Finc 409 Test 1 - Wolken TAMU
Recent Changes in the financial market
"dot com" stock bubble burst in 2000. Housing bubble 2006. Housing/security mortgages 2007-8 financial crisis and 2008-9 Great Recession. Economic activity slow to recover, unemployment rates high
6 principles of finance
1money has a time value - you want the money ASAP 2higher returns are expected for taking on more risk 3diversification of investments can reduce risk 4financial markets are efficient in pricing securities 5manager and stockholder objectives may differ 6reputation matters
Identify the 4 types of major financial markets
Debt securities equity security markets derivative securities markets foreign exchange markets
How do debt securities and equity securities differ?
Debt securities are obligations to repay borrowed funds. Common stocks are ownership shares in corporations
What is Finance?
Finance is the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial resources.
What are the three areas of finance?
Institutions (intermediaries) and markets (physical or electronic flow of funds); investments (securities and risk); financial management (financial planning, asset mgmt, fund raising).
Financial functions in financial system
Monetary system (create and transfer money) Financial institutions carry out savings-investment process via financial functions of accunulating savings and lending/investing savings Financial markets perform the financial functions of marketing and transferring financial assets
Money vs Capital Markets
Money markets - debt instruments of ONE YEAR OR LESS traded Capital markets - debt securities with maturities in EXCESS of one year & w corporate stocks
What are the differences between primary and secondary markets
Primary - initial offering of debt and equity securities to public occurs Secondary - markets where the transfer of existing debt and equity securities between investors occurs
Entrepreneurial Finance
Study of growth driven, performance focused, early stage firms raise finc. capital and manage operations and assets
Personal Finance
Study of individuals preparing for finc. emergencies, protect against premature death/loss of property, and accumulation of wealth
What is meant by the term "financial environment"?
The financial environment encompasses the financial system, institutions, markets, and individuals that make the economy operate efficiently.
Foreign exchange markets
banks and institutional traders buy and sell various currencies on behalf of businesses and other clients
Financial management career opportunities
cash mgmt analyst, capital expenditures analyst, credit analyst, financial analyst, cost analyst, tax analyst
Describe ethical behavior
how a person or group treats others - legally, fairly, honestly. Laws and regulations ensure minimum levels of protection and compliance.
Why study finance
informed economic decisions; better personal finance; success in business world
Contractual savings and real property organizations
insurance and real estate agent/broker, research analyst, mortgage analyst
Depository financial institution career opportunities
loan analyst, bank teller, investments research analyst
Derivative securities markets
markets for finc. contracts that derive their values from underlying debt and equity securities
Equity securities markets
markets where common stocks are initially sold and traded
Debt Securities markets
markets where money market securities, bonds (corporate, finc. instit., gov't), and mortgages are originated and traded
Other entry level finance jobs
not-for-profit org's; cash fund mgmt, asset acquisitions, borrowing funds; other various international positions
4 major components of effective financial system
policy makers monetary system financial markets financial institutions
Securities markets and investment firms
stockbroker or acct. executive, security analyst, investment banking analyst, financial planner assistant
