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Abnormal Return
The difference between an actual return and a benchmark or expected return or normal return based on the market’s return and concern security’s relationship with the market.
Accelerated depreciation
The method of depreciation that writes off the cost of a capital asset faster than the write-off under straight-line depreciation method. The three principal methods of accelerated depreciation are (a) sum-of years’ digits, (b) double declining balance, and (c) units of production.
Accounts payable
The amounts due to suppliers of goods and services of an organization.
Accounts receivable
Amounts of money owed to a firm by customers who have bought goods or services on credit. A current asset, the accounts receivable amount is also called receivables.
Accrual accounting
A method of accounting in which revenue is recognized when earned and expenses are recognized when incurred without regard to the timing of cash receipts and expenditures.
Accruals
Liabilities for services received for which payment has yet to be made. Examples include accrued wages, accrued taxes, and accrued interest.
Accrued expenses
Amounts owed but not yet paid for wages, taxes, interests, and dividends. The accrued expenses account is a short-term or current liability.
Active management
Attempts to identify mispriced securities, or to forecast broad market trends.
Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek better performance than a buy and hold portfolio.
Agency costs
Costs of resolving the conflicts of interest among stockholders, bondholders, and managers. They include the costs of providing managers with an incentive to maximize shareholders’ wealth and then monitoring their behavior, and the cost of protecting bondholders from shareholders.
Agency problem
Conflicts of interest among stockholders, bondholders, and managers.
Agency theory
The theory of the relationship between principals and agents. It involves the nature of the costs of resolving conflicts of interest between principals and agents.
Alpha
In a nutshell, alpha is the difference between a fund's expected returns based on its beta and its actual returns. Alpha is sometimes interpreted as the value that a portfolio manager adds, above and beyond a relevant index's risk/reward profile.
Amortization
Process of writing off or liquidating an asset or loan periodically on an installment basis.
Analyst
Employee of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on stocks of these companies.
Angel investor
A private wealthy individual that has no association with a venture capital firm, investment fund, etc. The "angel" invests private money into what he/she believes to be promising opportunities i.e. normally start-up companies.
Annual report
Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, as well as balance sheet, income statement, and cash flow statement information. SEC rules require that it will be distributed to all shareholders.
Annuity
A series of uniform receives (payments) for a specific number of years, which results from an initial deposit (receipts).
Appreciation
Increase in the value of an asset.
Arithmetic mean or Average
A measure of mean annual rates of return equal to the sum of annual holding period rates of return divided by the number of years.
Arbitrage
The simultaneous purchase and sale of an asset in order to profit from a difference in the price.
American option
An option which can be exercised at any time between the purchase date and the expiration date.
Asked price
The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.
Auction market
The most integrated market is an auction market, in which all traders’ coverage at one place to buy or sell an asset.
Asset allocation
The process of deciding how to distribute an investor’s wealth among different asset classes for investment purposes.
Asset pricing model
A model for determining the required or expected rate of return on an asset. See Also Capital Asset Pricing Model and Arbitrage Pricing Theory.
Balance sheet
A financial snapshot, taken at a point in time of all the assets the company owns and all the claims against those assets.
Balloon payment
A payment on debt that is much larger than other payments. The ultimate balloon payment is the entire principal at maturity.
Banker’s acceptance
The short-term promissory notes for which a bank (by having “accepted” them) promises to pay the holder the face amount at maturity.
Bankruptcy
The legal mechanism by which creditors take the lead over a company after that company could not meet its debt commitments.
Barter
A form of trading where the parties are accepting goods as payment rather than cash.
Behavioral finance
The study of investment behavior, based on the belief that investors do not always act rationally.
Beta coefficient
A measure of the extent to which the returns on a specific stock move with the stock market.
Blue chip Company
Large and creditworthy company. Used in the context of general equities. Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends.
Bond indenture
A legal document specifying the rights and obligations of both the issuing firm and the bondholders.
