CTP Glossary Notes

banker's acceptance (BA)

A cross-border financing instrument that can be used to finance the import, export, or domestic shipment of goods.

balance sheet

A financial statement that reports a company's financial condition, including assets, liabilities, and shareholders' equity, at a point in time.

accounts receivable (A/R) balance pattern

A forecasting tool that specifies the percentage of credit sales during a time period that remain outstanding at the end of the current time period and each subsequent time period.

board of directors

A group of individuals that are elected as representatives of the shareholders to establish corporate management-related policies and make decisions on major company issues.

Accredited Standards Committee (ASC) X12 822

A major standardized format currently in use for the transmission of commercial account analysis information and used primarily by US financial institutions.

beta

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

aggregate basis

A method of establishing insurance policy deductibles in which the deductible is set on a per-period basis, regardless of the number of occurrences.

account-to-account transfer

A method of transferring payments between bank accounts on a cross-border basis.

automated clearinghouse (ACH) credit transaction

An electronic message that instructs the originating depository financial institution to move funds from the originator's account to the receiver's account at the receiving depository financial institution.

board resolution

A resolution that gives a specific individual or individuals the authority to facilitate the business of the enterprise.

availability schedule

A schedule that specifies, for each drawee endpoint, when a bank grants available credit for deposited items or includes them in collected balances.

asset-backed security (ABS)

A security with income derived from a pool of assets, such as accounts receivable or credit card receivables.

Basel Capital Accords

A series of recommendations regarding the creation of international standards and regulations for how much capital financial institutions must set aside to reduce risks associated with investing and lending.

account reconciliation program (ARP)

A service offered by a financial institution that matches issue information to paid check information and reports outstanding/unpaid items.

application programming interface (API)

A set of routines, protocols, and tools for building software applications.

bill of lading

A shipping document that acts as the document of title for the shipped goods and recognizes that there is a contract of carriage.

bond anticipation note (BAN)

A short-term, interest-bearing security issued in anticipation of future revenues from a longer-term bond issue.

Basel Committee on Banking Supervision (BCBS)

A standards-setting body that provides a forum for regular cooperation on banking supervisory matters.

address verification service (AVS)

A system used to verify the identity of the person claiming to own the credit card being used in a transaction.

automated clearinghouse (ACH) debit transaction

An electronic message that instructs the originating depository financial institution to move funds from the receiver's account to the originator's account.

business continuity

Actions taken with regard to crisis management, alternative operating procedures, and communications to staff and customers.

automated clearinghouse (ACH)

An electronic network for financial transactions that processes large volumes of low-value credit and debit transactions in batches.

broker-dealer

An entity that serves as an intermediary in the purchase and sale of capital market securities.

additional paid-in capital (APIC)

An equity account that reflects the difference at the time of issue between the par value and the issuance price of any new stock sold by a company.

budget

An in-depth plan that details how economic resources will be procured and deployed over a specific time period.

Business Identifier Code (BIC)

An international standard for uniquely identifying financial institutions included in a financial transaction.

asset-backed commercial paper (ABCP)

An investment that has most of the features of standard commercial paper, but is secured against specific assets.

auditor's opinion

An opinion on a company's financial statements that is provided by an independent auditor based on a financial audit.

beneficial ownership (beneficial interest)

Control over funds or accounts, which may be separate from signature authority or legal title.

asset manager

Investment managers that run mutual funds and separately managed accounts (SMAs).

borrowing base

The amount of money a lender is prepared to loan the borrower against the collateral pledged.

book value per share

The book value of total common stockholders' equity divided by the number of common shares outstanding.

bond indenture

The contract between the issuing entity of a bond and the bondholders.

Board of Governors

The controlling entity for the US Federal Reserve System.

Accounting Standards Codification (ASC)

The detailed set of rules in the United States, referred to as Generally Accepted Accounting Principles (GAAP), that are developed, agreed upon, and published in the form of ASC Topics by the Financial Accounting Standards Board.

asset allocation

The mix of instruments in a capital market investment portfolio.

business email compromise (BEC)

The most common form of cyber attack, in which a criminal defrauds a company by either taking control of an email account or impersonating an actual email account.

buy side

The part of an investment bank that supports companies' decisions to purchase equity and debt.

availability

The point in time when the payee can use the funds provided by the payment, even though the payment may not be final.

as-of adjustment

The practice of a bank adding additional time as part of the collected-balance calculation when a check takes longer to clear than the initial availability that was granted.

blocked currencies

The practice of a government not allowing the conversion from the local currency into a major trading currency.

bid price

The price or yield at which a dealer will purchase a security.

ask price

The price or yield at which a dealer will sell a security.

arbitrage

The process by which an asset is purchased in one financial market and simultaneously sold in another market to produce a riskless profit.

asset/liability management

The process of managing and coordinating the assets and liabilities held in an investment portfolio to maximize earnings and minimize risk.

active hedging

The process of using various financial instruments to manage risks associated with future cash flows or the values of assets or liabilities.

