Defining Financial Terms

Finance is the study of people and businesses how they are view or portrayed. According to the statement” ; Finance is the study of how people and businesses evaluate investments and raise capital to fund them” (Martin, Keown, Titam, 2011). Finance is also managing and supplying a fund that offers resources, these would be banks or loan companies. Efficient markets are theories that values overcomes within the market. Efficient Market, when you make high profit without having to invest in markets that are risky to the owners or stakeholders. Primary market has to do with stocks and bonds that suggested by future investors. Businesses like AT&T could sell securities indirectly to potential investors. Debt, page five states; money that has been borrowed and must be paid. This includes such things as bank loans and bonds (Martin, Keown, Titam, 2011). A security is a negotiable instrument that represents a financial claim. It can take the form of ownership(stocks) or a debt agreement. The securities markets allow businesses and individual investors to trade the securities issued by public corporations. Bond, page 27 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. In finance, we use the term capital structure to refer to the way a firm finances its assets using a combination of debt and equity. Thus, capital structure ratios are used to answer a very important question (Martin, Keown, Titam, 2011) .
Cash Flows Are the Source of Value. Accounting statements contain important information that can be used to calculate current cash flows as well as evaluate the potential of the firm to generate future cash flows (Martin, Keown, Titam, 2011). Return on investment, 5 The product of the