Essay on Finance Terminology

923 Words Dec 4th, 2012 4 Pages
Financial Terminology
Shawna Mullens
FIN/ 370
October 28, 2011
Ruth Smith

Finance- "Is the study of how people and businesses evaluate investments and raise capital to fund them" (Titman, Martin & Keown, 2011, p. 4). "The science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities. Finance consists of financial systems, to include the public, private and government spaces, and the study of finance and financial instrument" (Investopedia, n.d., para. 1). "While finance is primarily about the management of money, a key component of finance is the management and interpretation of information" (Titman, Martin & Keown, 2011, p. 5). Finance role in finance is to help
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26). "In this market the issuing firm does not receive any new financing, as the securities it has sold are simply being transferred from one investor to another. The principal benefit of the secondary market for the shareholders of firms that sell their securities to the public is liquidity" (Titman, Martin & Keown, 2011, p. 26).
Risk- The possibility that shareholders will lose money when they invest in a company that has debt, if the company's cash flow proves inadequate to meet its financier obligation (Investopedia, n.d.). The role of risk in finance is to help an investor make a decision whether to invest or not by the risks that are outlined to him or her.
Security-"Is a negotiable instrument that represents a financial claim. Security can take the form of stocks or a debt agreement" (Titman, Martin & Keown, 2011, p. 26). Securities are bonds, notes and shares and finical instruments are bills of exchange and certificate of deposit. Collateral for the repayment of debts.
Stock- Ownership share in a company. "A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings" ( Investopedia, n.d. para.1).
Bond- "A debt instrument that certifies a contract between the borrower and the lender as spelled out in the bond indenture" (business dictionary.com, n.d.). The issuer pledges to pay the loan principal to the bondholder on a fixed

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