Chapter 19: Using Securities Markets for Financing and Investing Opportunities

Vocabulary-style flashcards covering the fundamentals of financial management, debt and equity financing, and the characteristics of primary and secondary securities markets.

Financial Managers

Professionals who examine financial data and recommend strategies for improving financial performance, responsible for activities like financial planning, forecasting, and budgeting.

Financial Plan

A strategy consisting of key activities including forecasts, budgets, investment (uses of funds), and financing (sources of funds).

Debt Financing

The funds raised through various forms of borrowing that must be repaid, such as short-term and long-term loans, trade credit, lines of credit, and bonds.

Equity Financing

The funds raised from within the firm from operations or through the sale of ownership in the firm, including sources like angel investors, venture capitalists, retained earnings, and stock.

Primary markets

Markets that handle the sale of new securities.

Secondary markets

Markets that handle the trading of securities between investors where the proceeds of the sale go to the seller rather than the issuing company.

Initial Public Offering (IPO)

The first offering of a company’s stock to the public.

Bond

A corporate certificate indicating that an investor has lent money to a firm; bondholders are creditors rather than owners.

Principal

The face value of a bond that must be repaid on the maturity date.

Interest

The payment the bond issuer makes to bondholders to compensate them for the use of their money, which is legally obligated and tax deductible for the firm.

Call provision

A feature that allows bonds to be repaid by the issuer before the scheduled maturity date.

Stocks

Shares of ownership in a company that do not have to be repaid to stockholders.

Stock Certificate

Evidence of stock ownership provided to the stockholder.

Dividends

Part of a firm’s profits that the firm may distribute to stockholders as either cash or additional shares, paid from after-tax profits.