Finance Terms

Syndicated Loan

A loan offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower. The borrower could be a corporation, a large project, or a sovereignty (such as a government). The loan may involve fixed amounts, a credit line, or a combination of the two. Interest rates can be fixed for the term of the loan or floating based on a benchmark rate. Typically there is a lead bank or underwriter of the loan, known as the "arranger", "agent", or "lead lender". This lender may be putting up a proportionally bigger share of the loan, or perform duties like dispersing cash flows amongst the other syndicate members and administrative tasks. AKA syndicated bank facility.

JP Morgan & Chase Co.

A multinational banking and financial services holding company headquartered in New York City. Largest bank in US - world's 6th largest by total assets. Formed in 2000, when Chase Manhattan Corporation merged with JP Morgan & Co. - Chase bought JP Morgan, stock deal valued at 33 billion dollars. Financial services industry is "rapidly consolidating". Chase was pursuing a major investment banking house or securities firm.

Municipal Bond

A municipal bond is a debt security issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are exempt from federal taxes and from most state and local taxes, especially if you live in the state in which the bond is issued. Municipal bonds may be used to fund expenditures such as the construction of highways, bridges or schools. "Munis" are bought for their favorable tax implications, and are popular with people in high income tax brackets.

Mutual Fund

A mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Pitchbook

A pitchbook is a sales book created by an investment bank/firm that details the main attributes of the firm. The pitchbook is used by the firm's sales force to aid it with selling products and issues, and generating new clients.

Preferred Equity/Stock

A preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights. Preferred stock combines features of debt, in that it pays fixed dividends, and equity, in that it has the potential to appreciate in price. The details of each preferred stock depend on the issue.

Road Show

A presentation by an issuer of securities to potential buyers. Road shows refer to when the management of a company that is issuing securities or doing an initial public offering (IPO) travels around the country to give presentations to analysts, fund managers and potential investors. The road show is intended to generate excitement and interest in the issue or IPO, and is often critical to the success of the offering. A non-deal road show occurs where executives hold discussions with current and potential investors, but nothing is offered for sale. AKA "dog and pony show."

Principal

A principal is the amount borrowed or the amount still owed on a loan, separate from interest. 2. The original amount invested, separate from earnings. 3. The face value of a bond. 4. The owner of a private company. 5. The main party to a transaction, acting as either a buyer or seller for his/her own account and risk.

Private Equity Firm

A private equity firm is an investment manager that makes investments in the private equity of operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital.

Syndicate

A professional financial services group formed temporarily for the purpose of handling a large transaction that would be hard or impossible for the entities involved to handle individually. Syndication allows companies to pool their resources and share risks.

League Table

A ranking of companies based on a set criteria such as revenue, earnings, deals or any other relevant metrics. The rankings are organized into lists, which can be used for investment research purposes or as promotional material for the companies on the list.

Bulge Bracket

A slang term used to describe the company or companies that issued the largest amount of securities on a new issue in an underwriting syndicate, or that are the largest underwriting company or companies in the industry. The bulge bracket is usually the first group listed on the tombstone, which is an advertisement of a new issue.

Subprime Loans

A subprime loan is a type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.

Economic Analysis

A systematic approach to determining the optimum use of scarce resources, involving comparison of two or more alternatives in achieving a specific objective under the given assumptions and constraints. Economic analysis takes into account the opportunity costs of resources employed and attempts to measure in monetary terms the private and social costs and benefits of a project to the community or economy.

Risk Mitigation

A systematic reduction in the extent of exposure to a risk and/or the likelihood of its occurrence. Also called risk reduction.

Fixed Income

A type of investing or budgeting style for which real return rates or periodic income is received at regular intervals at reasonably predictable levels. Fixed-income budgeters and investors are often one and the same - typically retired individuals who rely on their investments to provide a regular, stable income stream. This demographic tends to invest heavily in fixed-income investments because of the reliable returns they offer.

Zero Coupon Bond

A zero-coupon bond is a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. AKA accrual bond.

Asset-Backed Finance

ABF. Provides structured finance and securitization capabilities that bring together clients seeking capital with investors. Must have the capital to extend market-based financing to an array of issuers.

