Financial Terminology

Alphabet B

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Gagan Gupta Gagan Gupta

(PGMP+MBA)
Marketing
Financial Terminology- B 2

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: ggngupta.sns@gmail.com
Financial Terminology- B
Bad will (Negative Goodwill)
BALANCE
BALANCE FORWARD ACCOUNTING
Balance of Payments
3
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.
The excess amount of fair value of an asset or assets over
the purchase price.
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.
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
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: ggngupta.sns@gmail.com
Financial Terminology- B
BALANCE OF PAYMENTS / BALANCE OF
TRADE
Balance Sheet
BALANCE SHEET
BALANCE SHEET GEARING
BALANCED SCORECARD (BSC)
BALANCING OFF THE BOOKS
4
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.
It is the difference between a country's total export dollar
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.
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.
It is the ratio of interest-bearing debt to equity.
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.
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: ggngupta.sns@gmail.com
Financial Terminology- B 5
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: ggngupta.sns@gmail.com
Financial Terminology- B 6
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.
BANK RECONCILIATION 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 debts. 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 expenses 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: ggngupta.sns@gmail.com
Financial Terminology- B
BASE AMOUNT
BASE CAPITAL
BASIC ACCOUNTING
BASIC DEFENSE INTERVAL (BDI)
BASIC EARNINGS POWER (BEP)
BASIC NET INCOME PER SHARE
BASIC TENETS OF ACCOUNTING
7
It is the fundamental numerical assumption from which
something is begun or developed or calculated or
explained, e.g. base pay.
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.
Normally includes the areas of Debits and Credits;
Accounts; Assets, Liabilities, Equity, Revenue 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.
It is a measure that if for some reason all of your revenues
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.
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
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 stock equivalents
such as outstanding stock options, while the calculation of
basic net income per share does not.
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: ggngupta.sns@gmail.com
Financial Terminology- B 8
BASIS Generally, it is that figure or value that is the starting point
in computing gain or loss, depreciation, 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 Budget 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 financial statement data, attitudes about
corporate reporting practices, materiality judgments, and
decision effects of alternative accounting procedures.

Gagan Gupta
PGMP+MBA
Email: ggngupta.sns@gmail.com
Financial Terminology- B 9
BELOW THE LINE In accounting, It denotes credits or debits affecting
balance sheet accounts rather than the income statement.
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: ggngupta.sns@gmail.com
Financial Terminology- B 10
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 INVENTORY 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: ggngupta.sns@gmail.com
Financial Terminology- B 11
BILLINGS IN EXCESS OF COSTS COST IN EXCESS OF BILLINGS.
Bills of Exchange A credit instrument that originates from the creditor
(drawer) on which the DEBTOR (drawee’s) acknowledges
his LIABILITY; after such acceptance, the drawer may get
the bill discounted, so as to realize the proceeds
immediately. As an illustration, consider the following :
Hindustan Rasayans, a supplier of chemicals, draws a 90-
day bill of Rs. 6,20,000 on Indian Parma Corporation
(drawee’s) directing the drawee’s to make payment at the
end of 90 days to or to the order of Pyramid Finance
Limited (payee).
After the drawee’s accepts the bill, it is discounted with
Pyramid Finance at a DISCOUNT RATE of 20 percent per
annum. Hindustan Rasayans thus receives
6,20,000 x (1 – (90/365 x 20/100)) = Rs.5,89,425
The effective interest rate works out to 21 percent :
6,20,000 – 5,89,425 365
5,89,425 90
BILLS PAYABLE in merchant accounts, These are all bills which have been
accepted, and promissory notes which have been made,
are called "bills payable," and are entered in a ledger
account under that name, and recorded in a book bearing
the same title.
BILLS PURCHASED In trade finance, allows a seller to obtain financing and
receive immediate funds in exchange for a sales document
not drawn under a letter of credit. The bank will send the
sales documents to the buyer's bank on behalf of the
seller.
BILLS RECEIVABLE In merchant accounts, These are all promissory notes, bills
of exchange, bonds, and other evidences or securities
which a merchant or trader holds, and which are payable
to him.
BIN CARD It is a stock status recording document for a particular
material/item held in a stock room. It is for the recording
of stock receipts and issues and the running balance which
should be on hand.
BIR Bureau of Internal Revenue, Benefit/Investment Ratio, or
Best Incremental Return.
BLACK HOLE EXPENDITURE A capital R&D expenditure that does not give rise to a
depreciable asset and is not otherwise deductible.
BLACK MARKETS These are created when buyers and sellers meet to
negotiate the exchange of a prohibited or illegal good.
More generally, it is any unofficial market in which prices
are inordinately high.
BLANKET AUTHORIZATION It is direct authority to act without having to gain approval
for each action. For example: "Blanket authorization was
given to him for all his business travel".