Bond rating
A rating based on the possibility of default by a bond issuer. The ratings range from AAA (highly unlikely to default) to D (in default).
Bond
A security that obligates the issuer to make specified payments to the holder over a period of time.
Bid Price
That a trader of foreign exchange (typically a bank) is willing to pay for a particular currency.
Bid-asked spread
Difference between the price at which a bank is willing to buy a currency and the price at which it will sell that currency.
BSEC
The Bangladesh Securities and Exchange Commission (BSEC) is the regulator of the capital market of Bangladesh, comprising Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). The Commission is a statutory body and attached to the Ministry of Finance.
Block Transaction
An order or trade submitted for sale or purchase of a large quantity of securities. A block trade involves a significantly large number of shares or bonds being traded at an arranged price between parties, outside of the open markets, in order to lessen the impact of such a large trade hitting the tape.
Break-even analysis
An analytical technique for studying the relationship among fixed cost, variable cost, profits and sales volume.
Broker
An individual who is paid a commission for executing customer orders. Either a floor broker who executes orders on the floor of the exchange, or an upstairs broker who handles retail customers and their orders.
Business cycle
A recurrent cycle of growth, decline, recession, and recovery in the economic activity of a capitalist country.
Business risk
The risk related to the inability of the firm to hold its competitive position and maintain stability and growth in earnings.
Buy-side analyst
A financial analyst employed by a non-brokerage firm, typically one of the larger money management firms that purchases securities on its own account.
Call money
Money put into the money market that can be called at short notice.
Call option
A contract that gives the holder the right to purchase a specified quantity of the underlying asset at a predetermined price (the exercise price) on or before a fixed expiration dates.
Call provision
A written agreement between an issuing corporation and its bondholders that gives the corporation the option to redeem the bond at a specified price before the maturity date.
CAMEL rating
A system that assigns a numerical rating to bank based on examiner judgment regarding the bank’s capital adequacy (C), asset condition (A), management quality (M) , earnings record (E) and liquidity position (L).
CAPEX
An acronym for capital expenditure.
Capital adequacy
The ability of a bank to meet the needs of their depositors and other creditors in terms of available finds.
Capital asset
A long-term asset that is not purchased or sold in the normal course of business. Generally, it includes fixed assets, e.g., land, buildings, equipment, fixtures and furniture.
Capital budgeting
The process of identifying analyzing and selecting investment projects whose returns (cash flows) are expected to extend beyond one year.
Capital expenditure
Outlay required for acquiring a fixed asset from which benefits would be available beyond one year.
Capital gain
An increase in the capital value of an asset between the time of its acquisition by its owner and its sale by that owner.
Capital lease
A lease that does not usually provide for maintenance services, is not cancellable, and is fully amortized over its life.
Capital structure
The mix of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.
Capital
The total amount of money or other resources owned or used to acquire future income or benefits.
Cash cow
A company or division of a company that generates a steady and significant amount of free cash flow. This type of company pays out most of its earnings per share to stockholders as dividends.
Cash flow
The movement of money into or out of a cash account over a specific period of time.
Cost of equity capital
The required return on the company’s common stock in capital markets. It is also called the equity holders’ required rate of return because it is what equity holders can expect to obtain in the capital market. It is a cost from the firm’s perspective.
CEO
An acronym for Chief Executive Officer. The CEO is the principal individual responsible for the activities of a company.
Collateral
Security which is offered to the lender by the borrower, usually in the form of an asset such as accounts receivable or inventory.
Conglomerate
A corporation that is made up of many diverse, often unrelated divisions. This form of organization is thought to reduce risk, but may create problems of coordination.
Closed end mutual fund
A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. Also known as a "closed-end investment" or "closed-end mutual fund."
Call option
An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.
CDBL
The Central Depository Bangladesh Limited (CDBL) is a company set up the banks, stock exchanges and other institutions to operate the central securities depository in Bangladesh.
