Financial Terms and Roles
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- Date Submitted: 02/14/2011 07:02 PM
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a. Finance
This is the source through which you provide resource to fund the organization. Owner’s investment and profit reinvested i.e. retained earnings are the long term source of finance and liabilities may be divided into long term as well as short term finance. It you borrow for more than one year it is long term finance and if you borrow for less than a year it is short term finance.
b. Efficient Market
A hypothesis stating that the market price has incorporated and reflects all related information. No one can make high return without buying riskier investment as market prices are always fair, according to EMH
c. Primary Market
It’s a place where the securities are issued for the first time on exchange. Debt or equity based securities are issued by companies, government and other groups to raise finance. The company issues or sells securities directly to the investor at a specified price. The price may be at par or more than or less than par. If they are issued for more than par it is called premium or if it is issued at less than par, it is called discount. In primary market investor does not buy from another investor. The issue price is same for all the buyers.
d. Secondary Market
Places where an investor can go buy securities from another investor rather than issuing companies in order to save some money. The price in the market is almost different than the issue price. The price may or may not be less than the issued price due to its price being based on the market sediments. Due to change in price the issuer of the security is not affected. The difference in price is gain or loss to be borne by the investor.
e. Risk
The actual return earned on investment may be different from expected. The chance of the difference is known as risk. In simple words, it may be defined as uncertainty involved in any transaction. For example, you have supplied goods to the customer. Will the customer pay or not, this...
This is the source through which you provide resource to fund the organization. Owner’s investment and profit reinvested i.e. retained earnings are the long term source of finance and liabilities may be divided into long term as well as short term finance. It you borrow for more than one year it is long term finance and if you borrow for less than a year it is short term finance.
b. Efficient Market
A hypothesis stating that the market price has incorporated and reflects all related information. No one can make high return without buying riskier investment as market prices are always fair, according to EMH
c. Primary Market
It’s a place where the securities are issued for the first time on exchange. Debt or equity based securities are issued by companies, government and other groups to raise finance. The company issues or sells securities directly to the investor at a specified price. The price may be at par or more than or less than par. If they are issued for more than par it is called premium or if it is issued at less than par, it is called discount. In primary market investor does not buy from another investor. The issue price is same for all the buyers.
d. Secondary Market
Places where an investor can go buy securities from another investor rather than issuing companies in order to save some money. The price in the market is almost different than the issue price. The price may or may not be less than the issued price due to its price being based on the market sediments. Due to change in price the issuer of the security is not affected. The difference in price is gain or loss to be borne by the investor.
e. Risk
The actual return earned on investment may be different from expected. The chance of the difference is known as risk. In simple words, it may be defined as uncertainty involved in any transaction. For example, you have supplied goods to the customer. Will the customer pay or not, this...