Fin 370 Week 1 Financial Terms and Roles Essay

363 WordsJun 2, 20142 Pages
Financial Terms and Roles Financial Terms and Roles FIN/370 May 05, 2014 Teacher * Finance- the management of large amounts of money, especially by governments or large companies. * Efficient market (EMH)- An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. * Primary market- A market that issues new securities on an exchange. * Secondary market- A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. * Risk- The possibility that shareholders will lose money when they invest in a company that has debt, if the company's cash flow proves inadequate to meet its financial obligations. * Security- A financial instrument that represents: an ownership position in a publicly traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. * Stock- the capital raised by a business or corporation through the issue and subscription of shares. * Bond- A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. * Capital- wealth in the form of money or other assets owned by a person or organization, available, or contributed for a particular purpose such as starting a company or investing. * Debt- An amount of money borrowed by one party from another. * Yield- The income return on an investment. This refers to the interest or a dividend received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value, or its face value. * Rate of return- The gain or loss on an

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