Money Markets and Corporate Finance Vocabulary

Vocabulary terms and definitions related to financial markets, bond maturity, and the process of a company going public.

Money markets

Direct network which consists of corporations, financial institutions, investors and governments, which need to borrow or invest short-term capital.

Treasury bills (T-bills)

Bonds issued by governments.

Maturity

The length of time before a bond becomes repayable; for T-bills it is usually $3$ months, although they can have a maturity of up to $1$ year.

Commercial paper

A short-term loan issued by major companies, also sold at a discount.

Certificates of deposit

Also known as time deposits; these occur when the holder agrees to lend money by buying the certificate for a specified amount of time.

Discount

A price below the usual or advertised price.

Competitive

An adjective describing a good price, compared to others on the market.

Liquidity

The ability to sell an asset quickly for cash.

Short-term

In finance, an adjective meaning up to $1$ year.

Unsecured

An adjective meaning with no guarantee or collateral.

Redeemed

Repaid.

Cash flow

The movement of money in and out of an organization.

Par value

The price written on a security.

Go public

To change from a private company to a public limited company by selling shares to outside investors for the first time (with a flotation).

Due diligence

A detailed examination of a company and its financial situation.

Prospectus

A document inviting the public to buy shares, stating the terms of sale and providing information about the company.

Flotation

An offer of a company's shares to investors.

Underwriters a stock issue

Guarantees to buy the shares if there are not enough other buyers.

Preference shares

Shares whose holders receive a fixed or guaranteed dividend.

Goes bankrupt

Stops trading because it is unable to pay its debts.

Goes into liquidation

Has to sell all its assets to repay part of its debts; preference shareholders are repaid before others but after bond owners.

Stock exchange

A market on which companies' stocks are traded.

Investors

Buyers of stocks.

To underwrite

To guarantee to buy newly issued shares if no one else does.

Ordinary shares

The most common form of shares.

Bankrupt

Insolvent, or unable to pay debts.

Liquidation

The sale of the assets of a failed company.

Primary market

The market where newly issued shares are sold for the first time.