Howard Parsons
July 17, 2012
Financial Terms and Roles

1. Finance – The management of money by governments and companies.
The only role the word finance has in finance is the word itself. It is the definition of what exactly finance is.
2. Efficient Market – A market where all pertinent information is available to all participants at the same time.
An efficient market allows for businesses and investors to make the best investment decisions possible based off of current information.
3. Primary Market – The market where companies initially sell stocks that they have been authorized to sell.
The primary market allows firms to raise available capital by going public and selling initial stocks.
4. Secondary Market – The market where investors sell and trade previously issued stock.
The secondary market allows investors to buy, sell, and trade previously issued stock in the hope of earning money for them. The gain or loss is not absorbed by the company that issued the stock but rather the person who initially purchased the stock.
5. Risk – The chance that the actual return on an investment will be less than what was the projected return.
Taking on risky investments that have a higher projected return can lure in investors. The projected returns are higher because the risk of failure, or loss of money, has a higher possibility.
6. Security – An instrument that is issued to show ownership. Common securities are bonds, notes, and stock shares.
Securities are used by publicly traded companies to raise capital for further expansion of their existing company.
7. Stock – The capital raised by the selling of shares. Also, the proof of partial ownership in a publicly traded company.
Stocks are used as an instrument for companies to raise money and for investors to purchase and sale in the hope of turning a profit.

8. Bond – Another form of securities that is