Financial Terminology Alphabet B

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Gagan Gupta Gagan Gupta (PGMP+MBA) Marketing

2 Financial Terminology- B

Words Meaning B/(W) Better or Worse. B/D Brought Down (T-accounts). B/W Black & White, Between, or Bundled With. B2B Business-to-business. B2C Business-to-consumer B2G Business-to-government BACKCHARGE It is to charge a person or a firm an amount of money in order to make adjustments for a previous transaction. BACKDOOR LISTING It is a technique used by a company which failed to get listed on an exchange, whereby the company acquires and merges with a company already listed on that exchange. BACKLOG It is value of unfilled orders placed with a manufacturing company. Whether a firm's backlog is rising or falling is a clue to its future sales and earnings. BACK-TO-BACK TRADING It allows securities dealers to trade and settle the same securities several times during the same settlement day without loss of value days. BACKUP WITHHOLDING It is a mandatory withholding that may be imposed when rules regarding taxpayer identification numbers, (usually a Social Security number) are not met by the individual. Another way for these withholdings to take effect is when a notice is issued by the IRS to withhold on payments to that individual. Backup withholding may be claimed as a credit by taxpayers on their federal income tax return. Bad An account or receivable that has been deemed unrecoverable and written-off. BAD DEBT It is an open account balance or loan receivable that has proven to be uncollectible and is written off. BAD DEBT UNCOLLECTIBLE ACCOUNT EXPENSE. Bad Debt Expense Losses for uncollectible accounts receivable. Badla System An Indian term for a trading system with a mechanism for deferring either payment for shares purchased or delivery of shares sold. The system, discontinued by the Securities and Exchange Board of India (SEBI), from March 1994, was applicable to A group or 'Specified' shares. For carrying forward a purchase transaction from one settlement period to the next, the buyer normally paid the seller a charge termed badla or ''. This consideration would be fixed in the badla session. When buyers could not take delivery, badla financiers would step in and help out the buyers. In the reverse but abnormal situation,

Gagan Gupta

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3 Financial Terminology- B when the market was in an oversold position and a buyer demanded delivery but the seller could not respond even by borrowing shares, the buyer would be paid a 'Backwardation charge', also known as undha badla. However the buyer could insist on delivery, instead of accepting deferment charges, leading to an auction of the shares in question. The Contango or backwardation charge depended on various factors including the extent of outstanding position, short sales, floating , and the prevailing . The criticism against the badla system has essentially been on two counts: and transparency. The system was slanted in favor of short sellers who could, in a normal market situation, earn interest even without owning the shares sold (it has been argued though, that such short selling helps to check speculative and frenzied buying). Also, it was suspected that the Contango and backwardation charges reportedly decided at the badla sessions were often untrue. Besides, it appears that the limit of 90 days within which the carryovers were to be settled, was often exceeded. Bad will (Negative ) The excess amount of of an or over the purchase price. BALANCE It is: a. equality between the totals of the credit and debit sides of an account; or, b. the difference between the totals of the credit and debit sides of an account. BALANCE FORWARD It is where you maintain a list of charges and payments for each account. To find out the balance at any point in time, you add the charges, add the payments, and then subtract total payments from total charges. A billing statement is sent out every month with any balance carried forward from the previous statement Balance of Payments A statement that contains details of all the economic transactions of a country with the rest of the world, for a given time period, usually one year. The statement has two parts: the Current Account and the Capital Account.The 'Current Account' gives a record of a country's: (a) Trade Balance which shows the difference of exports and imports of physical goods such as machinery, textiles, chemicals and tea, (b) 'Invisibles' that comprise services (rendered and received) such as transportation and insurance and certain other flows, notably private transfers by individuals. When imports of goods exceed exports, it is referred to as a 'Trade Deficit'. However, the overall current account position depends on both the trade balance and the performance of 'Invisibles'.

The 'Capital Account' contains details of the inward and outward flows of capital and international grants and

Gagan Gupta

PGMP+MBA Email: [email protected]

4 Financial Terminology- B loans. Examples of such flows are external assistance, foreign (direct and PORTFOLIO) investments, subscription to Global Depository Receipts or EUROCONVERTIBLE BONDS and deposits of non-residents. Inflows on the capital account are helpful in financing a current account DEFICIT. Any gap that remains is covered by drawing on exchange or gold reserves, or by credit from the International Monetary Fund. Depending on the nature of imports, a deficit on the current account indicates an excess of investment over domestic saving in an economy. So long as this deficit is kept in check (evaluated as a percentage of the CROSS DOMESTIC PRODUCT), the DEBT SERVICE RATIO would remain within manageable limits.

