Finance: Finance as a term can be defined as a science of managing money and other related assets. This management has to do with banking, investment and credit. This science of management also involves monetary resources, funds and especially funds in government or any corporate body.
Efficient Market: An efficient market is a market that is assumed to have all the pertinent and the necessary information which help the market participants to transact fairly. This information should be available to all the participants fairly at the same time and the prices in the market are expected to respond to this information. A stock market is taken as the best example of the efficient market.
Primary Market: This is an initial market in which securities originate from. In this market, the initial buyer is the only person that can exchange funds and securities. The securities come directly from the company, federal government and any other entity that is known to distribute the securities.
Secondary Market: These are markets that trade stocks normally between persons and any other entities that buy and or sell them. The participants in the secondary market come from the primary market.
Risk: In finance, risk is any potential or chance that any action or activity that may lead to business loss or an outcome that is undesirable. Risk can also be defined as a return of an investment that may be different from what is expected.
Security: This is a negotiable instrument with a value or a recognizable worth. Examples of a security are debt security, and equity security.
Yield: This is a percentage profit that is earned on an original investment. It is a ratio of the cash earned annually to the amount of money spent on an investment expressed as percentage.
Rate of Return: This is defined as the net gain (loss) got from an investment. This is measured over a defined period and also expressed as a percentage.
Rate on an Investment (ROI): This is a measure of profitability which evaluates a business performance expressed as a ratio of the business profit to the company net worth.
Stock: A stock is a share in a company that is held or bought by an individual or group of individuals. Stocks are found and traded on a stock exchange.
Bond: This a debt instrument that is issued normally for a time period of one year or more with the intended purpose of raising capital by governments. They are issued mainly through the central bank. Bond can also be defined as promise to repay the principal received from an individual together with the interest it has earned.
Capital: This is defined as money, property and any other owned valuables that collectively show the individual’s or company’s wealth.
Debt: It is an obligation that comes in terms of money, goods, or services one party has to another. It can also simply defined as the amount that is borrowed by one party from another party with an understanding that it shall be paid at a given future date.
Cash flow: This is the amount of money or cash that moves in and out of a business account over a defined period of time which is normally a month.