Gagan Gupta
PGMP+MBA
Email: ggngupta.sns@gmail.com
Financial Terminology- B 12
BLANKET PURCHASE ORDER It is a long-term commitment to a supplier for material
against which short-term releases will be generated to
satisfy requirements. Often blanket orders cover only one
item with predetermined delivery dates.
BLENDED COSTS It is the cost of pre-set multiple items or processes that
result in more than one end result or product. In a sense it
is a form of cost averaging rather than stand-alone costing
of one given product or identified process.
BLIND RECEIVING It is a method to ensure more accurate warehouse receipt
counts, i.e., PO quantities or items are not displayed on
receiving tickets.
BLIND TRUST It is a trust where assets are not disclosed to their owner.
Blue Chip A share of a company that is financially very sound, with
an impressive track record of earnings and DIVIDENDS,
and which is highly regarded for its competent
management, quality products and/or services. Examples
in India are Hindustan Lever, Gujarat Ambuja Cements,
and Reckitt & Colman among others.
BLUE CHIP COMPANY In the equities market, is typified by a large and
creditworthy company. Such a company is renowned for
the quality and wide acceptance of its products or
services. Blue chip companies consistently make money
and pay dividends.
BLUE SKY LAW It is a law providing for state regulation and supervision of
the issuance of investment securities.
BMR Base Mortgage Rate.
BOA Board of Auditors, Bank of America, Board of Adjustment,
or Basic Ordering Agreement.
BOM BILL OF MATERIALS.
BONA FIDE GUARANTY It covers a specific element of a secured transaction, for
example, the integrity of receivables or the accuracy of
inventory count.
Bond A long-term debt instrument on which the issuer pays
interest periodically, known as 'Coupon'. Bonds are
secured by COLLATERAL in the form of immovable
property. While generally, bonds have a definite
MATURITY, 'Perpetual Bonds' are securities without any
maturity. In the U.S., the term DEBENTURES refers to long-
term debt instruments which are not secured by specific
collateral, so as to distinguish them from bonds.
It is a certificate of debt (usually interest-bearing or
discounted) that is issued by a government or corporation
in order to raise money; the issuer is required to pay a
fixed sum annually until maturity and then a fixed sum to
repay the principal.
BOND COVENANT These are agreements within a bond that can either be