Industrial Goods Sector

AKA Industrials. A category of stocks that relate to producing goods used in construction and manufacturing. This sector includes companies involved with aerospace and defense, industrial machinery, tools, lumber production, construction, cement and metal fabrication.

Hedgefund

Alternative investments using pooled funds that may use a number of different strategies in order to earn active return, or alpha, for their investors. They may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns. May have low correlations with a traditional portfolio of stocks and bonds, so allocating an exposure to hedge funds can be a good diversifier.

Middle Market

America's middle market firms have revenues in the $10 million to $1 billion range. There are about 200,000 such firms - most are privately held. Such firms straddle the middle market between the smaller companies and the billion-dollar giants.

Portfolio

American businessman, lawyer, investor, and philanthropist. He is vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett; in this capacity, Buffett describes Charlie Munger as "my partner."

Jefferies LLC

An American global investment bank and institutional securities firm headquartered in New York. The firm provides clients with capital markets and financial advisory services, institutional brokerage, securities research, and asset management. This includes mergers and acquisitions, restructuring, and other financial advisory services.

Equity

1. A stock or any other security representing an ownership interest. This may be in a private company (not publicly traded), in which case it is called private equity. 2. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as shareholders' equity. 3. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio. 4. When a business goes bankrupt and has to liquidate, the amount of money remaining (if any) after the business repays its creditors. This is most often called "ownership equity" but is also referred to as risk capital or "liable capital."

Exit Strategy

1. The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. In other words, the exit strategy is a way of "cashing out" an investment. Examples include an initial public offering (IPO) or being bought out by a larger player in the industry. Also referred to as a "harvest strategy" or "liquidity event". 2. In the context of an active trader, a plan as to when a trade will be closed out.

3G Capital

3G Capital is a American multibillion-dollar investment firm, founded in 2004 by Brazilian businessmen. The firm is best known for partnering up with Berkshire Hathaway for its acquisitions, including those of Burger King, Tim Hortons, and Kraft Foods.

Draconian

(Of laws or their application) excessively harsh and severe.

Treasury Bond

A T-Bond is a marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.

Brokerage Company

A brokerage company is a business whose main responsibility is to be an intermediary that puts buyers and sellers together in order to facilitate a transaction. Brokerage companies are compensated via commission after the transaction has been successfully completed.

Capital Structure

A capital structure is a mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.

Common Equity/Stock

A common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full. AKA Ordinary Shares.

Flash Trading

A controversial computerized trading practice offered by some stock exchanges. Flash trading uses highly sophisticated high-speed computer technology to allow traders to view orders from other market participants fractions of a second before others in the marketplace. This gives flash traders the advantage of being able to gauge supply and demand and recognize movements in market sentiment before other traders. Flash orders are also known as "step-up orders" or "pre-routing orders".

Credit Facility

A credit facility is a type of loan made in a business or corporate finance context. Specific types of credit facilities are: revolving credit, term loans, committed facilities, letters of credit and most retail credit accounts.

Corporate Bond

A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher, even for top-flight credit quality companies.

Quick Service Restaurants

A fast food restaurant, also known as a quick service restaurant (QSR) within the industry, is a specific type of restaurant characterized both by its fast food cuisine and by minimal table service.

Commercial Bank

A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional bank is a brick and mortar institution with tellers, safe deposit boxes, vaults, and ATMs. Some commercial banks are only online, and pay higher interest rates on investments and deposits, and charge lower fees.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. The balance sheet adheres to the following formula: Assets = Liabilities + Stockholders' Equity.

Fidelity Bond

A form of business insurance that offers an employer protection against losses - either monetary or physical - caused by its employees' fraudulent or dishonest actions. Fidelity bonds are often held by insurance companies and brokerage firms, which are specifically required to carry protection proportional to their net capital. Among the possible forms of loss a fidelity bond covers include fraudulent trading, theft and forgery.

