Financial Terms and Roles
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 ...view middle of the document...
Securities that are issued in the primary markets are then moved to secondary markets. In secondary markets, financial instruments such as stocks and mortgages are often traded amongst investors many times even after they are first purchased. Stocks are traded on the secondary markets, which allow investors to sell as needed. This enables businesses to continue using that money to finance their growth over extended periods of time.
Risk- A risk is a concern that a loss may occur. The chance that shareholders will not earn money expected, or lose money from an investment is a risk. Financial risks are the chances that a default on a bond may occur by the government. As a result, a bondholder could lose money. All activities involving economics may have financial risk as a factor. Losses in operations could incur when organizations are not willing to take financial risk. On the other hand, because of price variations that can occur with securities or other defaults, firms can suffer from a loss also due to financial risk.
Security- A security is negotiable financial instrument that contains a financial value that is issued by an issuer. A security is a note, bond or stock that serves as proof of an investment. Securities are said to be very liquid because they can be traded easily. Since securities can be easily traded they make markets more efficient. Bond issues are financial securities that may allow for a return over time.
Stock- Stock is ownership in a company that is sold in portions whether big or small which can also be referred to as shares. When businesses issue or sell stock they earn capital. Stocks influence decisions made by investors and businesses. They can be seen as financial security for creditors. Depending on demand stock prices tend to go up on down according to how much investors are willing to spend for them. Investors get dividends after stocks are sold.
Bond- Bonds are usually sold in capital markets, has a maturity term of more than ten years. Government, banks and other larger entities in which the bearer is paid a fixed amount on a particular end date issue bonds. In essence, they are debt securities or loans made to issuers, with expectance of being paid interest in return. Basically, when investors purchase bonds they are lending money. Many businesses use bonds to finance projects.
Capital- Capital is cash or goods that are used to help generate income by way of investments that a business has. Capital shows wealth of a business or entity through money, property or valuables...