Published on February 20, 2014
1 Defining Financial Terms Defining Financial Terms This article covers the topic for the University of Phoenix FIN 370 Financial Terms and Roles. Finance Finance is the branch of economics pertaining to the allocation, acquisition, and investment of resources. Finance is also focuses on the creation of economic value and profit for shareholders. It is a sector of economics regarding resource distribution as well as resource management, procurement and investment. So, finance works with money related issues, stock markets, and the goal to increase financial resources through the procuring and sale of debt or equity. Another way of putting the definition is; the study of how investors allocate their assets over time under conditions of certainty and uncertainty. A key purpose is that it affects decisions, is the time value of money, which indicates that a unit of currency now is worth more than the same currency tomorrow. Finance objective rates assets by their risk level, and expected rate of return. Finance is separated into three sub categories: public finance, corporate finance personal finance. Efficient Market
2 Defining Financial Terms An efficient market is a market where all relevant information is available to the public at one time and where prices respond immediately to available information. In an efficient market the stock prices indicate the true value of a company. The prices are situated by profitdriven beings that buy and sell the stocks until the stock prices reflect the state of a company. Investors have little time to earn profits from information available openly. An efficient market allocates to maximize profit by minimizing risk. Stock-markets are considered the best examples of efficient markets. Primary Market A primary market is a market in which new securities are purchased straight from the issuer.Financial market in which newly issued securities are offered to the public.This is the only market where the seller or issuer is allocated money from the purchases of its stocks and, where buyers and sellersnegotiate or conduct business without usingintermediaries. Secondary Market A secondary market is a market in which previously owned securities are bought and traded. The securities are purchased and sold to the public by a third party consequently profited from the sale did not go to who issued the securities but to the former owner of those securities. Formerly issued securities (such as bonds, notes, and shares) and financial instruments (such as bills of exchange and certificates of deposit) were bought and sold at commodity and stock exchanges, or over-the-counter markets, functioning as secondary markets.This affords a path for resale, andassistsin lowering the risk of investment, and sustainsliquescence in the financial system.
3 Defining Financial Terms Risk Risk is the ambiguityaccompanying an investment, and quantifiable odds of loss or less-than-expected gains.Risk gauges the prospective for inferior-than-expected and better-than-expected returns. Risks are assessed to determine if an investment is expected to make the owner a profit or if the investment could create a loss. Security Security is a financial instrument that represents a financial value issued by a corporation, government, or other organization, which is evidence of debt or equity. A security may be issued as a note, stock, treasury stock, bond, or investment contract. In the world of finance, a security is a broad term to describe an investment in a company.It is an investment instrument, besides an insurance policy or fixed annuity issued by a corporation, government, or organization offering evidence of debt or equity Stock A stock is a type of security that represents ownership in a corporation. Stocks also represent a claim on a part of the corporation’s assets and earnings. In the finance world, the cost of a share of stock for a corporation represents how well the company is doing financially. The higher the price of stock, the better the company is performing. 1. Equity capital raised through sale of shares.
4 Defining Financial Terms 2. Proportionate part of a corporation's equity capital epitomized by fully paid up shares. Bond A bond is a debt investment in which an investor loans money to a corporation. The corporation borrows the funds for a defined period of time at a fixed interest rate. Bonds are expended to finance strategies, improvements, and undertakings of a corporation. This is a type of debt or a long-term promissory note, issued by the borrower, promising to pay its holder a predetermined and fixed amount of interest each year. Capital Capital is the financial assets or the financial value of assets such as cash, factories, and machinery owned by a business. It measures accumulated financial assets of individuals, businesses, or countries, generated by forfeitingcurrentspending in favor of investment to produce future returns beyond investment expenditures. Debt Debt is the amount of money or goods borrowed by one party from another instituting the duty or obligation to pay money, deliver goods, or render services under an expressed or implied agreement. Use of debt in a firm's financial edificeestablishes financial leverage that can multiply yield on investments providing returns produced by the debt exceeding its cost. Since, the interest netted on the debt is written off as expense, it is normal to use the cheapest type of long-term financing.
5 Defining Financial Terms Yield The yield is the income return on an investment. A yield denotes the interest or dividends gained from a security. Annual income profited from an investment, stated as a percentage of monies invested. Rate of Return Rate of return on an investment expressed as a percentage of the total amount invested, is usually, but not always, calculated annually. This is also known as returns. The return on investment is a performance measure used to measure efficiency of an investment.Anassessmentof an organization’s profitability, equal to a fiscal year's income divided by common stock and preferred stock equity plus long-term debt. This measures how effectively the firm uses its capital to generate profit; the higher, the better. Cash Flow Cash flow represents revenue or expense streams that vary the amount of on-hand cash over a given period of time. It determines a corporation’s financial. Equates to cash receipts minus cash payments over a given period of time; or homogeneously, net profit plus amounts charged off for depreciation, reduction, and amortization.
6 Defining Financial Terms Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial Management: Principles and applications (10th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall. Mayo, H. B. (2007). Basic finance: An introduction to financial institutions, investments, and management (9th ed.). Mason, OH: Thomson. If you want the customized work as per your needs then please do let us know. We will give our best efforts to provide you the customized assignments as earliest as possible. You can visit our website www.studentwhiz.com for tutorials of other classes. In case of any complaints or feedback, please do write to us at email@example.com Looking forward to hear from you soon..!!
Financial Terms and Roles University of Phoenix FIN 370 (2 Pages | 362 Words) Financial Terms and Roles
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