Berkshire Hathaway

An American multinational conglomerate holding company headquartered in Omaha, Nebraska. Owns or hold a significant minority percentage in many companies (including Wells). Employs large amounts of capital and minimal debt. The company is known for its control and leadership by Warren Buffett, who is the company's Chairman of the Board, President, and Chief Executive Officer, and Charlie Munger, the company's Vice-Chairman of the Board of Directors. In the early part of Buffett's career at Berkshire, he focused on long-term investments in publicly traded companies, but more recently he more frequently bought whole companies.

Exchange-Traded Fund

An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.

Agent

An agent in the financial sense is any person who has been legally empowered to act on behalf of another person.

Intrapraneur

An inside entrepreneur, or an entrepreneur within a large firm, who uses entrepreneurial skills without incurring the risks associated with those activities. Intrapreneurs are usually employees within a company who are assigned a special idea or project, and are instructed to develop the project like an entrepreneur would. They have the resources and capabilities of the firm at their disposal, and their main job is to turn their idea or project into a profitable venture for the company.

Bank of America Merill Lynch

Bank of America (abbreviated as BoA or BofA) is an American multinational banking and financial services corporation headquartered in Charlotte, North Carolina. It is the second largest bank holding company in the United States by assets. As of 2013, Bank of America is the twenty-first largest company in the United States by total revenue. In 2010, Forbes listed Bank of America as the third biggest company in the world. The bank's 2008 acquisition of Merrill Lynch made Bank of America the world's largest wealth management corporation and a major player in the investment banking market.

Boutique Investment Bank

Boutique investment banks are non-full service, small sized investment banks that specialize in some particular aspects of investment banking such as corporate finance. They generally work on middle-market firms assisting on the sell-side. They do the same work as larger bulge-bracket banks but for smaller deal amounts, typically with enterprise value between $5 and $100 million. Well-known in their niche and typically founded/led by former partners of large banks.

Buy-Side

Buy side is the side of Wall Street comprising the investing institutions such as mutual funds, pension funds and insurance firms that tend to buy large portions of securities for money-management purposes. The buy side is the opposite of the sell-side entities, which provide recommendations for upgrades, downgrades, target prices and opinions to the public market. Together, the buy side and sell side make up both sides of Wall Street.

John Stumpf

Chairman and chief executive officer of Wells Fargo, one of the Big Four banks of the United States. Also on Board of Directors for Wells.

Jamie Dimon

Chairman, president, and chief executive officer of JPMorgan Chase, the largest of the Big Four American banks. Previously served on the Board of Directors of the Federal Reserve Bank of New York.

Federal Consulting

Consulting for the government.

Corporate Finance

Corporate finance consists of the financial activities related to running a corporation. 2) A division or department that oversees the financial activities of a company. Corporate finance is primarily concerned with maximizing shareholder value through long-term and short-term financial planning and the implementation of various strategies. Everything from capital investment decisions to investment banking falls under the domain of corporate finance.

Credit Suisse

Credit Suisse Group is a Switzerland-based multinational financial services holding company, headquartered in Zürich, that operates the Credit Suisse Bank and other financial services investments. The company is organized as a stock corporation with four divisions: Investment Banking, Private Banking, Asset Management, and a Shared Services Group that provides marketing and support to the other three divisions.

Critical Mass

Critical mass is the point at which a growing company becomes self-sustaining, and no longer needs additional investment to remain economically viable.

Debt

Debt is an amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

Debt Security

Debt security is any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate and maturity/renewal date. Debt securities include government bonds, corporate bonds, municipal bonds, preferred stock, collateralized securities (such as CDOs, CMOs, GNMAs) and zero-coupon securities. The interest rate on a debt security is largely determined by the perceived repayment ability of the borrower; higher risks of payment default almost always lead to higher interest rates to borrow capital. Also known as "fixed-income securities."

Deutsche Bank

Deutsche Bank AG (literally "German Bank") is a German global banking and financial services company with its headquarters in the Deutsche Bank Twin Towers in Frankfurt. It has more than 100,000 employees in over 70 countries, and has a large presence in Europe, the Americas, Asia-Pacific and the emerging markets. In 2009, Deutsche Bank was the largest foreign exchange dealer in the world with a market share of 21 percent. The company is a component of the Euro Stoxx 50 stock market index.

