FINANCE – the process of raising funds op capital for any kind of expenditure; the art and science of

managing money; securing and utilizing capital to start up, operate, and expand a company. concerned
with the process, institutions, markets, the instruments involved in the transfer of money among and
between individuals, businesses and governments.

Finance at the macro level - is the study of financial institutions and financial markets and
how they operate within the financial systems
Finance at the micro level is the study of financial planning, asset management, and fund raising for business
firms and financial institutions.

FINANCIAL MARKETS – carry out the allocation of financial resources or funds from savers to
borrowers.
FINANCIAL INSTITUTIONS OR INTERMEDIARIES – facilitate the flow of funds from savers to
borrowers.
FINANCIAL MANAGEMENT – the process of managing the acquired capital; involves the efficient use
of financial capital in the production and exchange of goods and services.
THE FINANCIAL SYSTEM – the collection of markets, institutions, laws, regulations, and techniques
through which bonds, stocks, and other securities are traded, interest rates are determined, financial
services are produced and delivered around the world.
CAPITAL – the money needed to start and continue operating business.
ASSET – smth that provides its owner with expected future benefits.
EQUITY CAPITAL – funds provided to the business by the owners.
DEBT CAPITAL – borrowed funds that the business owner owes to the lender.
FIXED CAPITAL – items bought once and used for a long period of time (real estate, fixtures,
equipment).
WORKING CAPITAL – the funds used to keep a business working or operating; cash or anything that
can easily and quickly be turned into cash.
SHARES OF STOCK – units of ownership that entitles purchaser to a certain amount of ownership.
SHARE-(STOCK-)HOLDER – the person who purchases shares of stock.
DIVIDENDS – proportional amounts of profit usually paid quarterly to stockholder.
MATURITY DATE – a deadline when the corporation must repay all of the money it has borrowed.
BONDS – an official paper given by the government or a company to show that you have lent them money
that they will pay back to you at a particular interest rate.
FINANCIAL MANAGEMENT – the process of managing this acquired capital.
FINANCIAL ASSET – a claim against the income or wealth of a business firm, household, or unit of
government, represented usually by a certificate, receipt, or other legal document, and usually created
by the lending of money.
REAL ASSETS – assets whose services provide direct benefits to their owners, either now or in the
future.
FINANCIAL ASSETS – assets whose benefit to the owner depends on the issuer of the asset meeting
certain obligations.
FINANCIAL LIABILITIES – obligations to deliver cash or another financial asset.
PRINCIPAL – the amount due on any debt before interest, or the amount invested before returns.
VALUE – that the financial liability gives the financial asset.
EQUITY LIABILITY – a liability of the firm that conveys a general right to dividends, but only if the
company’s board of directors decides to pay them.
DEBT LIABILITY – a type of loan, that conveys legal rights to interest payments and repayment of
principal.
MONEY – any financial asset that is generally accepted in payment for purchases of goods and services.
EQUITIES – claims against the firm’s profits and against proceeds from the sale of assets.
COMMON STOCK – entitles its holder to vote for the members of a firm’s board of directors and
determines company policy.
PREFERRED STOCK – carries no voting privilege but does entitle its holder to a fixed share of the
firm’s net earnings ahead of common shareholders.
DEBT SECURITY – claim that is fixed in amount and time (maturity).
NEGOTIABLE DEBT SECURITIES – can easily be transferred from holder to holder as a marketable
security.
NONNEGOTIABLE DEBT SECURITIES – cannot legally be transferred to another party.
LONG-TERM CAPITAL - long-term capital such as bank loan to pay for a house or car — goods that will last a
long time.
short-term capital to pay for items that last relatively short period of time.
Financial markets, institutions or intermediaries, and business financial management are basic elements of well-
developed financial systems.
An example of a debt liability is a bond that a firm issues. A debt liability, such as a bond, usually conveys
legal rights to interest payments and repayment of principal.

An example of an equity liability is a share of stock that a firm issues.

An example of equity financing is the sale of corporate stock

An example of debt financing is the sale of corporate bonds

CAPITAL MARKET – a financial relationship between suppliers and demanders of long-term funds

PRIMARY MARKET – the market where new securities are sold

AUCTION MARKET – markets where the equity securities of most large firms are traded.

IPO – the situation when the company wants to go public and sells its shares to the stock exchange.

MATURITY DATE – a dealine when the corporation must repay all of the money it has borrowed

DEBT FINANCING – the process of borrowing funds

EQUITY FINANCING – the process of obtaining owner funds

THE MONEY MARKET – a financial relationship between suppliers and demanders of short-term funds

SECONDARY MARKET – the market where pre-owned securities are bought

THE OTC MARKET – the market where dealers and investors communicate with one another by
telecommunications equipment