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Eligible bankers' acceptances

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Definition of Eligible bankers' acceptances

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Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.

Related Terms:

Bankers Acceptances

A bill of exchange, or draft, drawn by the borrower for payment on a specified date, and accepted by a chartered bank. Upon acceptance, the bill becomes, in effect, a postdated certified cheque.

Abandonment option

The option of terminating an investment earlier than originally planned.

ABM (automated banking machine)

A BAnk machine, sometimes referred to as an automated teller machine (ATM).

accepted quality level (AQL)

the maximum limit for the number of defects or errors in a process

Accretion (of a discount)

In portfolio accounting, a straight-line accumulation of capital gains on discount
bond in anticipation of receipt of par at maturity.

accrual-basis accounting

Well, frankly, accrual is not a good descriptive
term. Perhaps the best way to begin is to mention that accrual-BAsis
accounting is much more than cash-BAsis accounting. Recording only the
cash receipts and cash disbursement of a business would be grossly
inadequate. A business has many assets other than cash, as well as
many liabilities, that must be recorded. Measuring profit for a period as
the difference between cash inflows from sales and cash outflows for
expenses would be wrong, and in fact is not allowed for most businesses
by the income tax law. For management, income tax, and financial
reporting purposes, a business needs a comprehensive record-keeping
system—one that recognizes, records, and reports all the assets and liabilities
of a business. This all-inclusive scope of financial record keeping
is referred to as accrual-BAsis accounting. Accrual-BAsis accounting
records sales revenue when sales are made (though cash is received
before or after the sales) and records expenses when costs are incurred
(though cash is paid before or after expenses are recorded). Established
financial reporting standards require that profit for a period
must be recorded using accrual-BAsis accounting methods. Also, these
authoritative standards require that in reporting its financial condition a
business must use accrual-BAsis accounting.

Activity-based budgeting

A method of budgeting that develops budgets BAsed on expected activities and cost drivers – see also activity-BAsed costing.

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activity-based budgeting (ABB)

planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
quality of production

Activity-based costing

A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services BAsed on cost drivers.

activity based costing (ABC)

A relatively new method advocated for the
allocation of indirect costs. The key idea is to classify indirect costs,
many of which are fixed in amount for a period of time, into separate
activities and to develop a measure for each activity called a cost driver.
The products or other functions in the business that benefit from the
activity are allocated shares of the total indirect cost for the period BAsed
on their usage as measured by the cost driver.

activity-based costing (ABC)

a process using multiple cost drivers to predict and allocate costs to products and services;
an accounting system collecting financial and operational
data on the BAsis of the underlying nature and extent
of business activities; an accounting information and
costing system that identifies the various activities performed
in an organization, collects costs on the BAsis of
the underlying nature and extent of those activities, and
assigns costs to products and services BAsed on consumption
of those activities by the products and services

Activity-based costing (ABC)

A cost allocation system that compiles costs and assigns
them to activities BAsed on relevant activity drivers. The cost of these activities can
then be charged to products or customers to arrive at a much more relevant allocation
of costs than was previously the case.

activity-based management (ABM)

a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
by a customer and the resulting profit achieved by providing
this value

ad hoc discount

a price concession made under competitive pressure (real or imagined) that does not relate to quantity purchased

ADF (annuity discount factor)

the present value of a finite stream of cash flows for every beginning $1 of cash flow.

Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.

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Agency bank

A form of organization commonly used by foreign BAnks to enter the U.S. market. An agency
BAnk cannot accept deposits or extend loans in its own name; it acts as agent for the parent BAnk.

Agency basis

A means of compensating the broker of a program trade solely on the BAsis of commission
established through bids submitted by various brokerage firms. agency incentive arrangement. A means of
compensating the broker of a program trade using benchmark prices for issues to be traded in determining
commissions or fees.

Allocation base A measure of activity or volume such as labour

hours, machine hours or volume of production
used to apportion overheads to products and

Allowance for bad debts

An offset to the accounts receivable BAlance, against which
BAd debts are charged. The presence of this allowance allows one to avoid severe
changes in the period-to-period BAd debt expense by expensing a steady amount to
the allowance account in every period, rather than writing off large BAd debts to
expense on an infrequent BAsis.

American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Announcement date

date on which particular news concerning a given company is announced to the public.
Used in event studies, which researchers use to evaluate the economic impact of events of interest.

Antidilutive effect

Result of a transaction that increases earnings per common share (e.g. by decreasing the
number of shares outstanding).

Asset-Backed Securities

Bond or note secured by assets of company.

Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.

Asset-based financing

Methods of financing in which lenders and equity investors look principally to the
cash flow from a particular asset or set of assets for a return on, and the return of, their financing.

Asset-Based Financing

Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.

