Introduction to Business Finance and the Financial System

A set of flashcards covering key vocabulary and concepts related to business finance and the financial system as discussed in the lecture.

Business Finance

The acquisition, management, and utilization of funds within a business organization to maximize shareholder wealth.

Financial System

A network of institutions, markets, and infrastructure that allows for the flow of money and credit through an economy.

Investment Decisions

Decisions made by a firm regarding where to place its money to generate future returns, also known as capital budgeting decisions.

Financing Decisions

Decisions regarding how a firm raises funds for its investments, involving a mix of debt and equity.

Cash Flow Management

The process of managing the firm's cash to ensure it can meet its obligations and operate smoothly.

Capital Allocation

The process of directing limited business resources to areas where they will generate the highest possible return.

Dividend Decisions

Determinations of how much of a firm's profits should be distributed to shareholders or retained for reinvestment.

Working Capital Management

Management of day-to-day financial operations to ensure a firm meets its short-term obligations.

Financial Intermediaries

Institutions that gather savings and invest them into loans or other financial markets, e.g., banks and insurance companies.

Money Markets

Markets that deal with short-term borrowing and lending, typically with maturities of less than one year.

Capital Markets

Markets that facilitate the buying and selling of long-term financial instruments such as stocks and bonds.

Financial Instruments

Assets that can be traded, including equities, bonds, derivatives, and money market instruments.

Risk Management

The identification, measurement, and management of financial risks faced by businesses.

Primary Market

The market where new securities are issued and sold for the first time.

Secondary Market

The market where previously issued securities are traded among investors.