Topic 1 - Introduction to Finance
NASDAQ
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.
Treasury Securities
A debt instrument (bonds) that is issued by the United States Government in order to raise capital.
Enron
A firm that perpetrated one of the largest corporate frauds in history.
dealer market
A market made up from multiple dealers that hold an inventory of securities and quote prices.
auction market
A market with a physical location and where prices are determined by investors' willingness to pay.
The New York Stock Exchange (NYSE)
A physical trading floor and a computer network where stocks are bought and sold. It is the largest stock exchange in the world
fair return
An acceptable return for a passive investor.
teller
An entry level bank position.
longing
Buying an asset.
financial policy implementation
Incorporating new finance ideas within a firm.
cash management
Managing the day-to-day finance operations of a firm.
tax strategies
Minimizing the taxes a business pays.
investments
One of the three main areas of finance. As its name implies, it involves choosing which assets to invest in.
limit orders
Orders used by investors that are executed only if market prices reach the "limit" price.
market orders
Orders used by investors that time sensitive and are executed on a "first come - first serve basis".
shorting
Selling an asset.
liquidity
The ability to convert an asset to cash quickly without losing significant value
market efficiency
The degree to which prices in a market reflect all available information.
Corporate Finance
The finance function within a business. One of the three main areas of finance. the area of finance that involves maximizing shareholder or owner wealth for privately held companies. also known as managerial finance, financial management, and business finance
percentage returns
The percentage increase (or decrease) in price that is observed by an investor that buys and holds a particular security.
invest
To exchange something in hope of a return. to commit something in hope for a return
current market value
What someone would pay right now for an asset.
human resources (HR)
a business area that is responsible for the firm's people, including recruiting and retaining the firm's employees
private equity (PE)
a category of financial institutions that invest in an entity that is not publicly listed or traded using money received from institutional investors and wealthy individuals
credit analyst
a commercial bank employee with the responsibility to assess the riskiness of lending to borrowers and determining whether or not loans should be extended to potential bank clients an outgoing career
corporate bonds
a debt instrument that is issued by a corporation in order to raise capital
capital
a financial asset that can be used by a firm. an example of capital ma be cash held by a firm or machinery
investment bank
a financial intermediary that offers complex financial transactions such as underwriting, facilitating mergers, and buying and selling financial securities on behalf of large institutions
bonds
a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate
syndicate
a group of intermediaries that is used to oversee the issuance of stocks and/or bonds
wills
a legal expression of an individuals wishes concerning the desposition of his or her property after death; legal documents used in estate planning
dollar-cost averaging
a long-term investing strategy in which the investor contributes a set amount into an investment on a set schedule
specialist
a market maker on the New York Stock Exchange that holds an inventory of securities and acts as a liquidity provider to those that wish to buy and sell
asset manager
a professional who makes his or her living managing a portfolio of assets
401(k)
a tax-deterred retirement plan offered by employers to which both the employee and the employer may make contributions
Roth IRA
a tax-sheltered retirement plan individuals can use to avoid taxes on portfolio returns
trusts
an arrangement that allows a third party to hold assets on behalf of a beneficiary or beneficiaries; legal structures used in estate planning
shareholder
an individual (or entity) that holds a share or fraction of ownership in a particular company
earnings
another word for net income
What are the nine finance tracks listed in Careers-in-Finance?
commercial banking, corporate finance, financial planning, insurance, investment banking, money (asset) management, real estate, hedge funds, private equity
agency costs
costs that are incurred when management doesn't act in the best interests of shareholders. The costs that result from the principle-agent problem
estates
everything that a person owns or controls, especially at death; legal structures used in estate planning
returns
how much an investor gets out of an investment divided by how much the investor put into the investment
financial institution
intermediaries, such as banks, that link those that save to those that need to borrow the area of finance that deals with banks insurance companies, pension funds, and the like
initial public offering (IPO)
it is when a company goes out to raise money from the public for the first (initial) time by "offering" a share of its company
goal of the firm
maximize shareholder wealth
debt
money lent by a creditor to provide financing for the borrower
equity
ownership in an asset such as a company. often another name for a stock
mutual funds
portfolios of assets that are professionally managed for others to invest in
venture capital
professionally managed investment capital that is typically invested in very young new ventures
stocks
proof of equity ownership of a firm. gives the holder of the stock the right to vote on matters of the company, and claim to the assets of the company after debt and preferred stock holders have been paid
capital budgeting
short for capital budgeting analysis the process of deciding what assets to buy
marketing
the business area responsible for selling a product or service
operations
the business area that actually produce a company's products or provides a company's services
accounting
the business area that records past financial information and provides this historical data to decision makers in the form of financial statements
operations
the business function responsible for the production of the good or service being sold
marketing
the business function responsible of generating sales
primary market
the financial market where securities (stocks and/or bonds) are first sold
secondary market
the financial market where securities are traded after the initial issuance
money manager
the former term for an asset manager
dollar returns
the increase (or decrease) in price that is observed by an investor that buys and holds a particular security
cash
the most liquid asset on the balance sheet
risk
the possibility that the realized or actual return will differ from our expected return
asset pricing
the process of valuing assets
revenues
the top line of the income statement. the total amount of money a business brings in (before subtracting out any costs)
sales
the top line of the income statement. the total amount of money a business brings in (before subtracting out any costs)
finance
to pay for something
buyout
when an investor purchases a majority share of the stock of a firm
