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Finance Definitions

In: Business and Management

Submitted By nate1120
Words 291
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Finance- The study of how people and business evaluate investments and raise capital to fund them. *
Efficient market- a market in which prices correctly reflects all relevant information. *
Primary market- is a market in which new, as opposed to previously issued, securities are bought and sold for the first time. *
Secondary market- is where all subsequent trading of previously issued securities takes place. *
Risk- Return on total investment, the degree of uncertainty of return on an asset. *
Security- A negotiable instrument that represents a financial claim. It can take the form of ownership (stocks) or debt agreement. *
Stock- Ownership of a corporation indicated by shares, which represent a piece of the corporation’s assets and earnings. *
Bond- A long term 10 years or more, promissory note issued by a borrower, promising to pay the owner of the security a predetermined amount of interest each year. *
Capital- Refers to the way a firm finances its assets using a combination of debt and equity. *
Debt- A measures of the proportion of the firm’s assets that were financed by borrowing or debt financing. *
Yield- describes the amount in cash that returns to the owners of a security. *
Rate of return- the amount of revenue an investment generates over a given period of time as percentage of the amount of capital invested. Rate of return shows the amount of time it will take to recovers one’s investment. *
Return on investment- a measure of the rate of return earned on the common shareholders investments in the firm equal to next income divided by common equity. *
Cash flow- Cash that can be taken out of the business over and interval of time. Cash flows represent actual money that can be spent. Cash flows determine an investment’s...

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