A challenge posed to India some years ago was the upward pressure on the Rupee's exchange rate in the wake of large capital account inflows. So, to maintain the competitiveness of India's exports, the Reserve Bank of India (RBI) resorted to purchases of foreign exchange. However, this has also caused money supply to increase, and the RBI has had to 'sterilize' such monetization by raising the RESERVE RATIO or by engaging in OPEN MARKET OPERATIONS. BALANCE OF PAYMENTS / BALANCE OF It is the difference between a country's total export dollar TRADE value and its total import dollar value, generally or with respect to a particular trading partner. A positive balance means a net inflow of capital, while a negative means capital flows out of the country. A statement of the financial position of an enterprise, as on a certain date, and in a certain format showing the type and amounts of the various ASSETS owned, LIABILITIES owed, and shareholder's funds. BALANCE SHEET It is an itemized statement that lists the total assets and the total liabilities of a given business to portray its net worth at a given moment of time. The amounts shown on a balance sheet are generally the historic cost of items and not their current values. BALANCE SHEET GEARING It is the ratio of interest-bearing debt to equity. BALANCED SCORECARD (BSC) It is a strategic management system based upon measuring key performance indicators across all aspects and areas of an enterprise: Financial, Customer, Internal Process, and Learning and Growth. BALANCING OFF THE BOOKS It means totaling off the various amounts to find out how much money is left or, how overdrawn the organization is. At certain times; e.g. once a month, quarterly, for management committee meetings; it may be necessary to 'balance off the books".

Gagan Gupta

PGMP+MBA Email: [email protected]

5 Financial Terminology- B BALLOON PAYMENT It is a final loan payment that is considerably higher than prior regular payments, in order to pay off the loan. BANCASSURANCE It is a general term describing the broader financial services activities of banks and building societies, in particular their ‘insurance company’ activities. BANK ADEQUACY RATIO (BAR) It is the amount of money which a bank has to have in the form of stockholders' capital, shown as a percentage of its assets. Currently the BAR has been agreed internationally at 8%. BANK BALANCE It is the amount of money in a bank account on a particular date as recorded by a financial institution on a bank statement. BANK COLLECTION It is the collection of a check by the bank on behalf of a depositor. Bank Guarantee The financial guarantees and performance guarantees issued by banks on behalf of their clients. A financial guarantee assures repayment of money. (e.g. an advance received on an electrification contract), in the event of non-completion of the contract by the client. A performance guarantee provides an assurance of compensation in the event of inadequate or delayed performance on a contract. A deferred payment guarantee promises payment of installments due to a supplier of machinery or equipment. BANK GUARANTEE It is an irrevocable commitment by a bank to pay a specified sum of money in the event that the party requesting the guarantee fails to perform the promise or discharge the liability to a third person in case of the requestor's default. BANK OVERDRAFT Overdraft Bank Rate The rate of interest charged by the Reserve Bank of India (RBI) on financial accommodation extended to banks and FINANCIAL INSTITUTIONS. The support is provided in the form of a bills rediscounting facility and advances or REFINANCE against specified ASSETS (e.g. TREASURY BILLS and DATED SECURITIES) or PROMISSORY NOTES. The intent behind changing the Bank Rate at certain junctures is to raise or lower the cost of funds that banks obtain from the RBI. This, in turn, would alter the structure of banks' interest rates and thereby serve to curb or encourage the use of credit. However, the Bank Rate is a relatively passive instrument of credit control. In the wake of the East Asian currency crisis, the RBI used the Bank Rate in conjunction with the CASH RESERVE RATIO and other measures to stabilize the exchange rate of the Rupee.

Gagan Gupta

PGMP+MBA Email: [email protected]

