dictionary of finance · 56 commodity commodi es trade in commodity markets. 57 commodity exchange...

Sr.No Words Meaning

1 Absolute liability Strict Liability

2Accoun�ng standards

Rules to be followed in the prepara�on of company accounts.

3 Accounts payable Amount owed to trade creditors and included as current.

4 Accounts receivableInvoiced or billed amounts owing to a business which are outstanding from balance sheet.

5 A�er-hours trading 24-hours trading.

6 Annual accountsAll limited liability companies (incorpora�on) must file accounts or financial statements for public inspec�on each year.

7Annual general mee�ng(AGM)

All public limited companies (incorpora�on) in the UK are required by law to invite all shareholders to a general mee�ng with directors each year.(US = annual mee�ng, annual stockholders' mee�ng.) Among other things the mee�ng elects directors, appoints auditors and fixes their remunera�on.

8Ar�cles of associa�on

Memorandum of associa�on.

9 Asked Price Offer Price.10 Asset Something that has value or earning power11 Assets value Net Assets

12 Associate companyA company over which another company has some influence, normally through a minority shareholder of less than 50 per cent but more than 20 per cent.

13 Audit

The verifica�on of accounts by an external accountant. Larger limited companies (Incorpora�on) are required under the Companies acts to have their accounts audited by a member of a recognized accountancy body.

14 Authorized CapitalThe amount of share capital fixed in the memorandum of associa�on and the ar�cles of associa�on of a company as required by the companies acts.

15 Average A single number calculated to summarize a group of numbers.

16 BalanceIn financial accoun�ng the balance is the amount required to be inserted in one of two columns of debits and credits to make the totals equal.

EnrichersPr ivate l imited .

Dic�onary Of Finance


17 Balance of payments

The total movements of goods, services and financial transac�on between one country and rest of the world; the term commonly used for the record of such movements. In the money terms, therefor the balance of payments is the total of all receipts and payments of whatever nature are included, whether they be payments and receipts for non-commercial purposes, such as legacies and for pensions; for goods sold or services rendered; for investment purpose on behalf of government; or of private persons and agencies.

18 Balance sheetA statement of the wealth of business or organiza�on at a par�cular date, usually the end of the financial year as dis�nct from a profit and loss accounts, which records changes

19 Balloon PaymentThe final payment on a loan that is substan�ally larger than earlier payments. Designated to defer the burden of debt repayment

20 Bank ChargesFees and other charges made by banks for their services and debited from customers accounts, now commonly a�er the customer has received an itemized statement of charges

21 Bank Dra�A cheque issued by a bank in effect a cer�fied cheque in which the recipient may have confidence. Banks will issue dra�s for customers for a fee where a creditor will not accept an ordinary debtors cheque

22 Banknote

A note issue end by a bank promising to pay the bearer the par value of the note on demand. At one �me banknotes were exchangeable for gold, but now the promise to pay simply means that they are legal tender.

23 BankruptcyA declara�on by a court of law that an individual or company is insolvent.

24 Barter Countertrading

25 Bear A speculator who sells securi�es in expecta�on of a fall in prices.

26 Bear squeeze

27 Bid PriceThe price at which market maker will buy shares or a dealer in a commodity market will buy the commodi�es.

28 Bid rate The rate of interest offered for a deposit.

The purchase of currency or securi�es or commodi�es in the marketby the authori�es, thus raising prices and squeezing the liquidity ofspeculators who have been selling short in the expecta�on of fallingprices.


29 Bill of exchangeAn order in wri�ng addressed by one person to another and signed by the person giving it , requiring the person to whom it is addressed to pay, on demand or at a fixed date, a specified sum of money.

30 Bonus Issue An offer of free addi�onal shares to exis�ng shareholders. A company may decide to distribute further shares as an alterna�ve to increasing the dividend payout.

31 Break - evenThe point at which cumula�ve sales revenue is equal to total costs. At that point no profit or loss will have been incurred.

32 BrokerAn intermediary between a buyer and a seller in a highly organized market, e.g. a stock broker or a commodity broker.

