Glossary

Back Order

A customer order for materials, goods in process, or finished goods that is not currently in stock but is to be sold or delivered when it becomes available.

Backward Innovation

Building a more basic version of an existing product for a lesser-developed market.

Balance of Payments

The International Monetary Fund’s accounting system that tracks the flow of goods, services, and capital in and out of each country.

Balance of Trade

The difference between a country’s total imports and exports over a set period.

Balance Sheet

A statement showing a firm's accounting value on a particular date. It reflects the equation, Assets = Liabilities + Stockholders' equity.

Balanced Economy

In national finances, it is when exports are equal to imports.

Bank for International Settlements ((BIS))

An international organization, which promotes international monetary and financial cooperation among nations by fostering the cooperation of world central banks.

Bank Release

A document issued by a bank authorizing the delivery of goods.

Bank-based Corporate Governance System

A system of corporate governance in which the supervisory board is dominated by bankers and other corporate insiders.

Banker's Acceptance

A time draft drawn on and accepted by a commercial bank.

Banker's Draft

A payment instrument used to make international payments.

Bankruptcy

The status of an individual or a legal entity that does not have sufficient resources to pay for its debts as they become due.

Bargain Purchase Option

A lease provision allowing the lessee, to purchase the equipment for a price predetermined at lease inception, which is substantially lower than the expected fair market value at the date the option can be exercised.

Barter

Trade in which merchandise is exchanged directly for others without use of money or the involvement of a 3rd party.

Basel Convention

An international treaty concerned with restricting the movement of hazardous wastes between countries, especially from developed to underdeveloped countries.

Basic IRR Rule

Accept the project if the (Internal Rate of Return) IRR is greater than the discount rate; reject the project if IRR is less than the discount rate.

Basis

The simple difference between 2 nominal interest rates.

Basis Point

Equal to 1/100 of 1 percent.

Basis Risk

The risk of unexpected change in the relationship between futures and spot prices.

Basis Swap

A floating-for-floating interest rate swap that pairs two floating rate instruments at different maturities (such as 6-month LIBOR versus 30-day U.S. T-bills).

Bearer Bonds

Bonds that can be redeemed by the holder. The convention in most West European countries is to issue bonds in registered form (contrast with registered bonds).

Benchmarking

A systematic procedure of comparing a company’s practices against the best practice and modifying actual knowledge to achieve superior performance.

Beneficiary

A party who receives a legal benefit.

Beta

A measure of an asset’s sensitivity to changes in the market portfolio (in the Capital Asset Pricing Model) or to a factor (in the APT). The beta of an asset j is computed as bj = rj,k (sj/sk), where k represents a market factor (such as returns to the market portfolio in the CAPM).

Bid Bond

A type of bond which guarantees the fulfillment of an offer or bid if it is accepted.

Bid Rate

The rate at which a market maker is willing to buy the quoted asset.

Bid-offer Spread

The difference between the interest rate at which the bank borrows money and lends money.

Bilateral Investment Treaty (BIT)

A treaty between two countries to ensure that investments between the two countries receive the same treatment as domestic or other international investments.

Bilateral Trade Agreement

A commercial agreement between two countries, often detailing what specific quantities of what specific goods can be exchanged.

Bill of Lading (BOL)

A document that establishes the terms and conditions of a contract between a shipper and a shipping company under which freight is to be moved between specified points for a specified charge.

Blank Endorsement

The method whereby a bill of lading is made into a freely negotiable document of title.

Blanket Bond

A bond that coves a group of people, articles or properties.

Blanket Contracts

A long-term contract in which the supplier promises to re-supply the buyers as needed at agreed-upon prices over the contracting time.

Blanket Rate

A rate that is applied broadly over different articles or entities.

Blockade

The act of seizing commercial exchange with a particular country. Such act is common during wartime.

Blocked Funds

Cash flows generated by a foreign project that cannot be immediately repatriated to the parent firm because of capital flow restrictions imposed by the host government.

Bogor Goals

The Bogor Goals were created by the Asia Pacific Economic Cooperation (APEC) in Bogor, Indonesia in 1994, with the intention of increasing economic unity among Asian Pacific nations by increasing trade. The goals are to have free trade and investment in developed nations by 2010 and in developing nations by 2020.

Bond Equivalent Yield

A bond quotation convention based on a 365-day year and semiannual coupons (contrast with effective annual yield).

Bond of Indemnity

An agreement relieving the party to whom the bond is issued of responsibility in a situation in which the party would normally be liable.

Bonded Exchange

Foreign exchange that cannot be freely converted into other currencies.

Break-even Analysis

Analysis of the level of sales at which a project would make zero profit. The term can also be used for sales of financial instruments.

Bretton Woods Agreement

An agreement made near the end of World War II to promote exchange rate stability and facilitate the international flow of currencies.

Bretton Woods Conference

An international conference held in 1944 at Bretton Woods, New Hampshire. The conference established the International Monetary Fund and the World Bank.

Buffer Stock

Goods set aside and reserved for sale specifically to balance out the market in the case of a shortage of that good. In the case of a surplus, more off the good would be bought and set aside.