WEEK 1 DEFINITIONS

University of Phoenix Material

Definitions
Define the following terms using your text or other resources. Cite all resources consistent with APA
guidelines.
Term

Definition

Resource you used

Time value of money

The time value of money is a

simple financial principle that
believes money received today
is worth more than an equal
amount received in the future.

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Efficient market

A theoretical efficient market

occurs when information flows
freely, allowing supply and
demand to react instantly to
market changes.

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Primary versus secondary

market

In the stock market, the primary

market one that issues a new
security, such as an initial public
offering. A secondary market is
one that trades a security after
the initial availability.

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Risk-return tradeoff

The potential for higher returns

in the market generally comes
with higher risk. Inversely, lower
expected returns are generally
associated with lower risk.

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Agency (principal and agent

problems)

Companies are comprised of

owners and managers, but their
goals are sometimes not
perfectly aligned. Managers
incentive for working hard may
be to receive a company bonus
not caring if they it benefits the
shareholders.

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Market information and security

prices and information
asymmetry

Investors react to information by

buying and selling shares of a
company on the open market.
This dynamic affects the share
prices to maintain a stock price
passed on supply and demand.
Information asymmetry occurs
when one party has better
information than a competing
party.

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Agile and lean principles

Agile and lean principles are

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WEEK 1 DEFINITIONS

2
manufacturing processes and
procedures that seek to increase
efficiency. The most well-known
project management system is
six-sigma.

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Return on investment

Return on Investment or ROI can

be defined as the expected
financial gain on capital allocated
to certain project.

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Cash flow and a source of

value

Cash flow describes the

movement of cash through an
organization, both inflow and
outflow. The sources of value is
the specific activity or that results
in this cash flow.

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Project management

Project management is
organization of temporary
business goals into distinct
steps, groups, and processes.

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Outsourcing and offshoring

Outsourcing is the delegation of

tasks to a third-party contractor.
Offshoring is moving business
activities to a country outside the
companys main headquarters.

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Inventory turnover

Measures the rate at which a

company purchases and resells
products to customers.

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Just-in-time inventory (JIT)

JIT inventory is a strategy that

seeks to only receive and
produce inventory at the time of
expected use. This reduces
unnecessary warehousing costs.

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Vender managed inventory

(VMI)

VMI is a system of inventory

management where the
manufacturer monitors the
distributers stock levels and
sales patterns, then generates
orders based on this data.

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Forecasting and demand

management

Forecasting is used to predict

the future business needs of a
company. Demand management
looks at market trends to
determine how demand will be
influenced in the future.

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WEEK 1 DEFINITIONS

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References

FIN 370 Week 1 - Financial Definitions Worksheet. (2014). Retrieved from

http://octotutor.com/new-financial-definitions-worksheet-fin-370/