33 Brokerage The commission charged by a broker.

34 Brokerage accountThe record of purchase and sales of securi�es on behalf of a client kept by a stockbroker.

35 Brokerage house Broker

36 Budget An es�mate of income and expenditures for a future period.

37 BullA speculator who buy securi�es in the belief that prices will rise an that they will be able to sell them again later at a profit.

38 Bull Market A period of �me during which stock market prices are rising.

39 Burn RateThe rate at which a company needs addi�onal capital in order to stay in business.

40 CapitalThe accumulate wealth of a business or individual that is capable of genera�ng income.

41 Capital Account Balance of payments

42 Capital adequacyA measure of the value of the capital owned by the shareholders of a financial ins�tu�on rela�ve to the amount the ins�tu�ons has lent out.

43 Capital Employed Net assets minus current liabili�es.

44 Capital, cost of The rate of interest paid on the capital employed of the business.

45 Capital Expenditure The purchase of fixed asset.

46 Capital GainAn increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.

47 Capital GearingThe degree to which a company acquires assets or to which it funds its ongoing opera�ons with long- or short-term debt.

48 Cash Flow The movement of money into or out of a business.

49 Central Bank A bankers bank at the Centre of a country's monetary system.


50 Cer�ficate of depositA savings cer�ficate en�tling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomina�on.

51 Collateral US term for security now used more widely.52 COMEX Commodity Exchange of New York.53 Commercial Banks Privately owned banks.

54 Commercial BillAny other bill than a treasury bill. Commercial bills are bank bills or trade bills.

55 Commitment FeeA fee charged by a bank in respect of an used balance of a line of credit, designed to offset the banks cost of keeping the funds available.

56 Commodity Commodi�es trade in commodity markets.

57Commodity Exchange of New York

A major commodity market in metals, established in 1870 dealing principally in futures contracts and sharing with the London Metal exchange a dominant role in world metal trading.

58 Commodity Market A market or exchange in which commodi�es are bought and sold.

59 Company An incorporated business

60Company Limited by guarantee

A company in which the liability of shareholders is limited to the amount they guarantee to pay in the event of liquida�on rather than by the amount of the equity.

61 Compliance OfficerAll official stock exchange and many large financial ins�tu�ons have people responsible for ensuring that laws and regula�on's are complied with.

62 Conflict of interestA situa�on where a financial ins�tu�ons is ac�ng for the par�es on both side of a transac�on

63Consolidated Accounts

Financial statements that bring together the balance sheet and profit and loss accounts of parent Company and subsidiary so that thefinancial affairs of the group can be treated as whole.

64 ContractAny agreement under law including an agreement to buy or sell a security.

65 Corpora�on TaxA levy placed on the profit of a firm, with different rates used for different levels of profits.

66 Countertrading Another term for barter, i.e. the exchange of goods or services with out any monetary considera�on.

67 Country Risk Poli�cal Risk

68 Cover NoteA temporary confirma�on that an insurance risk has been covered, issued pending the comple�on of a full insurance contract.

69 CreditGran�ng the use or possession of goods and services with out immediate payment.

Dic�onary Of Finance70 Credit Guarantee

A type of insurance that protects a seller from the chance of the chance of non-payment by a buyer.

71 Creditor One to whom money is due.

72 Credit ra�ngAn assessment of the likelihood of an individual or business being able to meet its financial obliga�ons.

73 Credit Risk Risk

74 Credit SaleA sale agreement under which payment is made in installments, but with ownership of the object of the sale passing immediately to the purchaser.

75 Cross-border lis�ngShares and other securi�es may be traded on official stock exchange only where they are listed on a exchange.

76 Currency RiskThe risk a�aching to securi�es deals in denominated in foreign currencies, that unforeseen exchange rate changes may affect balance sheet value in the home currency.

77 Current AccountThe most common type of bank account on which deposits do not necessarily earn interest but can be withdrawn by cheque at any �me.

78 Current Ra�o Working Capital

79 Day orderAn order placed in a commodity market for execu�on in the same trading session or in the same day.

80 Day tradingThe prac�ce of rapid buying and selling of securi�es using sophis�cated communica�on facili�es, in order to take advantage of short lived price changes.

