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Financial Terms Essay

741 words - 3 pages

Finance is an aspect of business involving payment or receiving money. A company may evaluate investments and raise capital to fund future investments.

Efficient market
An efficient market occurs when pricing of securities reflect expected cash flow based on the financial information that is available to investors. Regardless of the information, the prices of securities respond to the information and reflect the action of the investors essentially determining the security pricing.

Primary market
The primary market is the market where buyers and sellers negotiate and make transactions directly without additional resale brokers. It is the market where the new securities are ...view middle of the document...

The difference between the two is the amount of dividends paid to shareholders. Stocks options in a company provide voting rights, a share of the company dividends, and a portion of capital appreciation in the value of the security.

A bond is a debt security with a maturity time of 10 years or more. Over the life of a bond, most will pay a fixed interest rate over the lifetime of the security. An example of this might be a savings bond.

Capital is the measure of accumulated financial strength of a business, government, or individual created when sacrifices made by present consumption that favors investments generating returns that are above the investment cost. An example of capital is the profit a company makes above cost allowing dividends to be paid to shareholders.

Debt is the obligation to pay billing statements, deliver product, or render services stated by an agreement. Money market debt must be repaid within one year. Note debt matures anywhere from one to 10 years. A debt with a maturity date of over 10 years is a bond. A business can use debt to create financial leverage and multiply on an investment if the returns generated exceed the cost of the debt. The interest paid on the debt...

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