6 Financial Terminology- B In recent times, it has been RBI's endeavor to make the Bank Rae and effective signaling device as well as a reference rate. However, since frequent changes in the Bank Rate may be undesirable, the short-term REPOS interest rate seems to be a useful supplement in influencing the flow and cost of funds in the short term. It is the verification of a bank statement balance and the depositor’s checkbook balance. BANK STATEMENT It is a statement reporting all transactions in the accounts held by the account holder. BANKRUPTCY It is a state of insolvency of an organization or individual, i.e. an inability to pay . In the U.S., bankruptcy can take either of three forms: A) Chapter 7 is involuntary liquidation forced by creditor(s). Some companies are so far in debt that they can't continue their business operations. They are likely to "liquidate" and are forced to file under Chapter 7. The courts take over and administers through a court appointed trustee. Their assets are sold for cash by a court appointed trustee. Administrative and legal are paid first, and the remainder goes to creditors. B) Chapter 11 is voluntary by the debtor. Unless the court rules otherwise, the debtor stays in control of the enterprise. The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt. C) Chapter 13 bankruptcy, a debtor proposes a 3-5 year repayment plan to the creditors offering to pay off all or part of the debts from the debtors' future income. The amount to be repaid is determined by several factors including the debtors' disposable income. To file under this chapter you must have a "regular source of income" and have some disposable income. Like in a Chapter 7, corporations and partnerships may not file under this chapter. BAR BANK ADEQUACY RATIO. BARRIERS TO ENTRY These are obstacles to the entry of new firms into a market. Barriers to entry may take various forms. They may be technical barriers, legal barriers or barriers that arise from strong branding of the product. BARS This is an acronym for Base Accounts Receivable System. BARTER SYSTEM TRADE EXCHANGE. BAS Basic Accounting System, Business and Administrative Services, or Bachelor of Arts and Sciences.

Gagan Gupta

PGMP+MBA Email: [email protected]

7 Financial Terminology- B BASE AMOUNT It is the fundamental numerical assumption from which something is begun or developed or calculated or explained, e.g. base pay. BASE CAPITAL It includes: (1) shares that (a) are non-cumulative, non- retractable, non-redeemable and, if convertible, are only convertible into common shares, and (b) have been issued and paid for; base capital also includes (2) contributed surplus (3) Retained earnings. BASIC ACCOUNTING Normally includes the areas of ; Accounts; Assets, Liabilities, Equity, and Expenses; and, an accounting system that offers a method for checking, balancing, and reconciling all accounting related transactions in order to produce accurate pictures of the entities financial health. Profit and Loss Reports, Balance Sheets, and Cash Flow Statements are the end result of compiling all the transactions into meaningful, usable information for individuals and business owners alike. BASIC DEFENSE INTERVAL (BDI) It is a measure that if for some reason all of your were to suddenly cease, the Basic Defense Interval (BDI) helps determine the number of days your company can cover its cash expenses without the aid of additional financing. The BDI is calculated: (Cash + Receivables + Marketable Securities) / ((Operating Expenses + Interest + Income Taxes) / 365) = Basic Defense Interval. BASIC EARNINGS POWER (BEP) It is useful for comparing firms in different tax situations and with different degrees of financial leverage. This ratio is often used as a measure of the effectiveness of operations. Basic Earning Power measures the basic profitability of Assets because it excludes consideration of interest and tax. This ratio should be examined in conjunction with turnover ratios to help pinpoint potential problems regarding asset management. Formula: EBIT / Total Assets BASIC PER SHARE It is always reported as net income per share on an undiluted basis. The calculation of diluted net income per share includes the effect of common equivalents such as outstanding stock options, while the calculation of basic net income per share does not. BASIC TENETS OF ACCOUNTING These are four in number: 1. Assets = Liabilities + Owner's Equity 2. Debits = Credits 3. Assets are on the left (debit side) 4. Liabilities and Equity are on the right (credit side).

Gagan Gupta

PGMP+MBA Email: [email protected]

8 Financial Terminology- B BASIS Generally, it is that figure or value that is the starting point in computing gain or loss, , depletion, and amortization of a company. Specifically, it is the financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. This new basis is called the ADJUSTED BASIS. BASIS In investments, It is the cost or book value of an investment. The gain or loss on an investment is the sale price less the basis. Basis is often called "cost basis." BASIS POINTS It is 0.01% in yield. For example, in increasing from 5.00% to 5.05%, the yield increases by five basis points. BATCH It is a collection of things or persons to be handled or processed together. BATCH COSTING BATCH COSTING is the identification and assignment of those costs incurred in completing the manufacture of a specified batch of components. Having arrived at the batch cost, the unit cost is simply derived by dividing it by the number of components in the batch. BATCHING In accounting, It is the gathering and organizing of incoming invoices prior to processing. BAY Buy Another Yearly. BBA Bachelor of Business Administration, Balanced Act of 1997, Budget Activity Account, Budget By Account, British Bankers Association, Black Business Association, etc. BCF Broadcast Cash Flow. BCL Bank Comfort Letter or Bachelor of Canon/Civil Law. BDI BASIC DEFENSE INTERVAL. BE Best Estimate, Best Effort, or Bill of Exchange. Bear A person who expects share prices in general to decline and who is likely to indulge in SHORT SALES. Bear Market A long period of declining security prices. Widespread expectations of a fall in corporate profits or a slowdown in general economic activity can bring about a bear market. Or A market characterized by falling prices for securities. BEHAVIOURAL ACCOUNTING The explanation and prediction of human behavior in all possible accounting contexts, e.g., adequacy of disclosure, usefulness of data, attitudes about corporate reporting practices, judgments, and decision effects of alternative accounting procedures.

