Financial Terms and Roles Essay

838 Words Mar 5th, 2012 4 Pages
Financial Terms and Roles
FIN 370

Financial Terms and Roles 1) Finance – is the resource from which cash is made from liabilities and owner’s equity. There are two different types of financing, short term and long term financing. Short term financing is when you borrow cash for less than a year, and long term is borrowing for more than a year. 2) Efficient Market – This means that it can be hypothesized that prices can prevail in a market that is assumed to always be fair. 3) Primary Market – This is the market where the issuing of securities is first exchanged. Different groups, companies, and the government, issue equity or debt based securities in order to raise financing. Many companies can sell or issue
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There are some securities that are considered interest based and others that are dividend based. Some examples of securities are notes, future, common and preferred stock, or other different financial assets. 7) Stock – Stocks are what is considered ownership in a business and is taken to be part of a company’s assets as well as their earnings. Stocks do not have maturity dates and they are considered to be irredeemable. There are two different categories of stock which are common stock and preferred stock and are both dividend based. For preferred stock there is a fixed dividend where for common stock there is not. Preferred stocks do not come with voting rights, but they do have a high claim on assets and earnings where common stocks do come with voting rights but a low claim of assets and earnings. 8) Bond – This is considered to be a debt instrument which is the amount loaned or the rate of interest and principal. A bond is considered an interest based security which is put into the category with fixed income securities. Bonds are issued for a lengthy time period which is more than a year and is considered a long term liability as well as what is considered long term finance. 9) Capital – This is an amount that is invested by a business owner, and is for corporations the amount that is invested by stockholders which is considered preferred or common stock. 10) Debt – This

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