| A | B |
|---|
| Financial Management | All the activities concerned with obtaining money and using it effectively |
| Short-Term Financing | Money that will be used for one year or less |
| Cash Flow | The movement of money into and out of an organization |
| Speculative Production | The time leg between the actual production of goods and when the goods are sold |
| Long-Term Financing | Money that will be used for longer that one year |
| Risk-Return Ratio | A ratio based on the principle that a high-risk decision should generate higher financial returns for a business and more conservative decisions often generate lesser returns |
| Chief Financial Officer (CFO) | A high-level corporate executive who manages a firm’s finances and reports directly to the company’s chief executive officer or president |
| Financial Plan | A plan for obtaining and using the money needed to implement an organization’s goals |
| Budget | A financial statement that projects income and/or expenditures over a specified future period |
| Cash Budget | A financial statement that estimates cash receipts and cash expenditures over a specified period |
| Zero-Base Budgeting | A budgeting approach in which every expense in every budget must be justified |
| Capital Budget | A financial statement that estimates a firm’s expenditures for major assets and its long-term financing needs |
| Equity Capital | Money received from the owners of from the sale of shares of ownership in a business |
| Debt Capital | Borrowed money obtained through loans of various types |
| Unsecured Financing | Financing that is not backed by collateral |
| Trade Credit | A type of short-term financing extended by a seller who does not require immediate payment after delivery of merchandise |
| Promissory Note | A written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date |
| Prime Interest Rate | The lowest rate charged by a bank for a short-term loan |
| Commercial Paper | A short-term promissory note issued by a large corporation |
| Floor Planning | Method of financing in which title to merchandise is given to lenders in return for short-term financing |
| Factor | A firm that specializes in buying other firm’s accounts receivable |
| Initial Public Offering (IPO) | When a corporation sells common stock to the general public for the first time |
| Investment Banking Firm | An organization that assists corporations in raising funds, usually by helping to sell new issues of stocks, bonds, or other financial securities |
| Common Stock | Stock whose owners may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of others |
| Preferred Stock | Stock whose owners usually do not have voting rights but whose claims on dividends and assets are paid before those of common-stock owners |
| Put Value | An assigned (and often arbitrary) dollar value printed on a stock certificate |
| Convertible Preferred Stock | Preferred stock that an owner may exchange for a specified number of shares of common stock |
| Retained Earnings | The portion of a corporation’s profits not distributed to stockholders |
| Private Placement | Occurs when stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors |
| Financial Leverage | The use of borrowed funds to increase the return on owners’ equity |
| Lease | An agreement by which the right to use real estate, equipment, or other assets is transferred temporarily from the owner to the user |
| Term-Loan Agreement | A promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments |
| Corporate Bond | A corporation’s written pledge that it will repay a specified amount of money with interest |
| Maturity Date | The date on which a corporation is to repay borrowed money |
| Registered Bond | A bond registered in the owner’s name b the issuing company |
| Debenture Bond | A bond backed only by the reputation of the issuing corporation |
| Mortgage Bond | A corporate bond secured by various assets of the issuing firm |
| Convertible Bond | A bond that can be exchanged, at the owner’s option, for a specified number of shares of the corporation’s common stock |
| Bond Indenture | A legal document that details all the conditions relating to a bond issue |
| Serial Bonds | Bonds of a single issue that mature on different dates |
| Sinking Fund | A sum of money to which deposits are made each year for the purpose of redeeming a bond issue |
| Trustee | An individual or an independent firm that acts as a bond owners’ representative |
| Personal Budget | A specific plan for spending your income |
| Personal Investment | The use of your personal funds to earn a financial return |
| Financial Planner | An individual who has had at least two years of training in investment, insurance, taxation, retirement , planning, and estate planning and has passed a rigorous examination |
| Blue-Chip Stock | A safe investment that generally attracts conservative investors |
| Rate of Return | The total income you receive on an investment over a specific period of time divided by the amount invested |
| Liquidity | The ease with which an investment can be converted into cash |
| Primary Market | A market in which an investor purchases financial securities (via an investment bank) directly from the issuer of those securities |
| High-Risk Investment | An investment made in the uncertain hope of earning a relatively large profit in a short time |
| Institutional Investors | Pension funds, insurance companies, mutual funds, banks, and other organizations that trade large quantities of securities |
| Secondary Market | A market for existing financial securities that are traded between investors |
| Securities Exchange | A marketplace where member brokers meet to buy and sell securities |
| Over-The-Counter (OTC) Market | A network to dealers who buy and sell the stocks of corporations that are not listed on a securities exchange |
| Nasdaq | Computerized electronic exchange system through which most OTC securities are traded |
| Account Executive | An individual, sometimes called a stockbroker or registered representative, who buys and sells securities for clients |
| Market Order | A request that a security be purchased or sold at the current market price |
| Limit Order | A request that a security be bought or sold at a price that is equal to or better than some specified price |
| Discretionary Order | An order to buy or sell a security that lets the broker decide when to execute the transaction and at what price |
| Program Trading | A computer driven program to buy or sell selected stocks |
| Full Disclosure | Requirement that investors should have access to all important facts about stocks, bonds, and other securities so that they can make informed decisions |
| Prospectus | A detailed, written description of a new security, the issuing corporation, and the corporation’s top management |
| Insider Trading | The practice of board members, corporate managers, and employees buying and selling a corporation’s stock |
| Asset Allocation | The process of spreading your money among several different types of investments to lessen risk |
| Municipal Bond | Sometimes called a muni, a debt security issued by a state or local government |
| Stock Dividend | A dividend in the form of additional stock |
| Capital Gain | The difference between a security’s purchase price and its selling price |
| Market Value | The price of one share of a stock at a particular time |
| Stock Split | The division of each outstanding share of a corporation’s stock into a greater number of shares |
| Mutual Fund | A professionally managed investment vehicle that combines and invests the funds of many individual investors |
| Net Asset Value (NAV) | Current market value of a mutual fund’s portfolio minus the mutual fund’s liabilities and divided by the number of outstanding shares |
| Family of Funds | A group of mutual funds managed by one investment company |
| Buying Long | Buying stock with the expectation that it will increase in value and then can be sold at a profit |
| Selling Short | The process of selling stock that an investor does not actual own but has borrowed from a brokerage firm and will repay at a later date |
| Margin Requirement | The portion of the price of a stock that cannot be borrowed |
| Security Average (or security index) | An average of the current market price of selected securities |