Equity Capital Market

ECM. A market that exists between companies and financial institutions that is used to raise equity capital for the companies. Some activities that companies operate in the equity capital markets include: overall marketing, distribution and allocation of new issues; initial public offerings, special warrants, and private placements. Along with stocks, the equity capital markets deal with derivative instruments such as futures, options and swaps.

Franchise

A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business's (the franchiser) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees. One of the biggest advantages of purchasing a franchise is that you have access to an established company's brand name; meaning that you do not need to spend further resources to get your name and product out to customers. Occurs frequently in highly competitive industries such as the fast-food industry.

Product Family

A group of related goods that are manufactured by a single company. Companies benefit from creating product families in that they can leverage the loyalty their existing customers feel toward an existing product to get them to buy additional, related products. Product families also allow companies to attract new customers to their brand by providing an array of products that are similar but meet slightly different needs.

High Yield Bond

A high-yield bond is a high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds. Because of the higher risk of default, these bonds pay a higher yield than investment grade bonds. Based on the two main credit rating agencies, high-yield bonds carry a rating below 'BBB' from S&P, and below 'Baa' from Moody's. Bonds with ratings at or above these levels are considered investment grade. Credit ratings can be as low as 'D' (currently in default), and most bonds with 'C' ratings or lower carry a high risk of default; to compensate for this risk, yields will typically be very high. Also known as "junk bonds".

Equity Research

Equity Research is a division within either a buy-side or sell-side firm which is responsible for the research used by the firm and its clients. The purpose of an equity researcher is to provide insight and detailed analysis into a company, entity or sector and this information is then used by investors to decide how to allocate their funds and by Private Equity firms and investment banks to value companies for mergers, LBOs, IPOs etc. Buy-side firms will then pay the equity research team for access to their information, and this is why equity research is a revenue-producing group for an investment bank.

Private Equity

Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.

Evercore Partners

Evercore is an American independent investment banking advisory firm founded in 1996 by Roger Altman, David Offensend, and Austin Beutner. Evercore's Investment Banking business advises its clients on mergers and acquisitions, divestitures, restructurings, financings, public offerings, private placements and other strategic transactions and also provides institutional investors with macro and fundamental equity research, sales and trading execution. Evercore's Investment Management business comprises wealth management, institutional asset management and private equity investing. Evercore serves clients from 28 offices in North America, Europe, South America and Asia.

Guaranteed Income Bond

GIB. An investment tool that provides income in the form of interest over a specified time period, usually between 6 months and 10 years. Generally considered a low-risk investment. You can typically choose how frequently you want the payments, such as monthly, quarterly or yearly.

Hedge Fund

Hedge funds are alternative investments using pooled funds that may use a number of different strategies in order to earn active return, or alpha, for their investors. Hedge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Because hedge funds may have low correlations with a traditional portfolio of stocks and bonds, allocating an exposure to hedge funds can be a good diversifier.

Initial Public Offering

IPO. The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred(, the best offering price, and the time to bring it to market.

Trading

In financial markets, trading means performing a transaction that involves the selling and purchasing of a security.

Investment Banking

Investment banking is a specific division of banking related to the creation of capital for other companies, governments and other entities. Investment banks underwrite new debt and equity securities for all types of corporations, aid in the sale of securities, and help to facilitate mergers and acquisitions, reorganizations and broker trades for both institutions and private investors. Investment banks also provide guidance to issuers regarding the issue and placement of stock.

Investment Bank

Investment banking is a specific division of banking related to the creation of capital for other companies, governments, and other entities. Investment banks underwrite new debt and equity securities for all types of corporations, aid in the sale of securities, and help to facilitate mergers and acquisitions, reorganizations, and broker trades for both institutions and private investors. Investment banks also provide guidance to issuers regarding the issue and placement of stock.

Liquidity

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.

Mergers and Acquisitions

M&A. A general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.

Mortgaged Backed Securities

MBS. A mortgage-backed security (MBS) is a type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution. Also known as a "mortgage-related security" or a "mortgage pass through."

Management Consulting

Management consultants solve problems. They are the hired guns brought in to assess the business operations of an organization looking for ways to improve efficiency and cut costs. They then bring these solutions to management - usually in PowerPoint form. Corporate managers, always sniffing around for new ways to unlock shareholder value, use consultants to improve the way a company does business.