81 DebenturesA type of debt instrument that is not secured by physical assets or collateral.

82 Debit Double entry bookkeeping.

83 DebtA sum of money or other property owed by one person or organiza�on to another.

84 Debt Instrument A medium for raising a loan , usually a short term loan.85 Debtor One who owes money to another.

86 DefaultUsually a failure to make payment or repayments of interest or principal on the due date.

87 Deprecia�onThe reduc�on in the value of an asset through wear and tear. The reduc�on in the value of a currency in terms of gold or other currencies in a free market.

88 Deriva�ves A generic term for futures, op�ons and swaps.

89Discre�onary Account

Funds for investment placed with a stock broker , commodity broker or other authorized investment manager, with either no, or only general, instruc�on as to how they should be invested.

90 Distributed earningsProfits paid to shareholders in the form of dividends as dis�nct from retained earnings.

92 Earned IncomeIncome from wages, salaries, certain pensions and social securi�es benefits that are treated as earned income for the tax purposes.

93Earnings Per Shares (EPS)

The total profits of the company a�er taxa�on and interest, divide by the number of share at issue.

94 Electronic BankingThe automated facility to call a bank account details, give instruc�ons for payments and make use of other services by means of computer.

95Electronics Funds Transfer (EFT)

A system for the automa�c transfer of funds one account to another by electronic means.

96 EquityThe residual value of the company's assets a�er all liabili�es have allowed for.

97 Equity Gearing The ra�o of borrowings to equity or risk capital.

98 Exchange Rate The rate at which one currency may be exchanged against another.

99 Face Value Par value

100 FactoringA business ac�vity in which a company takes over responsibility for collec�ng the debts of another.

101 Fair ValueThe price of a deriva�ve that is equitant, a�er transac�on cost, to that of underlying instrument.

102 Finance The provision of money when and where required.

103 Financial Ins�tu�onsThe group of major commercial and public organiza�ons engaged in exchanging.

104Financial Repor�ng Standards (FRS)

Accoun�ng Standards

105 Financial Year A 12 month period in respect of which financial accounts are kept.

106 Fixed Assets Assets

107 Fixed Exchange Rate Exchange Rate

108 Fixed InterestGenerally, refers to securi�es such as bond on which the holder receives a pre determined and unchanging rate of interest on the nominal value.

109

110

FloatA situa�on in which the check clearing func�on of federal reserve they have a �ming gap between the pos�ng of matching.

Foreign Exchange All foreign currencies.111 Forex A contrac�on of foreign exchange.

91 Dividend

The amount of a company's profit distributed to ordinary share holders, usually expressed either as a percentage of the nominal value of the ordinary share capital, or as an absolute amount per share.


112 Forward- ForwardA transac�on for the purchase at a future date, of an instrument maturing at a further future date.

113 Forward Price Forward

114Fundamental Analysis

A method of evalua�ng a security that entails a�emp�ng to measure its intrinsic value by examining related economic, financial and other qualita�ve and quan�ta�ve factors.

115 FuturesA vehicle for the purchase and a sale of commodi�es and financial instruments at a date in the future.

116 Futures MarketA market dealing in futures and op�ons on shares, bonds, foreign currencies and commodi�es.

117 Gearing The rela�ve importance of loans in the capital structure.

118 GoodwillThe value of business to a purchaser over and above its net asset value.

119 HedgeA transac�on tending to the opposite effect of another transac�on, engaged in to minimized a poten�al loss on the la�er.

120 High PurchaseA form of consumer credit in which purchaser of good or service pays the principal and interest in regular installments.

121 Holding CompanyA company that controls one or more other companies, normally by holding a majority of the shares of these subsidiaries.

122 Income Statement Profit and loss account.

123 Income TaxA compulsory transfer of a propor�on of employment and investment income of the state.

124 Incorpora�onAct of forming the company by carrying out the necessary legal formali�es.

125 Index Number

An average of a group of observa�ons of a price, or some other variable, expresses as a percentage of the average of the same variable in the base year against which the comparison is being made.

126 Infla�on A fall in the purchasing power of money.

127 InstrumentA term used to denote any form of financing medium, most usually those for the purpose of borrowing in the money market

128 Interest Payment for the loan.

129 Interest CoverThe number of �mes the interest payments made by the company to service its loan capital are exceeded by income of the business.