Gagan Gupta
PGMP+MBA
Email: ggngupta.sns@gmail.com
Financial Terminology- B 13
negative or positive in the view of the bondholder, e.g., a
negative bond covenant is a bond covenant that prevents
certain activities unless agreed to by the bondholders.
BOND DISCOUNT It is the excess of a bond face value over issued price.
BOND FUND GLOBAL MUTUAL FUND.
BOND INDENTURE It is the title specifying all the obligations of the issuing
company to the bondholder.
Bond Insurance A form for credit enhancement, which provides a financial
guarantee on the obligations of a debt instrument. The
purpose of credit enhancement is to increase the safety of
debt securities. Apart from financial guarantees, other
forms of credit enhancement include letter of credit,
overcollateralization, etc. Overcollateralization involves
the provision of additional assets as security.
BOND PREMIUM It is the excess of the issue price over the face value of the
bond.
BOND REFERENDUM REFERENDUM.
BOND SINKING FUND It is a provision to repay a bond.
BONDED It is to:
A) secure payment of duties and taxes on (goods) by
giving a bond; or
B) convert into a debt secured by bonds; or
C) Provide a bond for or cause to provide such a
bond (e.g., to bond an employee) that guarantees
any monetary loss caused by intentional acts by
the bonded employee.
BONDED WAREHOUSE It is a warehouse authorized by customs officials for the
storage of goods on which payment of duty is deferred
until the goods are removed.
BONDING It is generally used by service companies as a guarantee to
their clients that they have the necessary ability and
financial tracking to meet their obligations. Bonds are also
used to guarantee payment of duty for U.S. Customs entry.
Bonds Payable A long-term liability that represents a promise to pay a
sum of money plus interest at a maturity date (a
designated date in the future).
BONUS It is remuneration over and above regular salary.
BONUS ISSUE SCRIP ISSUE.
Bonus Shares The issue of shares to the shareholders of a company, by
capitalizing a part of the company's reserves. The decision
to issue bonus shares, or stock DIVIDEND as in the U.S.,
may be in response to the need to signal an affirmation to
the expectations of shareholders that the prospects of the
company are bright; or it may be with the motive of
bringing down the share price in absolute terms, in order

Gagan Gupta
PGMP+MBA
Email: ggngupta.sns@gmail.com
Financial Terminology- B 14
to ensure continuing investor interest. Following a bonus
issue, though the number of total shares increases, the
proportional ownership of shareholders does not change.
The magnitude of a bonus issue is determined by taking
into account certain rules, laid down for the purpose. For
example, the issue can be made out of free reserves
created by genuine profits or by share PREMIUM collected
in cash only. Also, the residual reserves, after the
proposed capitalization, must be at least 40 percent of the
increased PAID-UP CAPITAL. These and other guidelines
must be satisfied by a company that is considering a bonus
issue.
Book Building A process used to ascertain and record the indicative
subscription bids of interested investors to a planned issue
of securities. The advantages of this technique of
obtaining advance feedback are that it results in optimal
pricing and removes uncertainty regarding mobilization of
funds.
The concept of book building is alien to India's PRIMARY
MARKET; so, towards the end of 1995, efforts were under
way, to introduce this mechanism as an option in the case
of large issues (minimum size: Rs.100 crore). An issue was
divided into a 'Placement Portion' and another termed
'Net Offer to the Public'. For the Placement Portion, the
exercise of book building enables the issuing company to
interact with institutional and individual investors, and
collect particulars of the number of shares they would buy
at various prices. The procedure is carried out by a lead
manager to the issue, called the 'Book Runner'. It
commences with the circulation of a preliminary
PROSPECTUS and an indicative price band, for the purpose
of forming a syndicate of underwriters, comprising
FINANCIAL INSTITUTIONS, MUTUAL FUNDS and others.
This syndicate, in turn, contacts prospective investors in
order to elicit their quotes. These quotes are forwarded to
the book runner, who prepares a schedule of the size of
orders at different prices. After receiving a sufficient
number of orders, the company and the merchant bankers
decide the issue price and underwriting particulars. There
are some other aspects of book building arising from the
guidelines issued by the Securities and Exchange Board of
India. A change brought about in 1997 was that the book
building process could be applied to the extent of 100
percent of the issue size, for large issues as defined above.
Interestingly, the process has been used in India to place
debt securities as well.
BOOK COST Normally, It is the cost at the time an asset is purchased or
realized, i.e. the total amount paid to acquire an asset.

