Define the following terms and identify their role in financing
A. Finance
B. Efficient Market
C. Primary Market
D. Secondary Market
E. Risk
F. Security
G. Stock
H. Bond
I. Capital
J. Debt
K. Yield
L. Rate of Return
M. Return of Investment
N. Cash Flow
Try using this financial dictionary yourself:
http://www.investopedia.com/dictionary/default.asp
A. Finance: Finance refers to the management of money and other financial assets. It involves activities such as budgeting, investing, lending, borrowing, and determining the value of assets.
B. Efficient Market: An efficient market is a market where all relevant information is quickly and accurately reflected in the prices of securities. In an efficient market, prices adjust rapidly to any new information, making it difficult for investors to consistently outperform the market.
C. Primary Market: The primary market is where newly issued securities are first sold to investors. It is the market in which companies raise capital by selling new stocks or bonds directly to investors. In the primary market, issuers receive funds from investors in exchange for the issuance of securities.
D. Secondary Market: The secondary market is where existing securities are bought and sold by investors. It provides a platform for investors to trade securities among themselves after the initial issuance in the primary market. Examples of secondary markets include stock exchanges like the New York Stock Exchange (NYSE) and the Nasdaq.
E. Risk: Risk refers to the uncertainty or potential for financial loss. In finance, risk can arise from various factors such as market volatility, economic conditions, changes in regulations, or company-specific events. It is an essential consideration when making investment decisions, as higher risk is often associated with the potential for higher rewards.
F. Security: In finance, a security is a tradable financial asset. It represents ownership or a creditor relationship with a company or government entity. Common types of securities include stocks, bonds, options, and futures contracts.
G. Stock: Stock, also known as shares or equity, represents ownership in a company. When you purchase a stock, you become a shareholder and have a claim on the company's profits and assets.
H. Bond: A bond is a type of debt security where an investor loans money to a company or government entity in exchange for periodic interest payments and the return of the principal amount at maturity. Bonds are typically considered less risky than stocks and provide more predictable income streams.
I. Capital: Capital refers to financial resources, typically in the form of money or other assets, that are used to generate income or support business activities. It can include funds raised through investments, loans, or retained earnings.
J. Debt: Debt is a form of borrowing where an individual or entity receives funds from a lender with the promise to repay the borrowed amount along with interest over a specific period. It is a liability for the borrower and an asset for the lender.
K. Yield: Yield refers to the return on an investment, usually expressed as a percentage. It represents the income generated by an investment relative to its cost. For instance, bond yield refers to the interest income earned from a bond relative to its price.
L. Rate of Return: The rate of return is the gain or loss on an investment relative to the amount invested, usually expressed as a percentage. It measures the profitability of an investment over a specified period.
M. Return on Investment: Return on Investment (ROI) is a financial metric used to evaluate the profitability of an investment. It represents the gain or loss relative to the cost of the investment. ROI is typically expressed as a percentage and is used to assess the efficiency and effectiveness of an investment.
N. Cash Flow: Cash flow refers to the movement of money into and out of a business or investment. Positive cash flow occurs when there is more money coming in than going out, while negative cash flow occurs when there is more money going out than coming in. It is an important indicator of financial health and sustainability.