Financial Terms and Roles
Finance
“Finance is the study of how people and businesses evaluate investments and raise capital to fund them” (Mayo, 2012). The practice of generating, moving and using currency, allowing the flow of money through a business in the same way of the money flow throughout the world is Finance.
Efficient Market
Efficient market is a markets that holds every relevant facts to contributors in the same place, and where prices react instantly to accessible facts. The stock market is an example of an efficient market.
Primary Market
“Primary market is a market in which new, as opposed to previously issued, securities are bought and sold for the first time” (Mayo, 2012). By doing this people are able to help finance their new or old businesses.
Secondary Market
Secondary market is where previously issued securities i.e. bonds, shares, notes and financial instruments like bills of exchange and certificates of deposit are purchased and sold. Stock exchanges do serve as secondary markets, this helps reduce the risk of investments and maintains liquidity in financial systems.
Risk
Risk is the foundation for appraising all investments. Risk is one major concept of finance due to the higher the risk the greater the return.
Security
Security is an investment tool that is a sign of an ownership spot in a publicly traded corporation. A security is any replaceable, and open to modifications financial tool that represents some type of financial value.
Stock
Stocks are an important part of finance, more importantly for companies whom trade publicly. The primary advantages for stock are capital, ownership, and dividend returns.
Bond
Bond a long-term promissory note that is hand out by a borrower. A bond is a promise note to pay the owner with interest every year until the note is paid in full.
Capital
Capital is a quantity of accumulated financial power for an individual, firm, or nation, formed by losing consumption for investments to grow future returns above investment costs.
Debt
Debt is a responsibility or obligation to pay back money, deliver goods, or render service under an express or implied agreement. The individual who owes is called a debtor, the individual to whom the money is owed is owed is called a creditor or lender. Use of debt in a firm's financial structure generates financial power that can increase return on investment if the return is generated by debt that overcomes its cost.
Yield
Yield is the yearly rate of return on an