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Financial Terminology- B 15
BOOK INCOME It is the income reported within the financial statements
of the taxable entity, i.e., taxable income normally is not
aligned with the financial income (book income) reported
within financial statements
BOOK INVENTORY It is the acquisition cost of all inventories fewer liabilities
associated with the inventory.
BOOK OF ACCOUNTS Ledger
BOOK OF FINAL ENTRY Ledger
BOOK PROFIT BOOK INCOME.
Book Value It is the amount of NET ASSETS that would be available per
EUQUITY SHARE, after a company pays off all LIABILITES
including PREFERENCE SHARES from the sale proceeds of
all its ASSETS liquidated at BALANCE SHEE values.
BOOK VALUE It is an accounting term which usually refers to a business'
historical cost of assets less liabilities. The book value of a
stock is determined from a company's records by adding
all assets (generally excluding such intangibles as
goodwill), then deducting all debts and other liabilities,
plus the liquidation price of any preferred stock issued.
The sum arrived at is divided by the number of common
shares outstanding and the result is the book value per
common share. Book value of the assets of a company
may have little or no significant relationship to market
value.
Tangible Book Value is different than Book Value in that it
deducts from asset value intangible assets, which are
assets that are not hard (e.g., goodwill, patents, capitalized
start-up expenses and deferred financing costs).
Economic Book Value allows for a Book Value analysis that
adjusts the assets to their market value. This valuation
allows valuation of goodwill, real estate, inventories and
other assets at their market value.
Book Value of an Asset Cost of the asset (the amount that was paid for it) minus
accumulated depreciation.
BOOK VALUE OF EQUITY It is the difference between the book value of assets and
the book value of liabilities.
BOOK(S) When used as a noun refers to journals or ledgers (for
example: cash book). When used a verb it refers to the
recording of an entry (for example: to book the sale).
BOOKBUILD It is a particular way of conducting a float where the price
at which shares are sold is not fixed, but rather is
determined following a process in which interested
investors bid for shares. This is quite a common way of
determining the price paid for shares by institutional
investors (Funds Managers).
BOOK-ENTRY-ONLY These are securities that are recognized as belonging to a

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Financial Terminology- B 16
particular owner, without the creation of a physical stock
certificate.
BOOK-ENTRY-SECURITIES BOOK-ENTRY-ONLY.
BOOKING In import / export, It is an arrangement with a shipping
company to load and carry a shipment.
BOOKKEEPING It is the recording of business transactions. Or
It is the art, practice, or labor involved in the systematic
recording of the transactions affecting a business.
BOOKS OF ACCOUNT These are the financial records of a business. Usually refers
to the lowest level of recorded data, before summaries are
made.
BOOKS OF RECORD These are all mandatory entries into those documents that
track the activity, events, or decisions pertaining to the
subject for which the records are maintained, e.g., board
of director minutes, births or deaths, and marriage
licenses.
BOOK-TAX DIFFERENCE It is pretax book income minus tax net income.
BOOK-TO-BILL RATIO It is the ratio of orders taken (sic booked) to products
shipped and bills sent (sic billed). The ratio is a measure of
whether a company has more, equal to or less than the
orders than it can likely produce and deliver. The book-to-
bill ratio is primarily of interest to investors or traders in
the high-tech sector.
BOOK-TO-MARKET It is the ratio of the firm's book equity to market equity.
BOOT It is money received during an exchange to equalize
values, e.g. if a person sells his business for an assumption
of liabilities and for some cash the cash is 'boot.'
BORROWING COSTS It is the financial costs incurred by an enterprise in
connection with the borrowing of funds, i.e. interest,
amortization of discounts or premiums arising on the issue
of debt securities, loan fees, gains and losses on foreign
currency differences related to borrowed funds and
regarded as an adjustment to interest costs.
BOTTOM LINE In accounting/finance, It is specifically net income after
taxes. In general, it is an expression as to the end results of
something, e.g. the net worth of a corporation on a
balance sheet, sales generated from a marketing
campaign, or final decision on most any subject (Often
said: “give me the bottom line”).
BOTTOM UP It is a concept of analyzing a subject, such as costs or
revenue, starting from the lowest level working towards
the top.
BOUGHT LEDGER LEDGER.
Bought-out Deal The sale of securities under a negotiated agreement
between an issuer and the investing institution, as an
alternative to a PUBLIC ISSUE. The intent on the part of the