130 Interim Dividend A dividend paid during the year instead of at the end of the year.

131Interim Financial Statement

A summary financial statement issued part way through a financial year.

132 Intrinsic Value The value believe by some to a�ach inherently to a natural object regardless of its price at any given �me.


133 InventoryA term for stocks of raw materials, work in progress and finished goods.

134

135

InvestmentThe act of placing the monetary resources in to the crea�on of assets, in the manufacturing and services sectors of the economy.

Investment analystSome one who studies company and financial securi�es and make recommenda�ons to buy and sell shares and other securi�es.

136 Investment BankA financial intermediary that purchases new issues and places them in smaller parcels among investors.

137 IRR Internal rate of return.

138 Issued CapitalThe part of companies capital that has been subscribed by the share holders.

139 Last traiding DayThe last day on which futures trading can be done for the par�cular delivery month.

140 LaunderingThe conversion of money obtained illegally in to legi�mate bank accounts or business.

141 Lease backA contractual arrangements in which an asset is sold and immediately lease back to seller.

142 LeasingAn agreement between owner of property to grant use of it to another party for specified period at a specified rent.

143 Legal Person Incorpora�on.

144 Le�er of creditA non-nego�able order from a bank to a bank abroad, authorizing payment to a name person of a par�cular sum of money or up to a limit of certain sum.

145 Leverage Gearing

146 LiabilityAn obliga�on to make a financial payment, i.e. repayment of bank loan.

147 LIBOR London Inter bank offered rate.

148 Limited LiabilityThe restric�on of owners loss in a business to a amount of capital they have invested in.

149 Limited Liability Partnership

150 Liquid Assets Assets which consist of cash or other assets such as treasury bills.

151 LiquidateThe act of cancelling or closing out, a futures contract where the owner of the contract is long, normally done by the physical sale of underlying asset.

152 Liquidity In general, availability of funds to made claims.

153 Liquidity RiskThe risk and securi�es trading that the price of a security may fluctuate excessively owing to the lack of a sufficient volume of trading in the market.

154 Listed Company A company whose shares are listed on an official stock exchange.


155London Clearing House

The major clearing house for futures dealings in the London.

156 London Commodity Futures and op�ons exchange157 London FOX Futures and op�ons exchange

158London Interbank Offered Rate

The rate of interest offered on loans to first class banks in the London interbank market for specified period.

159London Interna�onal Financial Futures

An exchange in London in September 1982 for trading in financial futures and op�ons.

160London Stock Exchange (LSE)

The London market in which securi�es are bought and sold.

161 MarginGenerally in finance, the gross margin is difference between the price at which something is bought and the price at which it is sold, does the contribu�on towards overheads and other costs.

162 Margin CallA requirement for the increase in the original deposit or margin placed on a future or op�on contract.

163 Margin TradingA term describing the process by which commodi�es speculators trade in futures by subscribing only the margin.

164 Market OrderAn instruc�on from a client to a broker dealer to buy or sell a security or a commodity at the price prevailing at the �me of execu�on of the transac�on order.

165 Market Risk Risk

166 Maturity The period between the crea�on of financial claim and the date on which it is to be paid.

167Memorandum of Associa�on

The document that form the basis of registra�on of the company lis�ng the subscribers to the capital and the number of shares.

168 Merger A diffusion of two or more separate companies in to one.

169 Monetary PolicyThe policy of a government or a central bank in monetary affairs, having regard to broad goals e.g. Economy Growth

170 MortgageA legal agreement conveying condi�onal ownership of asset and security for a loan and becoming void when the debt is repaid.

171Mul�na�onal Company

A company having produc�on and other facili�es in a number of countries outside the na�on of origin.

172 Mutual FundA pool system of group investment, equilant to a unit trust in the UK, first developed in the USA in 1930.

173 Net current Assets Working Capital

174Net present Value (NPV)

Discounted Cash Flow.


