Financial Terms and Roles Essay

Submitted By andyll
Words: 667
Pages: 3
Open Document
Financial Terms and Roles
Finance is the study of how people in their personal life and businesses evaluate investments and raise capital to fund them in the economic world. The role in finance is that it deals with matters that are related to money and markets.
Efficient markets are a hypothesis that prices in a market that are continually fair. It consists of incorporated market prices that reflect information. The role of efficient market is to keep the price fair and stops anyone from making high returns unless they make a high investment.
Primary market is a marketplace where securities are distributed for the first time. The government and businesses issue debt or equity based securities to raising finance. In this market, prices are the same for all buyers except investors do not purchase from other investors.
A secondary market is another marketplace where the securities that have already been sold or purchased by investors. Prices in this market can vary from the issue price and the prices can vary from the original cost. Issuers are not affected by the changes in pricing.
A risk is the probabilities of differences in the total investments earned on an annual return. The risks are divided into three groups. They are market, credit, and operational risk. The role that risk plays is on the return on investment. If the risks are low, the return is low, if they are high, the return is high.
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 debt to an agreement. Security plays a role that consists of a source who issues securities and the source of investments in purchasing securities.
Stocks are part of an organizations assets that give a part of ownership in a business. They assist investors in establishing financial trust in an organization. Stocks are not obloigated to have a maturity date and usually have face value. There are two types of stocks. They are common and preferred. Common stocks are not fixed, have voting rights, and have a lower claim on earnings and assets, where preferred stocks are fixed, do not have voting rights, and the holder has a higher claim on earnings and assets. A bond is a debt instrument confirming a contract between the bond issuer and the bond holder. The instruments define the amount of the loan, interest rates, method of payments on interest and principal, and maturity dates. Capital is the sum of money that is invested by the owners of the business.
Show More

Related Documents: Financial Terms and Roles Essay

Can the Concept of ‘Early’ and ‘Late’ Industrialization Explain the Key Institutional and Organizational Characteristics of National Business Systems, and Do They Have Any Bearing on Long-Term National Competitiveness? Essay

Can the concept of ‘early’ and ‘late’ industrialization explain the key institutional and organizational characteristics of national business systems, and do they have any bearing on long-term national competitiveness? Introduction The concept of industrialization has been used among different nations and regions, while many countries have carried out their own industrialization progress during the past several decades, which stimulates the development of organizations and better corporate…

Words 2523 - Pages 11

Essay on Hospital Budget

Budget Over the years financial management has been a concept that is flourishing in the world of health care. “Until the 1960s, financial management in all industries was generally viewed as descriptive in nature, with its primary role being to secure the financing needed to meet a business’s operating objectives” (Gapenski, 2008, pg.26). However, today, financial management holds a more significant role in the management of businesses overall. “Now, the primary role of financial management is to plan…

Words 1091 - Pages 5

Introduction To Accounting And Finance

PowerPoint® slides to accompany Chapter 1 Introduction to accounting and finance Compiled by N. C. McGuigan and T. Kern © 2011 Pearson Learning objectives 1. Define accounting 2. Discuss the role of accounting information 3. List the main user groups for a business entity 4. Summarise the different uses that can be made of accounting information 5. Explain the different procedures involved in the accounting information system 6. State the key characteristics of accounting information © 2011…

Words 1786 - Pages 8

Finance: Investment and Financial Assets Essay

Question A) Discuss the role of financial intermediaries in a developed economy. What are the advantages of using a financial intermediary rather than having a direct transaction between borrowers and lenders? Financial intermediaries are organisation that “connects” borrowers and lenders by accepting funds from lenders and loaning funds to borrowers, they have numerous roles in the economy. This will be discussed in more detail throughout the question. Financial intermediaries are considered…

Words 1172 - Pages 5

Essay on Macroeconomic Variables Affecting a Business Environment

the central bank and financial system as a whole) to short-term liabilities (domestic and foreign, public and private) is seen, particularly by investors, as a major indicator of vulnerability. Another popular indicator of reserve adequacy is gross official reserves in months of imports of goods plus services. Total external debt and its maturity structure are important indicators as well. Terms of Trade. Past experience indicates that a large deterioration in the terms of trade has been a contributing…

Words 2188 - Pages 9

Role Of Finance For Managers

business school University of Huddersfield Count word: 4008 Table of content: 1.0 Introduction…………………………………………………. 2.0 Source of finance……………………………………………. 2.1 Alternative source of finance…………………………… 3.0 The role of management accountant………………………. 4.0 Analytical tool……………………………………………….. 4.1 The balance scorecard………………………………………. 5.0 conclusion……………………………………………………. 6.0 Appendix……………………………………………………. 7.0 Bibliography………………………………………………… 1.0 Introduction:…

Words 4056 - Pages 17

essay of financial organization

School International Finance Lecture 1: Financial Intermediation I Introduction It is a common misconception that wealth comprises only financial assets: a person is described as wealthy because he or she is very rich or has a lot of money, or even has a high income. Wealth, in fact is defined much more precisely than these rather loose statements would suggest and although a large part of a person’s wealth may indeed be held in the form of financial assets, e.g. shares, it also includes other…

Words 1333 - Pages 6

Cause of the Gfc Essay

Corporate Greed is an issue that heavily contributed to the recent Global Financial Crisis and draws on the important of Ethics in Business concerning the recent crisis (Froud 2009). It is believed that Corporate Greed Mortgage Brokers and Executives to ignore relevant responsibilities for self gains fuelled by reward systems that rewarded short term success (Froud, 2009).The irresponsibility and short term success are described by Froud (2009) to have incurred in the form of Adjustable mortgage…

Words 561 - Pages 3

Cost To Rescue British Financial Institution

rescue British financial institution Introduction This paper will begin with a brief background of the topic. In 2007---2008, the United States Suffered a severe “financial tsunami”，many of the largest financial institutions like “Lehman Brothers Holdings Inc.” have collapsed or been bought, And because of the connectivity of the global financial institutions, this “tsunami “quickly swept over the whole world, caused a broad impact on the global economy, world financial markets proceed…

Words 2016 - Pages 9

The shifting role of central banks Essay

The Shifting Role of Central Banks Term Paper for ECO 407 University of Toronto Introduction: The term paper will explore what the role of central banks has been traditionally and how that has been changing over time. Central banks historically have had three chief functional roles (Goodhart, 2010). Firstly, maintenance of price stability under monetary administration such as gold standard or fixed exchange rate or inflation target is a crucial role. Secondly, central banks help maintain…

Words 3728 - Pages 15