Financial Management: Principles and Applications, 13/e

2.3 The Financial Marketplace: Securities Markets

A security is a negotiable instrument that represents a financial claim. It can take the form of ownership (stock) or a debt agreement (bond). Businesses and individual investors can trade the securities issued by public corporations—that is, those whose debt and equity are traded in the public securities markets. Securities markets are typically discussed in terms of the primary and secondary markets. A primary market is a market in which new, as opposed to previously issued, securities are bought and sold for the first time. In this market, firms issue new securities to raise money that they can then use to help finance their businesses. The key feature of the primary market is that the firms ...