Financial Terminology Alphabet B “This file is dedicated to my all near and dear for their support” Dear Friends, It is my next file of financial terminology continues with Alphabet B. Firstly, thanks to all of you to support me and to inspire me to go ahead with my job. Hope you will be looking for next file after going through this file… 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 Debt 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 EXPENSE 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 'Contango'. 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 PGMP+MBA Email: [email protected] 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 stocks, and the prevailing interest rate. The criticism against the badla system has essentially been on two counts: equity 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 Goodwill) The excess amount of fair value of an asset or assets 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 ACCOUNTING 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 CASH 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. Balance Sheet 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.