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Financial Terminology- B 17
buyer is to offload the securities later in the market at a
profit. Bought-out deals are commonplace in issues of the
Over the Counter Exchange of India (OTCEI). The
advantage to the issuing company is the saving in time and
cost that a public issue would entail. It is a big help to
unlisted companies and projects, which must see through
a gestation period before tapping the PRIMARY MARKET.
For institutions and MUTUAL FUNDS, the route is another
avenue for investing funds. However, there could be some
disadvantages to the issuer such as interference by the
INSTITUTIONAL INVESTOR or restrictive CONVENANTS in
the initial subscription agreement. On the other hand, the
institutional investor or the sponsor in OTCEI deals, bears
the risk of capital loss due to a fall in the price of the
securities.
BOUNCED CHECK It is a check written for an amount exceeding the checking
account balance that is subsequently rejected for payment
due to insufficient funds.
BOY Beginning Of Year.
BPO Dependent upon usage, could mean Business Process
Outsourcing, Business Process Optimization, Blanket
Purchase Order, Broker Price Opinions, Business Process
Object, or Bank Payment Order.
BR Backward Reporting or Bad Register.
BRANCH ACCOUNTING It is accounting for geographically separated sections of
enterprises. The accounting system adopted depends
upon the degree to which the branch is controlled from its
head office.
BRAND IMAGE It is the view held by consumers about a particular brand
of good or service. The stronger the brand image the more
inelastic the demand for the product is likely to be.
BRAND LOYALTY It is a situation when a consumer is reluctant to switch
from consumption of a favored good. The consumer is
"loyal" to the brand.
BRAND NAME It is a name given to a product or service.
BREACH OF CONTRACT It is the failure to perform provisions of a contract.
Breakeven Analysis An analysis tool that models how revenue, expenses, and
profit vary with changes in sales volume. Breakeven
analysis estimates the sales volume needed to cover fixed
and variable expenses. Or
It is an analysis method used to determine the number of
jobs or products that need to be sold to reach a break-
even point in a business.
BREAK-EVEN EQUATION It is the equation that determines BREAK-EVEN POINT. Let
P = unit selling price, V = unit variable cost, FC = total fixed
costs, X = sales in units. The equation: PX = VX + FC.

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Financial Terminology- B 18
Breakeven Point The sales level at which revenues equal expenses (fixed
and variable). Or
It is the volume point at which revenues and costs are
equal; a combination of sales and costs that will yield a no
profit/no loss operation. Or
The point where the revenues from a business operation
equal the total costs (FIXED COSTS = VARIABLE COSTS).
Thus, a profit accrues when revenues exceed the break-
even point. The break-even volume is computed by
dividing the fixed costs (FC) by the difference between the
selling price per unit (SP) and variable cost per unit (VC).
For instance, if FC is Rs. 4,000, VC is Rs.60 and SP is Rs.85,
the break-even volume is 4,000/(85-60) = 160 units of
output.
The break-even point in terms of revenues can be
determined by dividing the fixed costs by the contribution
margin ((SP-VC)/SP). Thus.
4000 = Rs.13,600
((85-60)/85), which equals the revenues at 160 units.
BREAK-EVEN SALES BREAK-EVEN POINT.
Bridge Loan A short-term loan granted to a borrower to tide over a
temporary funds shortage. Such an accommodation is
usually arranged at the time of a PUBLIC ISSUE, when
expenditures on a project lead to a DEFICIT, thereby
necessitating a bridge loan.
BRIDGE LOAN (BRIDGING LOAN) It is an equity loan secured to solve short-term financing
problem.
BRITISH-AMERICAN MODEL It is an accounting model. There are other accounting
systems which differ from the U.S. accounting model. U.S.
GAAP and FASB standards are not the only accounting
principles used internationally; for example, many
countries reverse the U.S. debit and credit system. Many
countries with high rates of inflation account for inflation
in financial reports much more than the U.S. does. Also,
for any company operating internationally there is the
currency exchange translation problem when
consolidating financial statements.
BROKERAGE Dependent upon usage, is the business of a broker;
charges a fee to arrange a contract between two parties,
or, the place where a broker conducts his/her business.
BROUGHT FORWARD It is the recognition of a value that was determined in the
past, e.g. an accumulated balance brought forward at the
start of a new accounting period.
BSP Business Service Provider, Billing and Settlement Plan
(airlines), Business Systems Planning, or Bank Settlement
Plan.
BUDGET BUDGET is an itemized listing of the amount of all