175 Net profit Profit

176 Net worth Net Assets

177New York Mercan�le Exchange (NYMEX)

A commodity market, founded in 1872 as a bu�er and cheese market of New York, reincorporated in 1887 under its present name; it now deals in futures in crude oil.

178 NomineeA person or company holding securi�es on behalf of another in order to preserve anonymity or to simplify se�lement.

179 Opening Price The price at which a security is quoted when a stock exchange, or other market is open for business in a morning.

180 Open Posi�on A posi�on that is not covered or hedged.

181Opera�ng Profit / (loss)

Profit/ (Loss) before tax and interest, usually on the principle trading ac�vi�es of the business and excluding extra ordinary items.

182 Opera�onal RiskThe risk of bank or other losses owing to computer failure, poor documenta�on or fraud.

183 Op�onA contract giving its beneficiary the right to buy or sell a financial instruments or a commodity including Gold, at a specified price within a specified period.

184 OrderAn instruc�on from a client to a broker dealer to buy or sell a security.

185 Ordinary ShareA share in the equity capital of a business holders of ordinary shares being en�tled to all distributed profits a�er the holders of debentures preference share holders.

186 Out of moneyA situa�on where the exercise price of an op�on is adverse to the market price.

187 Overheads Cost that do not vary with output in t short run e.g. Rent

188 OvertradingA business is said to be overtrading when it has insufficient working capital to meet its debts when they fall due.

189 Paid up CapitalThe part of the issued capital a�er company that has been paid in by the share holders.

190 Parent CompanyA company that owns fi�y percent or more of the ordinary shares of a subsidiary company.

191 PartnershipAn incorporated of business based on a contractual rela�onship between two or more people who share risks and profits.

192 P-E Ra�o Price Earning Ra�o

193 Personal LoanA bank loan made without collateral security to a private customer for usually for specific purposes.

194 Poli�cal RiskThe risk in investment, that a deal may be seriously threaten by a change in official policy.

195 Por�olio A group of securi�es held as an investment.


201Price/ Earnings (P/E) Ra�o

The quoted price of an ordinary share divided by the most recent years earnings per share, also known mul�ple.

202 Price / Sale Ra�o A method of comparing share values.

203 Priva�za�on The sale of government owned equity in na�onalized industries or other commercial enter prices to private investors.

204 ProbabilityThe likelihood of an event occurring expresses as frac�ons of 1, where 0.0 is = to impossible and 1.0 = certain.

205 ProfitNet profit before tax is the residual a�er deduc�on of all money cost, sale revenue minus wages, salaries, rent, fuel, and raw materials.

206Profit and loss account (P/L)

A financial statement showing revenue, expenditure and the profit or loss resul�ng from opera�on in given period.

207 Promissory note Note

208 ProspectusA document containing company informa�on in correc�on with a new issue.

209 ProvisionsSums set a sight in the accounts to provide for an�cipated loss or expenditure.

210 ProxyShareholders enable to be present at share holders mee�ng may authorize other persons to vote on their behalf.

211Public Limited Company (PLC)

Incorpora�on.

212 Quoted Company A company who's shares are listed on an official stock exchange.

213 RateAn abbrevia�on of interest rate and applied mostly in the money market

214 Rate of exchangeThe value of a currency in terms of another, i.e. the number of units of that currency required to obtain one unit of the other.

215 Rate of interestThe propor�on of a sum of money that is paid over a specified period of �me in payment for its loan.

216 Rate of return Return on investment.

196Por�olio Investments Balance of payments

197 Posi�onThe extent of a persons financial commitments to a stock, commodity and currency.

198 Preference ShareHolders of preference shares precede the holders of ordinary shares but follow debenture holders, in the payment of dividends.

199 PremiumIn insurance, the sum of many paid, either once or con�nuously, to buy an insurance policy.

200 Present Value Discounted Cash Flow.


217 Receivables Amounts due to a business, i.e. owned by debtors

218 Regula�onGenerally, the supervision and control of the ac�vi�es of private enterprise by government in the interest of efficiency, fairness, health and safety.

219 Reserve AssetsHoldings of a commercial bank, not used for loans or other transac�ons and therefore available for use in the last resort to meet a shortage of funds.