advance rate

The proportion of a borrower's eligible collateral that a lender is prepared to lend against.

banker's acceptance (BA) rate

The rate at which BAs trade in the secondary market.

asset liquidity risk

The risk that an investment cannot be sold quickly without experiencing unacceptable substantial loss in value.

average daily float

The sum of the daily dollar amount of items in the process of collection, divided by the number of calendar or business days in the account analysis period.

average deposit float

The sum of the daily dollar amount of items in the process of collection, divided by the number of days in the account analysis period.

average collected balance

The sum of the daily ending collected balances, divided by the number of days in the analysis period.

average ledger balance

The sum of the daily ending ledger balances, divided by the number of days in the account analysis period.

average collection period

The sum of the dollar-days of float for all items received in a certain period, divided by the number of days in the period.

availability float

The time interval or delay between the day when a payment is deposited into a bank account and the day when the payee's account is credited with collected funds.

acceptance

A drawee's signed agreement to pay a negotiable instrument as presented.

brokerage firm

A financial institution that trades securities for its own account or on behalf of its customers.

balance-forward system

A cash application process in which payments are applied to the total outstanding balance on an accounts receivable account rather than to specific items.

account resolution

A board resolution that empowers a representative of the business to enter into agreements for financial services.

application service provider (ASP)

A business that provides computer-based services to customers over a network.

bond equivalent yield (BEY)

A calculation for restating semiannual, quarterly, or monthly discount bond or note yields into an annual yield.

basis point

A common measurement unit used for interest rates and other financial percentages.

bankruptcy

A condition of financial failure involving the inability to pay one's debts in a timely manner.

aggressive financing strategy

A current asset financing strategy that involves a company financing all fixed assets with long-term debt and equity, but financing only a portion of permanent current assets with long-term financing.

bond

A debt instrument in which an investor loans money to an entity that borrows the funds for a defined period of time, at a fixed or variable interest rate.

bank obligation

A debt instrument issued by a bank to raise funds.

Accredited Standards Committee (ASC) X12

A not-for-profit organization responsible for developing and maintaining cross-industry electronic data interchange (EDI) message standards in the United States.

Accredited Standards Committee (ASC) X9

A not-for-profit organization responsible for developing and maintaining financial industry standards, such as the size of a paper check and protocols for messaging, electronic security systems, and paperless contracts.

account analysis statement

A periodic statement that lists the fees for banking services provided to the account holder and any offsetting earnings credits for deposited funds.

bid-offer quote

A price quote in which a dealer or other entity provides both the price at which it is willing to purchase and sell a specific currency, commodity, or security.

base erosion and profit shifting (BEPS)

A process whereby a multinational corporation artificially books profits to related entities in low-tax jurisdictions, thereby avoiding or reducing its tax liability.

bond rating

A quality rating that is assigned to a bond issue to reflect both the probability of default and the loss given default on the issue.

account analysis

A record of the services provided to customers by a bank, along with detailed information on balances and credits earned.

barter

A trade payment method that involves the direct exchange of goods or services between two parties without the exchange of money.

available balance

A type of bank balance that represents the funds in a customer's account that the bank was able to invest in income-producing assets during the account analysis period.

break-even analysis

A type of cost/benefit analysis that establishes the level of activity at which benefits and costs are equal.

blockchain

A type of distributed ledger technology consisting of data structure blocks that may contain data or programs.

analytical forecast

A type of forecast that can be used to answer what-if questions or to predict the financial impact of a given action.

business interruption insurance

A type of insurance coverage that provides payments to an organization in the event it is unable to pursue a normal line of business for some period of time due to an unforeseen event.

asset-based lending

A type of lending that involves commercial loans and lines of credit that are backed by liens on specific assets of the borrowing company.

American option

A type of option contract that can be exercised at any time prior to the stated expiration date of the contract.

Bermudan option

A type of option contract that is exercisable only on specified dates that are spaced evenly over the option's life.

bank overlay structure

A type of pooling structure that combines both sweeping and pooling.

business risk

A type of risk that represents the classic risks to success in operating a business venture.

American depositary receipt (ADR)

A type of security issued by an American custodian bank to allow American investors to trade stock in a non-US company.

account-to-receiver transfer

A type of transfer that allows funds from accounts at a depository financial institution to be retrieved by any receiver either at a participating bank location or at a trusted, third-party provider in certain receiving countries.

all-in rate

An interest rate that consists of a base rate plus a spread that is added to or subtracted from the base rate.

advising bank

In a letter of credit (L/C) transaction, this is the bank that advises the seller of an L/C in its favor.

alpha (smoothing constant)

In an exponential smoothing forecasting methodology, this is the weight assigned to the most recent actual value and the most recent forecasted value.

bank capital requirements

Rules or regulations that specify the amount of capital the owners of a bank must contribute to the business.

average collection period

See days sales outstanding.

authentication

The ability to know, with a reasonable amount of certainty, who is accessing information or initiating a transaction.

accrual accounting

The accounting approach under which expenses must be reported when the revenues with which they are associated are recognized.