1) Finance: Finance is the art and science of measuring money.
2) Capital Budgeting: The process of planning and managing a firm’s long term investment
3) Capital structure: The mixture of debt and equity maintained by the firm.
4) Working capital: A firm’s short term assets and liabilities.
5) Agency Problem: The possibility of conflict of interest between the stock holders and management of a firm.
6) Primary Market: In a primary market transaction, the corporation is the seller, and the transaction raises money for the corporation. Corporation engages two types of primary market transaction: Public offerings and private placement.
7) Secondary Market: A secondary market transaction involves one owner or creditor selling to another. Therefore the secondary market transaction provides the means for transferring ownership of corporate securities.
8) Time Value of Money: The time value of money refers to the fact that a dollar in hand today is worth more than a dollar promised at some time in the future.
9) Compounding: The process of accumulating interest on an investment over time to earn more interest.
10) Discounting: Calculation of the present value of some future amount.
11) Discount Rate: The rate used to calculate the present value of future cash flow.
12) Present Value: The current value of future cash flow discounted at the appropriate discount rate.
13) Future Value: The amount of an investment is worth after one or more period.
14) Annuity: Annuity is a series of equal payment for a specific period. It is a level stream of cash flows for a fixed period of time.
15) Ordinary Annuity: A series of constant or level cash flows that occur at the end of each period for some fixed number of period.
16) Annuity Due: An annuity for which the cash flows occur at the beginning of the period.
Perpetuity: An annuity in which the cash flows continue forever. Perpetuity is also called consol (in Canada & UK). Preferred stock is an important example...