Unit 2 Flashcards
The study of managing and allocating funds at the personal or business level
Finance
o Forward looking or primarily focused on the future.
o Management and allocation of capital with the objective of investing forecasting budgeting, saving, borrowing, lending and so on.
o Uses accounting information to achieve these objectives.
Finance
The system of recording, reporting, and summarizing past financial information and transactions.
o Backward looking and focuses on the past.
Accounting
A financial asset that can be used by a firm or individual.
Ex. machinery or cash held by a firm.
Capital
An area of finance that deals with sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to its owners, and the tools and analysis used to allocate financial recourses.
Business finance
The mixture of debt and equity used to finance a firm.
Capital structure
An area of finance that involves deciding which assets to invest in to create wealth in the future.
Investments
The process of valuing assets.
Asset Pricing
What someone would pay right now for an asset.
Current Market Value
An area of finance that involves activities used to increase shareholder wealth.
Corporate finance
An area of finance that includes firms or organizations that exist to accept a wide variety of deposits, to offer investment products to individuals and businesses, to provide loans, or to broker financial transactions.
Financial Institutions
The total satisfaction received from consuming goods and services; the happiness you gain from your decisions as a consumer
Utility
Shares of ownership; stocks
Equity
Firms that have issued shares to the public
Publicly Traded Firms
Firms that have not issued shares to the public where the ownership rights are privately held.
Private held companies
Managing the day-to-day finance operations of a firm.
Cash Management
Methods used to minimize the amount of taxes a business pays
Tax Strategies
Incorporating new finance ideas within a firm.
Financial Policy Implementation
A financial institution that invests in an entity that is not publicly listed or traded using money received from institutional investors and wealthy individuals; Firms that are privately held and whose ownership is not yet bought or sold on any public stock exchange.
Private Equity
Professional managers of investment capital that typically invest in very young new ventures.
Venture Capitalists (VCs)
generating cash or stock from the sales or IPO of companies in the portfolio of investments.
Harvest
financial institution that accepts deposits, offers checking and savings accounts, and other basic financial products; extends various loans.
Commercial Banking
An entry-level commercial bank position with the responsibility to interact with customers at the bank’s front desk or drive-through window.
Teller
A commercial bank position with the responsibility to assess the riskiness of lending to borrowers and determining whether or not loans should be extended to potential bank clients.
Credit Analysts
A commercial bank position with the responsibility to find and attract new clients
Personal Bankers
An arrangement that allows a third party to hold assets on behalf of a beneficiary or beneficiaries
Trusts
Everything that a person owns or controls, especially at death.
Estates
A legal expression of an individual’s wishes concerning the deposition of his or her property after death.
Wills
The ability to turn financial securities into cash easily without losing significant value
Liquidity
A debt instrument (bond) that is issued by the United States government in order to raise capital
Treasury Securities
The top line of the income statement. The total amount of money a business brings in (before subtracting any costs)
Revenues
A debt instrument that is issued by a corporation in order to raise capital.
Corporate Bonds
A share of ownership in a company
Stock
A type of financial market used for short-term assets that are held for less than one year
Money Market
A type of financial market used for long-term assets that are held for greater than one year.
Capital Markets
The financial market where securities (stocks and/or bonds) are first sold
Primary Market
A group of intermediaries that is used to oversee the issuance of stocks and/ or bonds
Syndicate
When a privately held company first offers shares of stock to outside investors to raise capital, therefore becoming a publicly owned company; aka equity offerings
Initial Public Offering (IPO)
Where securities are traded after initial issuance.
Secondary Financial Market
A secondary market with a physical location and where prices are determined by investors’ willingness to pay.
Auction Market
A secondary market made up of multiple dealers that hold an inventory of securities and quote prices.
Dealer Market
A market maker on the NYSE that holds an inventory of securities and acts as liquidity provider to those that wish to buy and sell
Specialist
The possibility that the realized or actual return will differ from the expected return
Risk
The difference between the bid and ask prices that compensate the specialist for the risk that he or she bears for willingness to provide liquidity.
Bid-ask Spread
An independent federal government agency that (1) protects investors, (2) maintains fair, orderly, and efficient markets, and (3) facilitates capital formation.
U.S. Securities and Exchange Commission (SEC)
Financial institution that accepts monetary deposits and provides loans. Includes savings banks, commercial banks, savings and loan associations, and credit unions.
Depository institution
A type of depository institution also known as a “thrift” institution that places a significant focus on providing loans for residential mortgages and real estate.
Savings and loans association
Financial institution that is not allowed to accept monetary deposits but may perform functions such as lending money or acting as an intermediary between savers and lenders. Examples include brokerage firms, investment firms, mutual funds, and hedge funds.
Non-depository institution
Financial institution that facilitates the investment and purchase of securities in financial markets. Common services include underwriting, trading of securities on secondary markets, and the general sale of securities.
Securities firm
Company that invests the capital of investors in financial securities. Examples include mutual funds and investment trusts. The company may also be involved in issuing securities.
Investment firm
Financial intermediary that raises capital for long-term contractual agreements. Examples include an insurance company or a private pension fund.
Contractual savings institution
A financial institution that specializes in managing and administering retirement funds,
Pension Fund
Ensure that a nation’s economy remains healthy by controlling the amount of money circulating in the economy.
Central Banks
An investment company that continually offers investments and buys financial securities and instruments on behalf of investors.
Mutual Fund
A financial intermediary that offers complex financial transactions such as underwriting, facilitating mergers, and buying and selling financial securities on behalf of large institutions.
Investment Bank
Charge Premiums to invest in bonds and stocks to pay claims
Insurance Companies
Receive deposits and extend loans to individuals and businesses.
Banks and Credit Unions
Indicators that usually change before the economy changes.
Leading indicators
Indicators that change after the economy changes.
Lagging indicators
Indicators that are collected used and analyzed as economic shifts happen.
Coincident Indicators
Following accepted standards of moral conduct.
Ethics
Following one’s standards of right and wrong behavior
Morals
Costs that are incurred when management does not act in the best interest of shareholders.
Agency Costs
When the agent (the management) does not act in the best interest of the principal (the owners).
Agency Problem
The business function responsible for generating sales.
Marketing
The top line of the income statement. The total amount of money a business brings in (before substracting out any costs).
Sales
A physical trading floor and a computer network where stocks are bought and sold. It is the largest stock exchange in the world
New York Stock Exchange (NYSE)
A market in which prices fully reflect all the available information about a specific security.
Efficient Market
A hypothesized estimate of future prices or returns under different scenarios based on expectational data.
Expected Return
A person who makes strategic financial decisions in a corporation
Financial Managers
Following the laws and rules set by an authority
Legal
A computer network where stocks are bought and sold. It is the second-largest stock exchange in the world. Typically, technology- related companies will go public through this exchange.
NASDAQ
The business function responsible for improving and developing services and products
Research and Development
The process of combining several types of contractual debt (such as mortgages) and reselling them as a package to investors
Securitization
A person who owns shares of a company’s stock
Shareholders
Anyone who maybe affected by actions taken or a decision made
Stakeholder
