Fin 370 Week 1 Essay

477 WordsAug 22, 20112 Pages
Terms and Definitions 1. Finance: A branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Simply, finance deals with matters related to money and the markets. 2. Efficient market: A market in which the values of all assets and securities at any instant in time fully reflect all available information, which results in the market value and the intrinsic value being the same. 3. Primary market: A market in which, as opposed to previously issued, securities are traded. 4. Secondary market: The market in which stock previously issued by the firm trades. 5. Risk: The likely variability associated with expected revenue or income streams. 6. Security: A document; historically, a physical certificate but increasingly electronic, showing that one owns a portion of a publicly-traded company or is owed a portion of a debt issue. Securities are tradable. At their most basic, securities refer to stocks and bonds, but the term sometimes also refers to derivatives such as futures and options. 7. Stock: A distribution of shares of up to 25% of the numbers of shares currently outstanding, issued in a pro rata basis to the current stockholder. 8. Bond: A type of debt or a long term promissory note, issued by the borrower, promising to pay its holder to predetermined and fixed amount of interest each year. 9. Capital: Money that one has invested. For example, one uses capital when building a factory to make a new product. Likewise, one uses capital when one buys a single share of a stock. Free flow of capital into investments is thought to be a major component of economic growth. Generally speaking, businesses can only expand when they are able to raise capital from investors or borrow it from a bank or through a bond issue. 10. Debt: Consist of such of sources as credit extended by suppliers or a loan from a bank.

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