Finan101 - Terms

Terms and definitions for Finance 101

Money markets

platform where Short term, high liquidity, low risk securities are traded

Cash markets

platform where securities or commodities bought and sold for immediate delivery and settlement

One-name paper

debt obligation where only one person or entity is liable for payment

Types of one-name papers

Treasury notes, commercial paper, negotiable certificates of deposit, asset backed commercial paper

Treasury notes

short term discount securities redeemable at face value on maturity

commercial paper

unsecured promissory notes issued by large corporations to finance working capital needs

negotiable certificates of deposit

bank term deposit that is negotiable. able to be traded multiple times in secondary market

asset backed commercial paper

issued to finance the purchase of financial assets

bank accepted bills

debt instruments are created by companies and accepted by banks

capital markets

platform where capital goods are financed with stock or long term debt instruments

bonds

contractual obligations of a borrower to make periodic cash payments to a lender

ordinary shares

basic ownership claim in a corporation

preference shares

preferential treatment given over ordinary shares

bond markets

a platform where investors can buy and sell debt securities

state government bonds

issued by state or territory borrowing authorities that are backed by their governments

corporate bonds

debt contracts requiring borrowers to make periodic payments

primary equity markets

platform where companies issue new stocks to raise capital, selling directly to the investor

secondary equity markets

platform where investors buy and sell previously issued securities

share markets

platforms where ownership shares of publicly listed companies are issued

option market

investors can buy or sell contracts that grant the right - not obligation - to buy or sell underlying assets

surplus spending units

economic entity that earns more than it spends (lenders/savers)

deficit spending units

economic entity that spends more than it earns

direct financing

lender/savers deal directly with borrower/spenders

real rate of interest

is the nominal interest rate minus the rate of inflation

Capital budgeting

identifying productive assets that a company should buy

financing decisions

Determine how the company should finance or pay for assets

Working capital decisions

Day to day finances