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Financial Terminology- B 19
estimated revenue which a given business anticipates
receiving, along with a listing of the amount of all
estimated costs and expenses that will be incurred in
obtaining the above mentioned income during a given
period of time. A budget is typically for one business cycle,
such as a year, or for several cycles (such as a five year
capital budget). Of the many kinds of budgets, a CASH
BUDGET shows CASH FLOW, an EXPENSE BUDGET lists
expected payments of money, and a CAPITAL BUDGET
shows the anticipated payments for CAPITAL ASSETS. Or
A financial plan that projects receipts and payments of an
entity covering a specific period of time, usually one year.
Its primary purpose is to achieve financial control. Budgets
could be distinguished on the basis of time span, function
and flexibility. For instance, budgets may be short-term or
long-term; similarly, there are Sales Budgets, Cash
Budgets, Capital Expenditure Budgets and other to cover
different functions.
BUDGET CONTROL It is actions carried out according to a budget plan.
Through the use of a budget as a standard, an organization
ensures that managers are implementing its plans and
objectives. Their actual performance is measured against
budgeted performance.
BUDGET PERFORMANCE REPORT It is the comparison of planned budget and actual
performance.
BUDGET REVIEW PROCESS It is a formalized process designed to provide an open,
inclusive, and objective process by which to allocate entity
resources. Allocation of resources should: a. Be consistent
with the Mission and Strategic Plan, and the President’s
budget priorities for the entity, b. Meet the requirements
set forth by the board of directors, and c. Support
appropriate and prudent long term fiscal stability and
sustainability.
BUDGETARY ACCOUNTING It is contrary to financial accounting, looks forward: it
measures the cost of planned acquisitions and the use of
economic resources in the future.
BUDGETARY CONTROL It is a control technique whereby actual results are
compared with budgets. Any differences (variances) are
made the responsibility of key individuals who can either
exercise control action or revise the original budgets. See
BUDGET CONTROL.
BUDGETARY DEFICIT It occurs when expenditures are greater than revenues.
BUDGETING It is the documenting of intended expenditures over a
specified time period (normally one year) along with
proposals for how to meet them. See also ZERO BASED
BUDGET. Or
The process of determining and recording the expected

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Financial Terminology- B 20
financial results of a future period, generally the next fiscal
year. In some organizations budgeting is limited to
financial items that are shown on the income statement,
while in others the budgeting process produces the three
major statements (Income Statement, Balance Sheet, and
Cash Flow Statement). After the target time period begins,
the budgeting process frequently includes tracking actual
financial figures against the forecast as well. There is
considerable overlap between the activities of budgeting
and forecasting. Budgeting usually involves a more
detailed account structure and a finer time scale than
forecasting, which typically covers between three and
seven years of higher-level projections.
BUDGETING PROCESS It is a systematic activity that develops a plan for the
expenditure of a usually fixed resource, such as money or
time, during a given period to achieve a desired result.
BUFFER This is anything that stands between two other things. For
example, an inventory buffer would be additional
inventory over and above committed or planned
inventory. The inventory buffer will act as an inventory
reserve to ensure that sufficient inventory is available
when and if required, i.e., the buffer inventory stands
between committed inventory and 'out-of-stock' status.
BUFFER STOCK STOCK RESERVE.
Bull A person who expects share prices in general to move up
and who is likely to take a long position in the stock
market.
BURDEN RATE When referring to personnel burden, is the sum of
employer costs over and above salaries (including
employer taxes, benefits, etc.). When referring to factory
or manufacturing see OVERHEAD.
BURN RATE It is the rate at which a new company uses up its venture
capital to finance overhead before generating positive
cash flow from operations. It is the rate of negative cash
flow, usually quoted as a monthly rate.
BURSARY It is the treasury of a public institution or religious order.
BUSINESS ANALYST In securities/investment industry, It is a person with
expertise in evaluating financial investments; a business
analyst performs investment research and makes
recommendations to institutional and retail investors to
buy, sell, or hold; most analysts specialize in a single
industry or business sector.
BUSINESS COMBINATION The merger of separate entities or operations of entities
into one reporting entity.
BUSINESS ENTITY A selection of the legal form under which a business is to
operate: sole proprietorship, general partnership,
corporation, S corporation (in the U.S.), or, a limited

