Financial Terms and Roles
Finance is concerned with how individuals, such as managers, lenders, businesses, firms, investors, and borrowers allocate money over a specified period. This paper lists the definitions and roles of financial and accounting terms provided in the course design. The terminology that follows explains and interprets the concepts and elements relevant to the first week’s objectives and topics in Finance 370. Emphasis is placed on types of securities, markets, finance, equity, liability, ratios, and assets.
Finance is the study of how people and businesses evaluate investments and raise capital to fund them. The key role of finance is the management of cash flow in deciding on investments, how to fund them, how to allocate money for day-to-day operations over time, and the interpretation of financial concepts, which is the central focus of finance.
Efficient Market is a market price unbiased of the investments true mean value. The fact that the mean true value will deviate from the true mean randomly infers that there is an equal likelihood that prices may be over or under valued at different points in time. Because price is associated with the principle that market price reflects information, investors could drop, trade, or sell shares stocks, for example with Nike when any perceived risk from information that is available publicly to them so that investors cannot ever beat the market. The New York Stock Exchange is a good example of an organized market efficient to every investor.
Primary Market is a market that falls into the securities category where new securities are bought and sold for the first time. Key role and feature in the primary market is that firms receive the money raised (Titman, Martin & Keown. 2011. p. 12).
Secondary Market is a market that falls into the securities category. This is the place where the selling of securities purchased from a firm in the primary market...