Running head: DEFINING FINANCIAL TERMS
Defining Financial Terms
University of Phoenix
Defining Financial Terms
a. Finance: “Financial management is concerned with the maintenance and creation of economic value or wealth” (Keown, Martin, Petty, & Scott, 2005, p. 4).
• Role in finance: Finance within a company is vital since it leads toward creating wealth. It helps make decisions such as when to introduce new products, when to invest in new assets, and when to borrow money. (Keown et al., 2005, p. 4).
b. Efficient Market: “A market in which the values of all assets and securities at any instant in time fully reflect all available public information” (Keown et ...view middle of the document...
Security: “An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity” (InvestorGuide.com, Inc., 2009).
• Role in finance: Security is the source of finance who issued it and source of investment who buys it. Some of the securities are common stock, preferred stock, bonds, notes, debenture, option, future, swap, right, warrant or any other financial assets.
g. Stock: “An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits” (InvestorGuide.com, Inc., 2009).
• Role in finance: A way of being able to have financial assets, which represent claims for future payments. Without this exchange, the company can only survive on real assets.
h. Bond: “A type of debt or a long-term promissory note, issued by the borrower, promising to pay its holder a predetermined and fixed amount of interest each year” (Keown et al., 2005, p. 224).
• Role in finance: Without this exchange, the company can only survive on real assets. Investors are able to keep the company running by providing capital (through the sale of bonds) for longer periods of time
i. Capital: “The money, property, and other valuables which collectively represent the wealth of an individual or business” (InvestorGuide.com, Inc., 2009).
• Role in finance: Capital serves one of the most vital roles in finance. Without cash/goods being used for investing in businesses, our markets our stall. It is a must for our market system to function and survive
j. Debt: “…is money that has been borrowed and must be repaid at some predetermined date” (Keown et al., 2005, p. 37).
• Role in finance: Debt is caused when companies borrow money from...