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Definition of Infrastructure

Infrastructure Image 1


Basic facilities, such as transportation, communication, and legal systems, on which economic activity depends.

Related Terms:

Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.

World Bank

The International Bank for Reconstruction and Development, an international organization that provides long-term loans to developing countries to improve their infrastructure.

Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.

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.


A firm's productive resources.

Assets requirements

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

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.

Infrastructure Image 1

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 line

Line of credit granted by a bank to a customer.

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.

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.


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

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.

Infrastructure Image 2

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.

Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.

Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.

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.


A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.

Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.

Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.

Federal Financing Bank

A federal institution that lends to a wide array of federal credit agencies funds it
obtains by borrowing from the U.S. Treasury.

Federal Home Loan Banks

The institutions that regulate and lend to savings and loan associations. The
Federal Home Loan banks play a role analogous to that played by the Federal Reserve banks vis-à-vis
member commercial banks.

Infrastructure Image 3

Financial assets

Claims on real assets.

Fixed asset

Long-lived property owned by a firm that is used by a firm in the production of its income.
Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents,
trademarks, and customer recognition.

Fixed asset turnover ratio

The ratio of sales to fixed assets.

Fixed cost

A cost that is fixed in total for a given period of time and for given production levels.


Annuity contracts in which the insurance company or issuing financial institution pays a
fixed dollar amount of money per period.

Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
(net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid
plus long-term lease payments).


In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are
referred to as the fixed dates.

Fixed-dollar obligations

Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.

Fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.

Fixed-exchange rate

A country's decision to tie the value of its currency to another country's currency, gold
(or another commodity), or a basket of currencies.

Fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight
security because the optioned common stock is trading low.

Fixed-income instruments

assets that pay a fixed-dollar amount, such as bonds and preferred stock.

Fixed-income market

The market for trading bonds and preferred stock.

Fixed price basis

An offering of securities at a fixed price.

Fixed-price tender offer

A one-time offer to purchase a stated number of shares at a stated fixed price,
usually a premium to the current market price.

Fixed-rate loan

A loan on which the rate paid by the borrower is fixed for the life of the loan.

Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
floating-rate payment.

Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.

International Bank for Reconstruction and Development - IBRD or World Bank

International bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high
economic priority.

International Banking Facility (IBF)

International banking Facility. A branch that an American bank
establishes in the United States to do Eurocurrency business.

Investment bank

Financial intermediaries who perform a variety of services, including aiding in the sale of
securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and
institutional clients, and trading for their own accounts. Underwriters.

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

Merchant bank

A British term for a bank that specializes not in lending out its own funds, but in providing
various financial services such as accepting bills arising out of trade, underwriting new issues, and providing
advice on acquisitions, mergers, foreign exchange, portfolio management, etc.

Money center banks

banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.

Net assets

The difference between total assets on the one hand and current liabilities and noncapitalized longterm
liabilities on the other hand.

Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.

Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.

PIBOR (Paris Interbank Offer Rate)

The deposit rate on interbank transactions in the Eurocurrency market
quoted in Paris.

Prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
reorganization and then file it along with the bankruptcy petition.

Publicly traded assets

assets that can be traded in a public market, such as the stock market.

Quick assets

Current assets minus inventories.

Real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
financial obligation.

Reproducible assets

A tangible asset with physical properties that can be reproduced, such as a building or

Residual assets

assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.

Return on assets (ROA)

Indicator of profitability. Determined by dividing net income for the past 12 months
by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net
income/sales) multiplied by asset utilization (sales/assets).

Return on total assets

The ratio of earnings available to common stockholders to total assets.

Society for Worldwide Interbank Financial Telecommunications (SWIFT)

A dedicated computer network to support funds transfer messages internationally between over 900 member banks worldwide.

Wholesale mortgage banking

The purchasing of loans originated by others, with the servicing rights
released to the buyer.

World investible

wealth The part of world wealth that is traded and is therefore accessible to investors.


Anything of value that a company owns.

Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.


The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)


Things that the business owns.


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

Bank overdraft

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

Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.

Fixed costs

Costs that do not change with increases or decreases in the volume of goods or services
produced, within the relevant range.

Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).

Semi-fixed costs

Costs that are constant within a defined level of activity but that can increase or decrease when
activity reaches upper and lower levels.

Tangible fixed assets

Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.


Items owned by the company or expenses that have been paid for but have not been used up.

Bank reconciliation

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

Intangible assets

assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.

current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.

fixed expenses (costs)

Expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. fixed operating costs provide capacity to carry on
operations and make sales. fixed manufacturing overhead costs provide
production capacity. fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.

return on assets (ROA)

Although there is no single uniform practice for
calculating this ratio, generally it equals operating profit (before interest
and income tax) for a year divided by the total assets that are used to
generate the profit. ROA is the key ratio to test whether a business is
earning enough on its assets to cover its cost of capital. ROA is used for
determining financial leverage gain (or loss).

Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.

Fixed Charge Coverage Ratio

A measure of how well a company is able to meet its fixed
charges (interest and lease payments) based on the cash
generated by its operations. It is calculated by dividing the
earnings before interest and taxes by the total interest charges
and lease payments incurred by the firm.

Return on Total Assets Ratio

A measure of the percentage return earned on the value of the
assets in the company. It is calculated by dividing the net income
available for distribution to shareholders by the book value of all

Total Debt to Total Assets Ratio

See debt ratio

fixed cost

a cost that remains constant in total within a specified
range of activity

fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis

fixed overhead volume variance

see volume variance

World Trade Organization (WTO)

the arbiter of global trade that was created in 1995 under the General Agreement on Tariffs and Trade; each signatory country has one
vote in trade disputes

Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.

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.

Fixed asset

An item with a longevity greater than one year, and which exceeds a company’s
minimum capitalization limit. It is not purchased with the intent of immediate
resale, but rather for productive use within a company.

Fixed cost

A cost that does not vary in the short run, irrespective of changes in any
cost drivers. For example, the rent on a building will not change until the lease
runs out or is re-negotiated, irrespective of the level of business activity within
that building.

Fixed overhead

That portion of total overhead costs which remains constant in size
irrespective of changes in activity within a certain range.

Other assets

A cluster of accounts that are listed after fixed assets on the balance sheet,
and which contain minor assets that cannot be reasonably fit into any of the other
main asset categories.


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







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