Gagan Gupta

PGMP+MBA Email: [email protected]

9 Financial Terminology- B BELOW THE LINE In accounting, It denotes credits or debits affecting balance sheet accounts rather than the . Extraordinary items may also appear below the net profit line in the income statement, but accounting standards- setters have increasingly favored reflecting most such items in periodic net income. BENCHMARK A study to compare actual performance to a standard of typical competence; or, a standard for the basis of comparison as being above, below or comparable to. BENEFICIAL OWNER The person who enjoys the benefits of ownership even though title is in another name (often used in risk arbitrage). BENEFICIARY A person who benefits from the terms of a trust, pension or provident fund, or other deferred income plan, or an insurance policy. In banking, it is the person in whose favor a letter of credit is issued or a draft is drawn. BENEFIT TAXABLE BENEFITS. Or The total amount of indirect compensation that the business will provide to employees for each forecast year. Benefits are either statutory, such as payroll taxes and worker's compensation; or discretionary, such as health insurance, life insurance, and 401(K) plans. BENEFIT PERIOD The projected useful life time period over which an asset will be productive. BEST PRACTICES The generally understood operational characteristics of corporations which have been successful in terms of high repayment rates, significant outreach, and progress towards surplus generation. BETA In securities, It is a statistical measurement correlating a stock's price change with the movement of the stock market. The beta is an indicator or statistical measure of the relative volatility of a stock, fund, or other security in comparison with the market as a whole. The beta for the market is 1.00. Stocks with betas above 1.0 are more responsive to the market, but are also more risky investments. Stocks with a beta below 1.0 tend to move in the opposite direction of the market. For example, if the market moves 10%, a stock with a beta of 3.00 will move 30%; a stock with a beta of .5 will move 5%. BID PRICE ASK PRICE. BIFURCATED Generally means to be divided into or made up of two parts. In accounting an example would be: to split the cash account in the accounting records into two accounts, cash – principal and cash – income. BIG 4 Usually refers to the largest accounting firms: Deloitte & Touché, Ernst and Young, KPMG, and PricewaterhouseCoopers.

Gagan Gupta

PGMP+MBA Email: [email protected]

10 Financial Terminology- B BIG BATH A business strategy in which a company manipulates its income statement to make poor results look even worse. Strategy being that the following year will show significant improvement. Big bath is sometimes employed by new CEOs to make their first year’s results more impressive by employing big bath accounting to prior year results. BILL It is: A) to enter in an accounting system : prepare a bill of (charges) B) to submit a bill of charges to C) to enter (as freight) in a waybill D) to issue a bill of lading to or for e.g., "billable expenses" are those expenses for which reimbursement invoices are issued. BILL AND HOLD Ship In place BILL AND HOLD SHIP IN PLACE. BILL IN PLACE SHIP IN PLACE. BILL OF EXCHANGE Draft BILL OF LADING It is the contract between the owner of the goods and the cargo carrier to move the goods to a specified destination. A clean bill of lading is issued by the carrier verifying receipt of the merchandise in apparent good condition (without visually apparent damage or defect). Bills of lading can sometimes be made to cover the whole trip, or separate bills of lading can be prepared for each carrier. Ocean shipments generally require two, an Inland Bill of Lading covering land transportation to the port and an Ocean Bill of Lading covering the ship portion. Bills of lading are negotiable while cargo is in transit. BILL OF MATERIALS (BOM) It is a listing of all the assemblies, sub-assemblies, parts, and raw materials that are needed to produce one unit of a finished product. Each finished product has its own bill of materials. BILL OF SALE It is a written statement attesting to the transfer (sale) of goods, possessions, or a business to a buyer. BILLABLE Those costs and/or expenses that are covered under a contractual agreement between two entities that may be billed to the receiving entity. BILLABLE HOURS Professional hours worked and billed to clients. BILLBACK In e-commerce and credit card transactions, It is a means of recovering or reducing interchange fees for transactions clearing differently than planned. The processing company (FDC) passes through the charges to the merchant. BILLINGS The request for payment of a debt. Or Generally, It is the request for payment of a debt. In accounting, it is sales for which invoicing has been issued.

Gagan Gupta

PGMP+MBA Email: [email protected]