Financial Terms and Roles

Financial Terms and Roles

* Finance - The study of money and how it can be used. Financing a car deals with how much money will be financed, at what interest rate, for how long to pay the money back, and what will be the risk of financing the car.

* Efficient market - The information of the market is available and is accurate at the current time. Efficient market makes the markets up and downs stay accurate so that the market can adjust instantly. The stock market is a good example of an efficient market.

* Primary market - Securities that are bought and sold to investors in the financial market for the first time, they are considered primary.

* Secondary market - Securities that were previously bought and sold in the financial market. No funds are exchanged though; the securities are transferred from one investor to another. Can help monitor and control the trading of securities.

* Risk - The economy can hold the risk of losing or gaining assets and or liabilities. The actual return from the investment is not what was expected.

* Security - Shares that can determine an obligation or provide a return on investment. Securities can act as added income for a company.

* Stock - The capital or fund that a corporation raises through the sale of share entitling the holder to dividends and to other rights of ownership (American Heritage Dictionary, 1982). Two types of stocks are common and preferred. Common stock gives the owners voting rights to the company and preferred stock does not include voting rights, only has precedence on the assets and earnings of the company.

* Bond - A promissory note that is usually a type of debt issued by a borrower or issued for more than a year promising to pay back by a specific date and include a fixed amount that includes interest.

* Capital - The net worth of a company, the remaining assets of a business after all liabilities are accounted for. Can show what financial resources owned by a company.

* Debt - An obligation or liability that a company owes to a bank or lender of some sort. Debt can determine the financial situation of a company.

* Yield - The annual return rate on investment by a percentage. A company that has investments that are not yielding at a high income the company can let that investment go.

* Rate of return - The gain or loss on an investment over a specific period, expressed as a percentage increase over the initial investment cost (Investopedia).This can show both good and bad investments that the company has which investments are paying off and at what rate and which investments are not paying off.

* Return on investment - Determines the companies' profits. Return on investments can show if the return rate on the investment is making the company money or not by how