In Chapter 1, we saw that a firm’s primary goal is to maximize its stock price. Stock prices are determined in the financial markets; so if financial managers are to make good decisions, they must understand how these markets operate. In addition, individuals make personal investment decisions; so they too need to know something about financial markets and the institutions that operate in those markets. Therefore, in this chapter, we describe the markets where capital is raised, securities are traded, and stock prices are established and the institutions that operate in these markets.