April 6, 2011
Definition of financial terms
Finance concerns the management, maintenance, and creation of economic value or wealth (Keown, Martin, Petty, & Scott, Jr., 2005, p. 4). Efficient market is the theory that market prices reflect the knowledge and expectations of all investors (Downes & Goodman, 2010). Primary market is the market for new issues of securities. A market is primary if the proceeds of sales go to the issuer of the securities sold. The term applies to government securities auctions, opening option, and futures contract sales (Downes & Goodman, 2010). Secondary markets handle the exchanges and the over-the-counter markets where the sell and purchase occur after the original issuance. Secondary markets include the money-market instruments traded among investors (Downes & Goodman, 2010). Risk is measureable possibility of losing or not gaining value (Downes & Goodman, 2010). Security is collateral offered by a debtor to a lender to secure a loan (Downes & Goodman, 2010). Stocks represent ownership of a corporation, which permits a claim to the corporation’s earning and assets (Downes & Goodman, 2010). Bond is any interest-bearing, discounted government, or corporate security that obligates the issuer to pay the bondholder a specified sum of money at specific intervals. The repayment of the principal amount of the loan at maturity is an additional function of the bond (Downes & Goodman, 2010). Capital is the accumulation of assets, cash or ownership (Keown, Martin, Petty, & Scott, Jr., 2005). Debt constitutes moneys, goods, or services that one party is obligated to pay to another in accordance with an expressed or implied agreement. Debt may or may not be secured. General name for bonds, notes, mortgages, and other forms of paper evidencing amounts owed and payable on specified dates or on demand is another description for debt (Downes & Goodman, 2010). Yield is a...