Essay on Fin 370 Defining Financial Terms

893 Words Dec 3rd, 2012 4 Pages
Defining Financial Terms
Week 1
FIN 370

Defining Financial terms * Finance * Finance is the study of how people and businesses evaluate investments and raise capital to fund them. Our interpretation of an investment is quite broad. * Business use finance to study every decision they make from investing in a product to market short term or long term, and if the ROI is worth-while or not. Firms must also use this study when recruiting vendors, sub-contractors, and even fresh new employees all of these are investments that need to have a positive ROI in the eyes of the company.

* Efficient market * An efficient market is a market in which all the available information is fully incorporated into
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Securities are broadly classified as debt securities (bonds) and equity securities (shares of common stock). * Companies sell securities to earn capital to fund projects or products.

* Stock * An instrument that signifies an ownership position in a corporation. * Common stock when purchased is ownership in a particular company that along with ownership come certain rights. These rights might include the ability to vote on company decisions and participation in profits through dividends from the company. Preferred stock is the same as common stock with a slight difference that preferred shareholders receive their dividends before common stock holders assuming that there is profit to be shared.

* Bond * A long-term (10-year or more) promissory note issued by a borrower, promising to pay the owner of the security a predetermined amount of interest each year. * Simply a loan over 10 years that the holder may earn an interest rate over that time in which the borrower pays annually or as a balloon payment after the life of the bond. Used to raise capital.

* Capital * Financial assets or the financial value of assets, such as cash. The factories, machinery and equipment owned by a business. * This is the measured value of a company, and something that can be borrowed against or sold to raise cash.

* Debt * Money that has been borrowed and must be repaid. This includes such things as

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