D775: Introduction to Business Finance

Business Finance

the area of business in which 1) financial measures are used to help management make decisions (ratio analysis), 2) financial analyst use mathematical models to select which projects to invest in (capital budgeting), and 3) financial analysts use the cost of capital to determine whether these project should be financed with either debt or project equity, and what type of each

Common Stock

a type of security that represents ownership in a corporation, granting shareholders voting rights and a claim on a portion of the company’s profits through dividends

Liquid

an asset that can be quickly and easily converted into cash without significantly affecting its market price

Market Capitalization

the total market value stock, calculated by multiplying the current stock price by the total number of outstanding shares

Dividend

a portion of a company’s earnings distributed to shareholders, usually in the form of cash or additional stock

Capital Appreciation

when a stock is bought at a lower price than what is said. subtracting the lower purchase price from the higher sales price is the appreciation

Preferred Stock

a class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically without voting rights but with fixed dividends

Bonds

debt securities issued by corporations or governments to raise capital, where the issuer agrees to pay back the principal along with interest on specified dates

Coupon Rate

the annual interest paid by a bond issuer on the bond’s face value, expressed as a percentage

Maturity

the date on which the principal amount of a bond or other debt is to be paid in full