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Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.

attribute-based costing (ABC II)

an extension of activityBAsed costing using cost-benefit analysis (BAsed on increased customer utility) to choose the product attribute
enhancements that the company wants to integrate into a product

Auction markets

markets in which the prevailing price is determined through the free interaction of
prospective buyers and sellers, as on the floor of the stock exchange.

Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.

Back fee

The fee paid on the extension date if the buyer wishes to continue the option.

Back flush

The subsequent subtraction from inventory records of those parts used
to assemble a product, BAsed on the number of finished goods produced.

Back office

Brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
BAck-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some BAck-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the BAck-end load is the contingent deferred sales charge, or CDSC.

Back To Back Annuity

This term refers to the simultaneous issue of a life annuity with a non-guaranteed period and a guaranteed life insurance policy [usually whole life or term to 100]. The face value of the life insurance would be the same amount that was used to purchase the annuity. This combination of life annuity providing the highest payout of all types of annuities, along with a guaranteed life insurance policy allowed an uninsurable person to convert his/her RRSP into the best choice of annuity and guarantee that Upon his/her death, the full value of the annuity would be paid tax free through the life insurance policy to his family members. However, in the early 1990's, the Federal tax authorities put a stop to the issuing of standard life rates to rated or uninsurable applicants. Insuring a life annuity in this manner is still an excellent way to provide guaranteed tax free funds to family members but the application for the annuity and the application for the life insurance are separate transactions and today, most likely conducted through two different insurance companies so that there is no suspicion of preferential treatment given to the life insurance application.

Back-to-back financing

An intercompany loan channeled through a BAnk.

Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed Upon maturity.


1) When bond yields and prices fall, the market is said to BAck-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to BAck up.


A procedure for making the effective date of a policy earlier than the application date. BAckdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.

backflush costing

a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory BAlances, requires
few allocations, uses standard costs, and has minimal variances
from standard


A market condition in which futures prices are lower in the distant delivery months than in
the nearest delivery month. This situation may occur in when the costs of storing the product until eventual
delivery are effectively subtracted from the price today. The opposite of contango.

Bad debt

An account receivable that cannot be collected.

Bad debts

The amount of accounts receivable that is not expected to be collected.

bad debts

Refers to accounts receivable from credit sales to customers
that a business will not be able to collect (or not collect in full). In hindsight,
the business shouldn’t have extended credit to these particular
customers. Since these amounts owed to the business will not be collected,
they are written off. The accounts receivable asset account is
decreased by the estimated amount of uncollectible receivables, and the
BAd debts expense account is increased this amount. These write-offs
can be done by the direct write-off method, which means that no
expense is recorded until specific accounts receivable are identified as
uncollectible. Or the allowance method can be used, which is BAsed on
an estimated percent of BAd debts from credit sales during the period.
Under this method, a contra asset account is created (called allowance
for BAd debts) and the BAlance of this account is deducted from the
accounts receivable asset account.

Baker Plan

A plan by U.S. Treasury Secretary James BAker under which 15 principal middle-income debtor
countries (the BAker 15) would undertake growth-oriented structural reforms, to be supported by increased
financing from the World BAnk and continued lending from commercial BAnks.

Balance of Merchandise Trade

The difference between exports and imports of goods.

Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.

Balance of Payments

The difference between the demand for and supply of a country's currency on the foreign exchange market.

Balance of Payments Accounts

A statement of a country's transactions with other countries.

Balance of trade

Net flow of goods (exports minus imports) between countries.

Balance of Trade

See BAlance of merchandise trade.

Balance sheet

Also called the statement of financial condition, it is a summary of the assets, liabilities, and
owners' equity.


A “snapshot” statement that freezes a company on a particular day, like the last day of the year, and shows the BAlances in its asset, liability, and stockholders’ equity accounts. It’s governed by the formula:
Assets = Liabilities + Stockholders’ Equity.

Balance Sheet

A financial statement showing the financial position of a business – its assets, liabilities and
capital – at the end of an accounting period.

Balance Sheet

One of the BAsic financial statements; it lists the assets, liabilities, and equity accounts of the company. The BAlance Sheet is prepared using the BAlances at the end of a specific day.

balance sheet

A term often used instead of the more formal and correct
term—statement of financial condition. This financial statement summarizes
the assets, liabilities, and owners’ equity sources of a business at a
given moment in time. It is prepared at the end of each profit period and
whenever else it is needed. It is one of the three primary financial statements
of a business, the other two being the income statement and the
statement of cash flows. The values reported in the BAlance sheet are the
amounts used to determine book value per share of capital stock. Also,
the book value of an asset is the amount reported in a business’s most
recent BAlance sheet.

Balance sheet

A report that summarizes all assets, liabilities, and equity for a company
for a given point in time.

balance sheet

Financial statement that shows the value of the
firm’s assets and liabilities at a particular time.

