Accounting definitions for accounts interview

 B-Share

 A class in a family of multi-class mutual funds. This class is characterized by a back-end load structure that is paid only when the fund is sold.

  Bad Debt Reserve

  An account set aside by a company to account for and offset losses that arise as a result of defaults from futures loans. 

This figure may be calculated based on historical norms or other known information about the relative safety of the debt. 

Bad debt reserves become alarming when they reach levels outside of historical norms or averages, either at the company level

or the national level. For instance, there are many concerns today about China's high bad debt reserves at its banks,

an aftereffect of many years of almost non-existent lending requirements.

 Balance Of Payments - BOP

 A record of all transactions made between one particular country and all other countries during a specified period of time. BOP compares the

dollar difference of the amount of exports and imports, including all financial exports and imports. A negative balance of payments

means that more money is flowing out of the country than coming in, and vice versa.

 Balance Of Trade - BOT

 The difference between a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy.

A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus.Also referred to as "trade balance".

 Banker's Acceptance - BA

 A short-term credit investment created by a non-financial firm and guaranteed by a bank.

 Bankruptcy

 A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy. Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply can't be paid while offering creditors a chance to obtain some measure of repayment based on what assets are available. In theory, the ability to file for bankruptcy can benefit an overall economy by giving persons and businesses another chance and providing creditors with a measure of debt repayment. Bankruptcy filings in the United States can fall under one of several chapters of the Bankruptcy Code, (which involves liquidation of assets), Chapter 11 (company or individual "reorganizations") and Chapter 13 (debt repayment with lowered debt covenants or payment plans). Bankruptcy filing specifications vary widely among different countries, leading to higher and lower filing rates depending on how easily a person or company can complete the process.

 Bear Market

 A market condition in which the prices of securities are falling or are expected to fall.

Although figures can vary, a downturn of 15-20% or more in multiple indexes (Dow or S&P 500) is considered an entry into a bear market.

Beta

 A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Also known as "beta coefficient".Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. 

A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market.

For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.
Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk

 Black Scholes Model

 A model of price variation over time of financial instruments such as stocks that can, among other things, be used to determine the price of a European call option. The model assumes that the price of heavily traded assets follow a geometric Brownian motion with constant drift and volatility. When applied to a stock option, the model incorporates the constant price variation of the stock, the time value of money, the option's strike price and the time to the option's expiry. Also known as the Black-Scholes-Merton Model. The Black Scholes Model is one of the most important concepts in modern financial theory. It was developed in 1973 by Fisher Black, Robert Merton and Myron Scholes and is still widely used today, and regarded as one of the best ways of determining fair prices of options. There are a number of variants of the original Black-Scholes model.

 Blotter

A record of trades and the details of the trades made over a period of time (usually one trading day). The details of a trade will include such things as the time, price, order size and a specification of whether it was a buy or sell order. The blotter is usually created through a trading software program that records the trades made through a data feed. 

 Blue Chip

 A nationally recognized, well-established and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.

 The name "blue chip" came about because in the game of poker the blue chips have the highest value. Blue chip stock is seen as a less volatile investment than owning shares in companies without blue chip status because blue chips have an institutional status in the economy. The stock price of a blue chip usually closely follows the S&P 500.

 Book Building

 The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay.

 Book Value Per Common Share

 A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.

Formula:Should the company decide to dissolve, the book value per common indicates the dollar value remaining for Common shareholders after all assets are liquidated and all debtors are paid.In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate.

 Bottom Line

 Refers to a company's net earnings, net income or earnings per share (EPS). Bottom line also refers to any actions that may increase/decrease net earnings or a company's overall profit. A company that is growing its net earnings or reducing its costs is said to be "improving its bottom line".The reference to "bottom" describes the relative location of the net income figure on a company's income statement; it will almost always be the last line at the bottom of the page. This reflects the fact that all expenses have already been taken out of revenues, and there is nothing left to subtract. This stands in contrast to revenues, which are considered the "top line" figures.Most companies aim to improve their bottom lines through two simultaneous methods: growing revenues (i.e., generate top-line growth) and increasing efficiency (or cutting costs).

  Brand Equity

 Brand equity is created through aggressive mass marketing campaigns. Good examples of companies with strong brand equity are corporations such as Nike and Coca-Cola, whose corporate logos are recognized worldwide.

An intangible value-added aspect of a particular good that is otherwise not considered unique.

 Break-Even Point - BEP

1. in general, the point at which gains equal losses. 2. in options, the market price that a stock must reach for option buyers to avoid a loss if they exercise. For a call, it is the strike price plus the premium paid. For a put, it is the strike price minus the premium paid.
 Also referred to as a "breakeven". For businesses, reaching the break-even point is the first major step towards profitability.

 Breakpoint Sale

 The sale of a mutual fund at a set dollar amount that allows the fund holder to move into a lower sales charge bracket. If, at the time of investment, an investor is unable to come up with the funds needed to qualify for the lower fee, he or she can sign a letter of intent promising to reach the total amount, or breakpoint, in a set time period.
Any sales that occur just below a breakpoint are considered unethical and in violation of FINRA (formerly the NASD) rules. An example of a breakpoint sale would be when an investor plans to invest $95,000 in a front-load mutual fund and  faces a charge of 6.25% or $6,125. If the investor is properly advised, he or she will be told that adding $5,000 for a total investment of $100,000 will qualify the sale fro a lower sales charge of 5.5%, or $5,500.

This means that the investor will essentially have $5,625 more invested than the initial purchase plan due to the savings in sales charges.

 Bridge Financing

 A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations These funds are usually supplied by the investment bank underwriting the new issue. As payment, the company acquiring the bridge financing will give a number of shares at a discount of the issue price to the underwriters that equally offsets the loan. This financing is, in essence, a forwarded payment for the future sales of the new issue.

 Bridge Loan

 A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory. Also known as "interim financing", "gap financing or a "swing loan".

 In-House Financing

 A type of seller financing in which a firm extends customers a loan, allowing them to purchase its goods or services. In-house financing eliminates the firm's reliance on the financial sector for providing the customer with funds to complete a transaction.The automobile sales industry is a prominent user of in-house financing. Many vehicle sales rely on the buyer taking a loan, in-house financing allows the firm to complete more deals by accepting more customers. Whereas banks or other financial intermediaries might turn down a loan application, car dealerships can choose to lend to customers with poor credit ratings.

 Broker

 1. An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services. A licensed real estate professional who typically represents the seller of a property. A broker's duties may include: determining market values, advertising properties for sale, showing properties to prospective buyers, and advising clients with regard to offers and related matters.

Broker-Dealer

A person or firm in the business of buying and selling securities operating as both a broker and a dealer depending on the transaction.Technically, a broker is only an agent who executes orders on behalf of clients, whereas a dealer acts as a principal and trades for his or her own account. Because most brokerages act as both brokers and principals, the term broker-dealer is commonly used to describe them.

 Buoyant

The term used to describe a commodities market where the prices generally rise with ease when there are considerable signals of strength.

These types of markets can be very volatile as the prices are rapid to rise and fall with investor sentiment.

Business Cycle

The recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of

the business cycle are growth (expansion), peak, recession (contraction), trough and recovery.

At one time, business cycles were thought to be extremely regular, with predictable durations, 

but today they are widely believed to be irregular, varying in frequency, magnitude and duration.