Fin 370 Week 1 Define

Running head: DEFINING FINANCIAL TERMS






Defining Financial Terms
University of Phoenix
Defining Financial Terms
  a. Finance: “Financial management is concerned with the maintenance and creation of economic value or wealth” (Keown, Martin, Petty, & Scott, 2005, p. 4).
        • Role in finance: Finance within a company is vital since it leads toward creating wealth. It helps make decisions such as when to introduce new products, when to invest in new assets, and when to borrow money. (Keown et al., 2005, p. 4).
  b. Efficient Market: “A market in which the values of all assets and securities at any instant in time fully reflect all available public information” (Keown et al., 2005, p. 16).
        • Role in finance: To provide quick information with accurate and right prices.
  c. Primary Market: “Transactions in securities offered for the first time to potential investors” (Keown et al., 2005, p. 484).
        • Role in finance: Provide a channel for sale of new securities. In addition, it also provides a variety of opportunities to those who issue securities such as corporations, or government, to raise resources to meet their requirements within their obligations.
  d. Secondary Market: “The market in which stock previously issued by the firm trades” (Keown et al., 2005, p. 11).
        • Role in finance: To provide a place for investors/public an efficient place to trade his/her securities. For management of firms, secondary markets serve as control and monitoring conduit – enabling implementation of incentive-based management contracts and helps management made decisions.
  e. Risk: “…we referred to risk as the likely variability associated with expected revenue or income streams” (Keown et al., 2005, p. 507).
        • Role in finance: There exist multiple roles for risk in finance. Risk is the way to evaluate all investments.
  f. Security: “An investment instrument, other than an insurance policy or fixed annuity, issued... [continues]

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