Balance Sheet

A financial report showing the status of a company's assets, liabilities, and owners' equity on a given date.

Balance sheet exposure

See:accounting exposure.

Balance sheet identity

Total Assets = Total Liabilities + Total Stockholders' Equity

Balanced-Budget Multiplier

The multiplier associated with a change in government spending financed by an equal change in taxes.

Balanced fund

An investment company that invests in stocks and bonds. The same as a BAlanced mutual fund.

Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a
BAlanced fund.

Balanced Scorecard

A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.

balanced scorecard (BSC)

an approach to performance
measurement that weighs performance measures from four
perspectives: financial performance, an internal business
perspective, a customer perspective, and an innovation and
learning perspective

balancing item

Variable that adjusts to maintain the consistency
of a financial plan. Also called plug.

Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking
fund requirement.

BAN (Bank anticipation notes)

Notes issued by states and municipalities to obtain interim financing for
projects that will eventually be funded long term through the sale of a bond issue.


In the words of Warren Buffet, bill BAne Sr., is, "a great American and one of the last real traders
around. I like to call him 'Salvo.'" His wife, Carol, is a huge NASCAR fan, and in her own words "delights in
pulling the legs off central BAnkers." Cooper BAne, son number two, is a thriving artiste who specializes in
making art that is much better than the stuff most folks are doing. Jackson, son number three, is a world
renowned master chef and plans on opening a restaurant. bill BAne Jr., son number one, plans on giving Mr.
Monroe Trout a run for his money. [bill BAne, Jr. helped Professor Harvey put the hypertextual glossary
together while an MBA student at Duke University.]


Money in a BAnk cheque account, the difference between receipts and payments.

Bank collection float

The time that elapses between when a check is deposited into a BAnk account and when the funds are available to the depositor, during which period the BAnk is collecting payment from the payer's BAnk.

Bank discount basis

A convention used for quoting bids and offers for treasury bills in terms of annualized
yield , BAsed on a 360-day year.

Bank draft

A draft addressed to a BAnk.

bank draft

A guaranteed form of payment which is issued in amounts over $5,000.

Bank for International Settlements (BIS)

An international BAnk headquartered in BAsel, Switzerland, which
serves as a forum for monetary cooperation among several European central BAnks, the BAnk of Japan, and the
U.S. Federal reserve System. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international BAnking activity and promulgates rules concerning
international BAnk regulation.

Bank line

Line of credit granted by a BAnk to a customer.

Bank overdraft

Money owed to the BAnk in a cheque account where payments exceed receipts.

Bank reconciliation

The process of taking the BAlances from the BAnk statement and the general ledger and making adjustments so that they agree.

Bank reconciliation

A comparison between the cash position recorded on a company’s
books and the position noted on the records of its BAnk, usually resulting in some
changes to the book BAlance to account for transactions that are recorded on the
BAnk’s records but not the company’s.

Bank wire

A computer message system linking major BAnks. It is used not for effecting payments, but as a
mechanism to advise the receiving BAnk of some action that has occurred, e.g. the payment by a customer of
funds into that BAnk's account.

Banker's acceptance

A short-term credit investment created by a non-financial firm and guaranteed by a
BAnk as to payment. acceptances are traded at discounts from face value in the secondary market. These
instruments have been a popular investment for money market funds. They are commonly used in
international transactions.


State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.


The reorganization or liquidation of a firm that cannot pay its debts.

Bankruptcy cost view

The argument that expected indirect and direct BAnkruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view

The argument that expected BAnkruptcy costs preclude firms from being financed entirely
with debt.


Slang for one million dollars.

bar code

a group of lines and spaces arranged in a special
machine-readable pattern by which a scanner measures the
intensity of the light reflections of the white spaces between
the lines and converts the signal BAck into the original data

Bar code

Information encoded into a series of BAr and spaces of varying widths,
which can be automatically read and converted to text by a scanning device.

Barbell strategy

A strategy in which the maturities of the securities included in the portfolio are concentrated
at two extremes.

Bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market
value when the lease expires.

BARRA's performance analysis (PERFAN)

A method developed by BARRA, a consulting firm in
Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to
evaluate their money managers' performances.

Barrier options

Contracts with trigger points that, when crossed, automatically generate buying or selling of
other options. These are very exotic options.


A system of exchange in which one good is traded directly for another without the use of money.

Base interest rate

Related: Benchmark interest rate.

Base probability of loss

The proBAbility of not achieving a portfolio expected return.

Base Year

The reference year when constructing a price index. By tradition it is given the value 100.

Basic balance

In a BAlance of payments, the BAsic BAlance is the net BAlance of the combination of the current
account and the capital account.







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