Financial Terms and Roles
By: Efrain Gonzalez
June 5, 2013
During this brief summary the author will identify a list of terms followed by the role each one plays in finance. The terms that will be identified are: finance, efficient market, primary market, secondary market, risk, security, stock, bond, capital, debt, yield, rate of return, return on investment, and last but not least cash flow.
Finance is the history of funds management, saving and lending money, how money is spent, budgeted, and managing money or supplying funds to provide a resource. The role finance plays in finance is to supply a consumer with funds and terms of agreement to help the consumer purchase an item or product on credit.
The efficient market is a market in which values of all and any assets, securities reflect available public information at any given time, instant, or period. Its role in finance according to EMH is no one can make high return without buying riskier investment as market prices are always fair. The efficient market also provide understanding of price changes in stock prices, and the way securities are valued and priced in the financial market.
The primary market is a market where new securities are traded and the only time that the issuing firm actually receives money for stock. Securities, stocks, and bonds are offered to investors for the first time. The role of a primary market in finance is to allow the potential investor to buy from the company and not to allow other investors to increase the stock.
The secondary market is where trades are sold and traded, securities issued and bought before are traded in this market. The role of the secondary market in finance is to provide a place for buyers to get rid of unwanted products without wasting them, and to offer advantages for the seller and the buyer.
Risk is an action or activity that can lead to a loss or gain but it’s not 100% guaranteed the outcome will be good or bad...
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