money wisely and would be an example of implementing financial plans and strategies in order to reach financial goals. 2. Credit In what ways do you use credit...

Words: 434 - Pages: 2

Premium Essay

Fin 370 Week 1 Define

...Running head: DEFINING FINANCIAL TERMS Defining Financial Terms University of Phoenix Defining Financial Terms a. Finance: “Financial management is concerned with the maintenance and creation of economic value or wealth” (Keown, Martin, Petty, & Scott, 2005, p. 4). • Role in finance: Finance within a company is vital since it leads toward creating wealth. It helps make decisions such as when to introduce new products, when to invest in new assets, and when to borrow money. (Keown et al., 2005, p. 4). b. Efficient Market: “A market in which the values of all assets and securities at any instant in time fully reflect all available public information” (Keown et al., 2005, p. 16). • Role in finance: To provide quick information with accurate and right prices. c. Primary Market: “Transactions in securities offered for the first time to potential investors” (Keown et al., 2005, p. 484). • Role in finance: Provide a channel for sale of new securities. In addition, it also provides a variety of opportunities to those who issue securities such as corporations, or government, to raise resources to meet their requirements within their obligations. d. Secondary Market: “The market in which stock previously issued by the firm trades” (Keown et al., 2005, p. 11). • Role in finance: To provide a place for investors/public an efficient place to trade his/her securities. For management of firms, secondary markets serve as control...

Words: 878 - Pages: 4

Premium Essay

Accounting Standards Boards

...Accounting Standards Boards Name ACC/541 Date Instructor Name Accounting Standards Boards The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) first converged in 2002 following the Norwalk Agreement (Whittington, 2007). The convergence was inspired by the need of the boards to produce a solid infrastructure by uniting the two frameworks represented by each board in a bid to harmonize accounting practices worldwide (Whittington, 2007). Additionally, the convergence was also inspired by the need to attain improvement in accounting standards by achieving completeness, and improving coherence (Whittington, 2007). In the IASB framework for example, Bullen, and Crook (2005) note that there were specific areas of difficulty that benefited from the convergence. Some of these areas include the explicit meaning of what liability is, and the distinction between equity and liability. Joining Forces During the FASB/IASB convergence announcement in 2002, the two boards stated that they would work together to develop accounting standards that would be used for both cross- border, and domestic financial reporting. They also stated that they would work toward making their respective standards compatible, and that future work programs would be done with the need to retain compatibility (Schroeder, Clark & Cathey, 2011). Another development in the FASB/IASB relationship took...

Words: 1166 - Pages: 5

Premium Essay

Dave Armstrong Case

...problem in various ways. He could weigh a comprehensive, broad definition against his narrow decision problem. Additionally, Dave has not established a clear objective. He is focused on financial implications but is ignoring personal fulfillment. Without a clear objective, Dave cannot clearly evaluate alternatives. His alternatives are limited to his three job prospects. He has not developed a range of alternatives that are distinctly different. For the consequences portion of the PrOACT approach, Dave has asked his wife for her opinion; however, it seems like his wife has not placed much thought on how Dave’s decision will affect her. Dave must deal with tradeoffs between his career and his family. Clearly defining an objective will help him strike a balance. Clarifying uncertainties and evaluating his risk tolerance will help Dave with his decision. Lastly, Dave should consider linked decisions by clarifying his long terms goal. 2. The elements most relevant for Dave’s decision problem are problem and objectives. Dave is only looking at the obvious problem that is in front of him: which of the three job prospects should he choose. He has constrained himself to only those three job prospects. Reevaluating his decision problem can help him better understand his decision problem. Clearly defining objectives will help Dave what is important to him; consequently, he will be able to look at the three job prospects and see if they are the only option for him. 3. Dave could...

Words: 440 - Pages: 2

Free Essay

Dave Armstrong Case

...problem in various ways. He could weigh a comprehensive, broad definition against his narrow decision problem. Additionally, Dave has not established a clear objective. He is focused on financial implications but is ignoring personal fulfillment. Without a clear objective, Dave cannot clearly evaluate alternatives. His alternatives are limited to his three job prospects. He has not developed a range of alternatives that are distinctly different. For the consequences portion of the PrOACT approach, Dave has asked his wife for her opinion; however, it seems like his wife has not placed much thought on how Dave’s decision will affect her. Dave must deal with tradeoffs between his career and his family. Clearly defining an objective will help him strike a balance. Clarifying uncertainties and evaluating his risk tolerance will help Dave with his decision. Lastly, Dave should consider linked decisions by clarifying his long terms goal. 2. The elements most relevant for Dave’s decision problem are problem and objectives. Dave is only looking at the obvious problem that is in front of him: which of the three job prospects should he choose. He has constrained himself to only those three job prospects. Reevaluating his decision problem can help him better understand his decision problem. Clearly defining objectives will help Dave what is important to him; consequently, he will be able to look at the three job prospects and see if they are the only option for him. 3. Dave could...

Words: 440 - Pages: 2

Premium Essay

Case Study

...GOALS Defining "Goal" A goal is a statement of a desired future an organization wishes to achieve. It describes what the organization is trying accomplish. Goals may be strategic (making broad statements of where the organization wishes to be at some future point) or tactical (defining specific short-term results for units within the organization). Goals serve as an internal source of motivation and commitment and provide a guide to action as well as a means of measuring performance. An observable & measurable end result having one or more objectives the achieved with in a more or less fixed time frame. GOAL SETTING Goal setting is one of the most prominent and basic tools used by both individuals and organizations to assist in setting their direction and in accomplishing it. Goal setting is the process of identifying something that you want to accomplish and establishing measurable goals and timeframes. For example:- when you decide on a financial change to save more money and then set a certain amount to save of each month. Goal setting is a motivational technique based on the concept that the practices of setting specific goals, enhances performance, and that setting difficult goals results in higher performance than setting easier goals. Successful companies and the other organizations (public sector and non-profit entities) often set both long- and short term goals, not only for sales, products, and service development but also for improving quality, reducing errors...

Words: 252 - Pages: 2