Glossary

Back Office

Brokerage house administrative operations supporting the trading of stocks and other securities.

Back-end load

A charge imposed when investors sell shares in mutual funds which has the effect of discouraging withdrawals.

Balance sheet

Provides a snapshot of everything a company owes and owns at the end of its financial year. A component of a company’s annual report.

Balloon payment

A final payment on, for example, a loan.

Bank reconciliation

The agreement of a bank account balance as per the nominal ledger to the bank statement – adjusting for items seen as outstanding such as cheques and receipts.

Banker’s draft

Cheque made out to a creditor by a debtor’s bank offering more security than a standard cheque.

Bankruptcy

Situation where an individual is incapable of settling his/her debts.

Barter

An exchange of products or services between individuals/organisations without the involvement of money.

Base currency

The currency that forming the base of a quotation. E.g. Sterling is the base currency in the dollar/pound rate.

Base rate

Interest rate set by the Bank of England upon which other banks base themselves.

Basic state pension

Payments made to retired individuals who have made national insurance payments during their life.

Basket trade

Contract or other instrument for the purchase/sale of a group of shares/currencies traded together.

Bear market

Market in which sellers outnumber buyers with a consequent downwards trend of share prices.

Benchmark (benchmarking)

Standard or point of reference by which performance can be measured.

Beneficial loan

Loan made by an employer to an employee on which interest is either not charged or less than the official rate. The difference between the interest charged and the official rate is taxable.

Beneficiary

An individual or organisation standing to benefit from a contractual or fiduciary relationship, usually relating to a trust or will.

Big Mac Index

Analysis comparing the price of the snack designed to show relative price levels around the world and judge whether a currency might be over or undervalued.

BIK (benefits in kind)

Benefits, excluding salaries, given to employees which are taxed as employment income. E.g. cars and medical insurance

Black economy

Segment of the economy that operates on barter and unreported private cash transactions with the aim of avoiding tax.

Board of directors

The individuals elected to run a company by its shareholders.

Bond

1. Written promise by company to pay the face amount at the maturity date. 2. Cash or property given to assure performance. 3. A type of insurance compensating an employer for employee dishonesty.  

Bond rating

Credit rating agencies grade bonds according to how likely it is that the issuer will default either on interest or capital payments. Bonds with a AAA rating are considered the least likely to default.

Bonus issue

Issue of shares for free to shareholders in proportion to their existing holdings.

Book transfer

Transfer of title from seller to buyer without physical movement of the asset.

Book value (net book value)

The value of an asset net of any depreciation charged or the carrying value, per a balance sheet, of other assets or liabilities.

Breach of contract

The breaking of terms agreed upon, within a contract. Mainly witnessed in employment contracts.

Break even (analysis)

The level of a company’s sales at which they are equal to costs and thus neither a profit nor loss is made.

Break-up value

The total value of a company’s separate operations if sold separately.

Bridging Loan

Is a short-term loan that is offered under the expectation of a long term loan. The interest rate applied to this loan is generally higher than that of longer loans.

Budget deficit

Gap between government spending and revenue and thus the amount that needs to be borrowed.

Budgetary accounting

Measures the cost of planned acquisitions to the use of economic resources in the future.

Bull market

Market in which prices are rising and in which investor confidence in the continuation of rising prices is high.

Burn rate

The speed at which a company spends its finances.

Business cycle

Fluctuations in economic/business activity between peaks and troughs over a given period.

Business Property Relief

Deduction made from the value of business property when assessed for inheritance tax.

Buy back

Purchase by a company of its own shares.