Financial Terms and Roles

1) Finance
Finance is considers the management of how income acquired and used.
Whether dealing with corporate or personal issues, finance may consist of how
individual or business acquires, invest, and manage money. Financial decisions
are the role finance plays, which consist of money as the resource and how and
the source of how the organization obtain the revenue.

2) Efficient Market
Efficient markets are a hypothesis that prices in a market are continually fair. This
consists of incorporated market prices reflecting associated information
completely. Keeping values current is the role efficient markets play by keeping
market price fair and prohibiting anyone to make a high returns unless he or she
buys a much high risk investment.

3) Primary Market
A primary market is a marketplace where securities are distributed for the first
time. The government, businesses, and other groups issue debt or equity-based
securities permissible to raising finance. In primary market prices are the same
for every buyer; however, investors in a primary market do not purchase
securities from other investors.

4) Secondary Market
A Secondary Markets is a marketplace where securities that already issued are
sold or purchased by investors. Prices in a secondary market vary from the issue
price and prices can vary from the original cost, although prices are affected by
market sentiments in a secondary market issuers are not affected because of the
changes in pricing.

5) Risk
Risks are the probabilities of differences in the total investments earned on an
annual return. These risks are divided in three different groups, market, credit,
and operational risk. In finance risk plays a role in the return on investment. If the
risk are low the return is low if they are high the return is high.

6) Security
Securities are known as stocks indicating right of ownership to a dept
agreements and bond indicating debt agreements. Security is an investment or
financing system supplied by the government or organization that represents
stocks that indicate the right to ownership and bonds representing the dept to an
agreement. In finance, the role of security consists of the source who issues
securities and the source of investment in purchasing securities.

7) Stock
Claim on part of the organizations assets or obtaining ownership in the business are
known as stock. Stocks assist investor in establishing financial trust in an
organization. Stocks usually have a face value however; stocks are not obligated to
have a maturity date. Two main types of stock are common and preferred stock.
Preferred stocks are fixed, do not have voting rights, the holder has a higher claim
on earnings and assets whereas common stocks are not fixed, have voting rights,
and have a lower claim on earning and assets.

8) Bond
Bonds are dept instruments confirming a contract between the bond issuer and the
bond holder. These dept instruments define the amount of the loan, interest rates,
method of payments on interest and principal, and maturity dates. Bond are interest
rate securities known as fixed income securities.

9) Capital
Capital is the sum of money invested by the owners of the businesses to produce
income in which companys assets in the production of wealth and income.

10) Debt
Debts are responsibilities of payment paid by an organization known as liabilities.
Depts borrowed under a year are known as short-term depts and over a year, long-
term depts. Depts are also the sources of financial availability. For tax purposes
interest paid on dept are often calculated as an expense.

11) Yield
Yields consist of the rate of returned based on market price. For example, a bonds
yield is stated in the terms of returns if maturity is held; however, if held to the call
date the bond earnings are equivalent to the current market price.

12) Rate of Return
The rate of return occurs when a profit or loss in money on an investment is made
over a specified period on investments, converts into percentages. These
percentages are calculated by the current value minus the value at the time of
purchase.

13) Return on Investment
Similar to the rate of return the return on investment is the profit or loss made on
investment. Return on Investments is a type of ratio that describes of a company
measures its profitability. This consists of dividing the net income by the companys
total assets.

14) Cash Flow
Cash flow occurs when cost is paid or received in the form of cash on an income
statement. These income statements are based income and expensed earned
whether they have been received or paid or not received or paid. Cash flow
statements are divided into three groups,
Cash flow from operating activities - income received in the period in which
cash and expenses associated with the operation of the business occurred,
Cash flow from investing activities - the buying and selling of fixed assets, and
additional investment
Cash flow from financing activities - the sources organizations have
produced long term finances.