220 Reserve PriceThe lowest price at which someone is prepared to sell something. Thus, client may instruct a broker to sell securi�es or commodi�es at or above a specified reserve price.

221 Retail PriceAn index number measuring changes in the weighted average of price of a basket of goods and services.

222 Retained EarningUndistributed profits that may simply be reserves or may be used for investment in fixed assets.

223Return on Capital Employed Return on investment.

224Return on Investment

A financial ra�o showing profit as a percentage of total assets or return on capital employed or shareholders funds.

225 Right IssueAn offer of new shares to exis�ng shareholders. A company will offer the right in a certain propor�on to exis�ng holdings, depending upon the amount of new equity capital it wishes to raise.

226 Risk Generally the possibility of loss.

227 Risk ManagementThe iden�fica�on and acceptance or offse�ng of the risks threa�ng the profitability of an organiza�on.

228 ROCE Return on capital employed.

229 Sale and lease back Leaseback.

230 Savings Income not spent on consump�on.

231 Saving Account Deposit account.

232 SecurityA pledge of financial or physical property to be surrendered in the event of failure to repay a loan.

233 Se�lement Payment of an obliga�on.

234 Shareholder The owner of shares in a company.

235 Shareholder's EquityThe total assets of a company minus its external liabili�es, i.e. except those to equity shareholders.

236 Short Hedge A hedge effected by the sale of a future contract.

237 Sole ProprietorshipAn incorporated business owned by a single person and not benefi�ng from limited liability.


238 Solvency The ability to pay one's debts in full on the due date.

239 Specula�onDealings in a commodity or financial asset with a view to obtaining a profit on the prospec�ve change in the market value of the item in ques�on.

240 Specula�ve RiskOf insurance, a risk arising out of entrepreneurial ac�on, leading to gain or loss in a way not calculable by the law of large numbers and therefore not insurable.

241 Spot Immediate or now.

242 Spot Price The present value of an asset, as opposed to futures, forward or op�on prices.

243 SpreadThe difference between the interest rate charged by a bank or bank on a loan and that paid by them for their funds.

244 Spread Be�ngThe prac�ce of making bets on the movement of a security price, normally a stock market index, in rela�on to a reference level.

245 Stop LossThe price at which a security is automa�cally sold to protect the investor against further loss.

246 Stop Order Order.

247 Subsidiary Generally, a company controlled by another, parent company.

248 SwapA transac�on whereby a security of a certain value is sold to a buyer in exchange for the purchase, from the buyer, of a security having the same value.

249 Taxa�onA compulsory transfer of money from private individuals, ins�tu�ons and commercial enterprise to finance government expenditure.

250 Technical AnalysisThe study and predic�on of price movements in security and commodity markets, based on the analysis of charts of share prices and trading volumes.

251 Trade Balance Balance of payments.

252 Trade Bill A bill of exchange accepted by a party other than a bank.

253 Trading Posi�on Commodity Market; Traded months.

254 Trading Risk Currency Risk.

255 Transac�on Risk Currency Risk.

256 Treasury The central economic and finance department of a na�onal government, so named chiefly in the USA and the UK, equivalent to the finance ministry of most governments.


257 Treasury BillA money market instrument issued by the central bank, in principle to supply the government's short term financial needs, but also as a means of influencing credit and the money supply.

258 True and fair view Audit

Turnover The total sales revenue of a business.

259 VolumeAn indicator of turnover on a stock exchange. Volume usually is measured by the number of transac�on in a security or in all securi�es during a period.

260 Wealth TaxAn annual tax on the net value of assets of an individual, levied above a threshold.

261 Weighted AverageAn average calculated by assigning weights to each item to reflect their rela�ve importance.

262 Winding up Liquida�on

263 Window DressingFinancial adjustments made solely for the purpose of accoun�ng presenta�on, normally at the �me of audi�ng of company accounts.

264 Withholding TaxTaxa�on deducted from payments to non residents, usually in the form of a standard rate of income tax applied to dividends or other payments by companies.

265 Working CapitalThe excess of current assets over current liabili�es; that part of current assets financed from long term funds.


dictionary of finance · 56 commodity commodi es trade in commodity markets. 57 commodity exchange...

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