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Financial Terminology- B 21
liability company.
BUSINESS ENTITY PRINCIPLE Where the business is seen as an entity separate from its
owner(s) that keeps and presents financial records and
prepares the final accounts and financial statements. The
accounting is kept for each entity as a whole (groups of
companies must present consolidated accounts and
consolidated financial statements).
BUSINESS MATRIX often used in business incubators, is where separate
business entities join forces to advance the development
of a start-up, e.g.., one firm may offer offices, another
marketing/sales assistance or manufacturing expertise,
etc. Such a matrix may receive compensation in the form
of equity from the start-up being assisted by that business
matrix.
BUSINESS PLAN A description of a business (normally over a 1-5 year
period). A basic business plan includes: product(s) and/or
service(s), the market, competitor analysis, the key people
involved, financing needs, and the financial rewards if the
business plan is implemented successfully. A well-
prepared business plan plays two important roles, firstly, it
is a useful management tool that can help management
plot a course for the company, and secondly, it is a vital
sales tool that will impress funding sources, e.g., venture
capitalists or the board of directors, with management's
planning ability and general competence. Other things
being equal, a well prepared business plan will increase a
company's chances of obtaining a financial commitment to
fund the business.
BUSINESS PROCESS REENGINEERING The analysis and radical redesign of business processes
(BPR) using objective, quantitative methods and tools and
management systems to accomplish change or
performance improvement. Also called: Re-Engineering,
Reengineering, Process Reengineering, Process Quality
Management, BPR, Process Innovation, Process
Improvement, and Business Process Engineering
BUSINESS PUBLICATIONS AUDIT (BPA) It is similar to the Audit Bureau of Circulation; the BPA is a
third-party organization that verifies the circulation of
print media through periodic audits.
Business Risk The risk of business failure, which stems from factors such
as the cost structure of a venture (i.e., FIXED COST versus
VARIABLE COST), intra-industry competition, and
government policies. It is reflected in the variability of
profits before interest and taxes.
BUSINESS RISK OPERATING RISK.
BUSINESS SEGMENT A component of an enterprise that:
(a) provides a single product or service or a group of
related products and services

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Financial Terminology- B 22
(b) That is subject to risks and returns that are
different from those of other business segments.
BUSINESS TRANSACTION TRANSACTION.
BUSINESS UNIT It is equivalent to a wholly owned subsidiary except that it
is not treated as a separate legal entity. It is an
organization within a firm that could operate separately
because it has all support functions contained within the
business unit. The internal financial reporting from a
business unit to the corporate office is basically identical
to a separate legal entity.
BUSINESS VALUATION Determines the price that a hypothetical buyer would pay
for a business under a given set of circumstances.
BUSINESS-TO-BUSINESS (B2B) Describes commerce transactions between businesses,
such as between a manufacturer and a wholesaler, or
between a wholesaler and a retailer. Contrasting terms are
business-to-consumer (B2C) and business-to-government
(B2G).
BUY SIDE This refers to investors such as pension funds, mutual
funds and hedge funds, which buy and sell securities
through brokers and dealers.
BUYER'S MARKET Where the quantity of goods for sale exceeds the amount
consumers are willing and able to buy at the current
market price. It is characterized by low prices. For
example, a market condition that occurs in real estate
where more homes are for sale than there are interested
buyers.
BVAL Business Valuator Accredited for Litigation.
BVI British Virgin Islands (a major offshore banking and
corporation player).
BYLAWS The provisions of corporate policies.
BY-PRODUCTS These are incidental products resulting from the
processing of another product.

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Gagan Gupta
PGMP+MBA
Email: ggngupta.sns@gmail.com