Definition of Intermediary

Intermediary

An independent third party that may act as a mediator during negotiations.

financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.

Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.

Brokered market

A market where an intermediary offers search services to buyers and sellers.

Unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the
condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched
book hedges its net market risk with futures and options, usually.
Related expressions: open book and short book.

ABM (automated banking machine)

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

Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

Act of state doctrine

This doctrine says that a nation is sovereign within its own borders and its domestic
actions may not be questioned in the courts of another nation.

Active

A market in which there is much trading.

Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a
better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy

activity

a repetitive action performed in fulfillment of business functions

activity analysis

the process of detailing the various repetitive actions that are performed in making a product or
providing a service, classifying them as value-added and
non-value-added, and devising ways of minimizing or eliminating
non-value-added activities

Activity-based budgeting

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

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

activity center

a segment of the production or service
process for which management wants to separately report
the costs of the activities performed

activity driver

a measure of the demands on activities and,
thus, the resources consumed by products and services;
often indicates an activity’s output

Actual cost

The actual expenditure made to acquire an asset, which includes the supplierinvoiced
expense, plus the costs to deliver and set up the asset.

actual cost system

a valuation method that uses actual direct
material, direct labor, and overhead charges in determining
the cost of Work in Process Inventory

Actuals

The physical commodity underlying a futures contract. Cash commodity, physical.

Actuary

One who uses statistical information to evaluate the probability of future events and prices insurance products.

ADF (annuity discount factor)

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

Affirmative covenant

A bond covenant that specifies certain actions the Firm must take.

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.

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
services.

Amortization factor

The pool factor implied by the scheduled amortization assuming no prepayemts.

Annuity factor

Present value of $1 paid for each of t periods.

annuity factor

Present value of an annuity of $1 per period.

Asset activity ratios

Ratios that measure how effectively the Firm is managing its assets.

Asset-Backed Securities

Bond or note secured by assets of compAny.

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.

At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.

Back-to-back financing

An intercompAny loan channeled through a bank.

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.

Bank

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.

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.

Bankruptcy

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

bankruptcy

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.

Bill and Hold Practices

Products that have been sold with an explicit agreement that delivery
will occur at a later, often yet-to-be-determined, date.
Capitalize To report an expenditure or accrual as an asset as opposed to expensing it and charging it against earnings currently.

Blue-chip company

Large and creditworthy compAny.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Bridge financing

Interim financing of one sort or another used to solidify a position until more permanent
financing is arranged.

Bullet contract

A guaranteed investment contract purchased with a single (one-shot) premium. Related:
Window contract.

business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay

Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.

cash flow from operating activities, or cash flow from profit

This equals the cash inflow from sales during the period minus the cash
outflow for expenses during the period. Keep in mind that to measure
net income, generally accepted accounting principles require the use of
accrual-basis accounting. Starting with the amount of accrual-basis net
income, adjustments are made for changes in accounts receivable,
inventories, prepaid expenses, and operating liabilities—and depreciation
expense is added back (as well as Any other noncash outlay
expense)—to arrive at cash flow from profit, which is formally labeled
cash flow from operating activities in the externally reported statement
of cash flows.

Cash Flow Provided by Operating Activities

With some exceptions, the cash effects of transactions
that enter into the determination of net income, such as cash receipts from sales of goods
and services and cash payments to suppliers and employees for acquisitions of inventory and
expenses.

Cash Flow Provided or Used from Financing Activities

Cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.

Cash Flow Provided or Used from Investing Activities

Cash receipts and payments involving
long-term assets, including making and collecting loans and acquiring and disposing of
investments and productive long-lived assets.

CASH FLOWS FROM FINANCING ACTIVITIES

A section on the cash-flow statement that shows how much cash a compAny raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations.

CASH FLOWS FROM INVESTING ACTIVITIES

A section on the cashflow statement that shows how much cash came in and went out because of various investing activities like purchasing machinery.

Cash settlement contracts

Futures contracts, such as stock index futures, that settle for cash, not involving
the delivery of the underlying.

Cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which
calls for future delivery of an asset at an agreed-upon price.

Central Bank

A public agency responsible for regulating and controlling an economy's monetary and financial institutions. It is the sole money-issuing authority.

Characteristic line

The market model applied to a single security. The slope of the line is a security's beta.

Clearing House Interbank Payments System (CHIPS)

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

Collection fractions

The percentage of a given month's sales collected during the month of sale and each
month following the month of sale.

Commercial Bank

A privately owned, profit-seeking Firm that accepts deposits and makes loans.

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Company Acquisitions

Assets acquired to create money. May include plant, machinery and equipment, shares of another compAny etc.

company cost of capital

Expected rate of return demanded by investors in a compAny, determined by the average risk of the compAny’s assets and operations.

Company-specific risk

Related: Unsystematic risk

Companyspecific Risk

See asset-specific risk

Completed-Contract Method

A contract accounting method that recognizes contract revenue
only when the contract is completed. All contract costs are accumulated and reported as expense
when the contract revenue is recognized.

computer-aided manufacturing (CAM)

the use of computers to control production processes through numerically
controlled (NC) machines, robots, and automated assembly systems

computer integrated manufacturing (CIM)

the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system

concentration banking

System whereby customers make payments to a regional collection center which transfers funds to
a principal bank.

Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance compAny to whom the manufacturer has sold the conditional
sales contract.

Confirmation

he written statement that follows Any "trade" in the securities markets. ConFirmation is issued
immediately after a trade is executed. It spells out settlement date, terms, commission, etc.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal act
containing the requirements for offering insurance to departed employees.

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.

Consumer Credit Protection Act

A federal act specifying the proportion of
total pay that may be garnished.

Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
bilateral agreement between the buyer and seller of a transaction as defined by an exchange.

Contract

A formal written statement of the rights and obligations of each party to a transaction.

Contract Accounting

Method of accounting for sales or service agreements where completion
requires an extended period.

contract manufacturer

an external party that has been granted an outsourcing contract to produce a part or component for an entity

Contract month

The month in which futures contracts may be satisfied by making or accepting a delivery.
Also called value managers, those who assemble portfolios with relatively lower betas, lower price-book and
P/E ratios and higher dividend yields, seeing value where others do not.

contract vendor

an external party that has been granted an
outsourcing contract to provide a service activity for an entity

Contract Work Hours and Safety Standards Act

A federal act requiring federal contractors to pay overtime for hours worked exceeding 40 per week.

Conversion factors

Rules set by the Chicago Board of Trade for determining the invoice price of each
acceptable deliverable Treasury issue against the Treasury Bond futures contract.

Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

cost of goods manufactured (CGM)

the total cost of the
goods completed and transferred to Finished Goods Inventory
during the period

Cost of lease financing

A lease's internal rate of return.

Cost of manufacture

The cost of goods manufactured for subsequent sale.

cost-plus contract

a contract in which the customer agrees
to reimburse the producer for the cost of the job plus a
specified profit margin over cost

Counterparty Party

on the other side of a trade or transaction.

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