Capital Market
The market for long-term funds where securities such as common stock, preferred stock, and bonds are traded. Both the primary market for new issues and the secondary market for existing securities are part of the capital market.
Call Money Rate
The interest rate on a type of short-term loan that banks give to brokers who in turn lend the money to investors to fund margin accounts. For both brokers and investors, this type of loan does not have a set repayment schedule and must be repaid on demand.
Credit Crunch
(Banking & Finance) a period during which there is a sudden reduction in the availability of credit from banks and other lenders
Country risk
Uncertainty due to the possibility of major political or economic change in the country where an investment is located. It is also called political risk.
Credit risk
The risk that an issuer of debt securities or a borrower may default on his or her obligations or that the payment may not be made on a negotiable instrument.
Crowding-out effect
Phenomenon that occurs when insufficient loanable funds are available for potential borrowers, such as corporations and individuals, as a result of excessive borrowing by the Treasury, because limited loanable funds are available to satisfy all borrowers, interest rates rise in response to the increased demand for funds, which crowds some potential borrowers out to the market.
Crown jewels
An anti-takeover tactic in which major assets (the crown jewels) are sold by a firm when faced with a takeover threat.
Cost Leadership
Strategy used by businesses to create a low cost of operation within their niche. The use of this strategy is primarily to gain an advantage over competitors by reducing operation costs below that of others in the same industry.
Covariance
A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means returns move inversely.
Creditworthiness
An assessment of the likelihood that a borrower will default on his or her debt obligations. It is based upon factors, such as his/her history of repayment and credit score. Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default.
Current assets
Assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during the normal operating cycle of the business (usually one year).
Current liability
Amount owed for salaries, interest, accounts payable and other debts due within 1 year.
Compounding
The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Capital Structure
In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or ‘structure' of its liabilities.
Debentures
Bonds that promise payments of interest and principal but pledge no specific assets. Holders of a debenture have first claim on the issuer’s income and unpledged assets. These bonds are known as unsecured bonds also.
Debit card
A payment mechanism that allows for payment of a purchase by an immediate charge against the purchaser’s account at the financial institution that sponsors the card.
Debt (liability)
An obligation to pay cash or other goods or to provide services to another.
Debt capacity
The maximum amount of debt (and other fixed-charge financing) that a firm can adequately service.
Debt instrument
An asset requiring fixed taka payments, such as a government or corporate bond.
Dedication
A portfolio management technique in which the portfolio’s cash flows are used to retire a set of liabilities over time. Also known as cash flow matching.
Defensive companies
Firms whose future earnings are likely to withstand an economic downturn.
Defensive stock
A stock whose return is not expected to decline as much as that of the overall market during a bear market.
Deflation
A general fall in the level of prices of goods and services throughout an economy. Antithesis of inflation.
Delta
The relationship between an option price and the underlying futures contract or stock price when trading securities. In general usage, it is the difference between two empirical data points, e.g. the delta between 4 and 6 is 2.
Depository institutions
Financial institutions that acquire a bulk of their funds by offering their liabilities to the public in the form of deposits.
Depreciation
The systematic allocation of the cost of a capital asset over a period of time for financial reporting purposes, tax purposes or bond.
Direct lease
A lease under which a lessor buys equipment form a manufacturer and leases it to a lessee.
Dividends
The portion of a corporation's earnings which is paid to the stockholders.
Dumping
The selling of merchandise in a foreign country at, or, below cost in order to seize market share.
Duration
A measure of the effective maturity of a bond, defined as the weighted average of the times until each payment, with weights proportional to the present value of the payment.
Differentiation
Result of efforts to make a product or brand stand out as a provider of unique value to customers in comparison with its competitors.
Debt Covenants/BANKING/ FINANCIAL
Debt covenants, also called banking covenants or financial covenants, are agreements between a company and its creditors that the company should operate within certain limits.
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