Fin 370 Defining Financial Terms

Investments. “The analysis and process of choosing securities and other assets to purchase.” (Cornett, Adair, & Nofsinger, 2016, p. 7).

One such metric used by security departments and many organizations to ensure capitol is allocated in the areas it will do the most good is known as return on investment (ROI). ROI looks at the total amount of capital expenditures for the budgeted item or project. Management can then assess whether the total cost of the system provides the necessary return on investment to justify the expenditure. For example, if a security department was installing a new employee badging system, management would look at the capital cost of the system to assess if it provides the necessary return on investment by preventing unauthorized access and protecting

Dividend Yield: measures cash return per common share by dividing annual cash dividends per share by market price per share.

Finance is the act/process/study of managing money in such a way that you aquire and keep more money, and lose less of it. Finance is deciding what to do with the money you have. Accounting is figuring out how much money you have.

Return on investment (ROI) time value of money for the investment may not be applicable by the time the investment start making money, I would need to evaluate the investment, the risk of the investment, and the future value of the investment. Other factors that will contribute to the ROI is the interest amount on the borrowed money for the

Return on Assets (ROA): “Return on assets is the ratio of annual net income to average total assets of a business during a financial year.” (Irfanullah, 2013) In short, it measures a company’s

Yield - Describes the amount in cash that returns to the owners of a security. Yield applies to various stated rates of return on stocks, bonds and other investment type insurance products.

The IRR method is also known to sometimes have multiple values, one value or no values for a rate of return. This would depend on the time horizon of the project also to whether the project is viable or not. Another limitation is that the IRR method overstates the equivalent annual rate of return when cash flows aren’t per annum and reinvested at different reinvestment rates.

Since, return on assets equals net income divided by total assets, it can cause companies not to invest in their total assets and abuse their workforce. Such as in the oil refinery example, they had no more total assets, and net income kept rising, the total assets worked harder and harder, which caused net income to rise against the flat total assets.

the amount of time required for an investment to generate cash flows sufficient to recover its initial cost

Efficiency refers to how productive a company is in using its assets. Efficiency is usually measured relative to how much revenue is generated for a certain level of assets.

"The field of finance is largely about helping businesses and other organizations make money. Finance majors learn how to make financial decisions for organizations. Course work covers such topics as planning, raising funds, making wise investments, and controlling costs." Finance majors practice making investment decisions, understand the economy and the stock market, work with complex computer programs, and learn how to create and manage a budget. (Citation) Both accounting and finance majors deal with money and learning how to understand it

Finance is the study of applying specific value to things we own, services we use and decisions we make. Financial management is the process for and the analysis of making financial decisions in the business context. The major subareas of finance are investments, financial management, financial institutions, market, and international finance. Risk is a potential future negative impact to value and or cash flow. It is often discussed in terms of probability of loss and the expected magnitude of the loss.

The historical roots on Return on Investments (ROI) have an extensive historical background which involves the Du Pont system. It is significant to illustrate the major history behind the Return on Investments (ROI) and how the Du Pont system started. The purpose of the Return on Investment (ROI) is to evaluate the efficiency of an investment or compare the efficiency of various investments. In addition to (ROI) share the common class of profitability ratios. Several examples will show how Return on Investments (ROI) and the Du Pont system has established life-long formulas to help indicate growth or decline on financial investments.

Last but not least important, an efficient capital market is one in which stock prices fully reflect all available information. However, the paradox is that since information is reflected in security prices quickly, knowing information when it is released does an investor little good. Furthermore, it is impossible to create a portfolio which would earn extraordinary risk adjusted return. As a consequence, all the technical and fundamental analysis are useless, no one can consistently outperform the market, and new