Stock Market Crash of 2008

Mortgage crisis. Credit crisis. Bank collapse. Government bailout. Phrases like these frequently appeared in the headlines throughout the fall of 2008, a period in which the major financial markets lost more than 30% of their value. Subprime mortgages are mortgages targeted at borrowers with less-than-perfect credit and less-than-adequate savings. An increase in subprime borrowing began in 1999 as the Federal National Mortgage Association (widely referred to as Fannie Mae) began a concerted effort to make home loans more accessible to those with lower credit and savings than lenders typically required. The idea was to help everyone attain the American dream of home ownership. Since these borrowers were considered high-risk, their mortgages had unconventional terms that reflected that risk, such as higher interest rates and variable payments. While many saw great prosperity as the subprime market began to explode, others began to see red flags and potential danger for the economy. The role of Fannie and Freddie is to repurchase mortgages from the lenders who originated them, and make money when mortgage notes are paid. Thus, ever-increasing mortgage default rates led to a crippling decrease in revenue for these two companies. n the up-trending market that existed from 1999 through 2005, these mortgages were virtually risk-free. A borrower, having positive equity despite the low mortgage payments since his home had increased in value since the purchase date, could just sell the home for a profit in the event he could not afford the future higher payments. However, many argued that these creative mortgages were a disaster waiting to happen in the event of a housing market downturn, which would put owners in a negative equity situation and make it impossible to sell. To compound the potential mortgage risk, total consumer debt in general continued to grow at an astonishing rate and in 2004, it hit $2 trillion for the first time. During the run-up in housing prices, the mortgage-backed securities (MBS) market became popular with commercial investors. An MBS is a pool of mortgages grouped into a single security. Investors benefit from the premiums and interest payments on the individual mortgages it contains. This market is highly profitable as long home prices continue to rise and home owners continue to make their mortgage payments. The risks however, became all too real as housing prices began to plummet and homeowners began to default on their mortgages in droves. By March 2007, homeowners were defaulting at high rates as all of the creative variations of subprime mortgages were resetting to higher payments while home prices declined. Homeowners were upside down - they owed more on their mortgages than their homes were worth - and could no longer just flip their way out of their homes if they couldn't make the new, higher payments. Instead, they lost their homes to foreclosure and often filed for bankruptcy in the process. On Sunday September 7, 2008, with the financial markets down nearly 20% from the October 2007 peaks, the government announced its takeover of Fannie Mae and Freddie Mac as a result of losses from heavy exposure to the collapsing subprime mortgage market. One week later, on September 14, major investment firm Lehman Brothers succumbed to its own overexposure to the subprime mortgage market, and announced the largest bankruptcy filing in U.S. history at that time. The next day, markets plummeted, and the Dow closed down 499 points at 10,917. The collapse of Lehman cascaded, resulting in the net asset value of the Reserve Primary Fund falling below $1 per share on September 16, 2008. Investors then were informed that for every $1 invested, they were entitled to only 97 cents. This loss was due to the holding of commercial paper issued by Lehman and was only the second time in history that a money market fund's share value has "broken the buck." When one considers the irrational growth of the subprime mortgage market along with the investment vehicles creatively derived from it, combined with the explosion of consumer debt, maybe the financial turmoil of 2008 was not as unforeseeable as many would like to believe.

Warren Buffet

Most successful investor in the world. Chairman, CEO, and largest shareholder of Berkshire Hathaway, and is consistently ranked among the world's wealthiest people.

Payment-In-Kind

PIK is the use of a good or service as payment instead of cash. A financial instrument that pays interest or dividends to investors of bonds, notes or preferred stock with additional debt or equity instead of cash. Payment-in-kind securities are attractive to companies who would prefer not to make cash outlays. They are often used in leveraged buyouts.

Tim Sloan

President and Chief Operating Officer of Wells Fargo. Responsible for the operations of the company's four main business groups: Community Banking, Consumer Lending, Wealth and Investment Management, and Wholesale Banking.

Corporate Credit Rating

Providing independent, objective assessments of the credit worthiness of companies and countries, a credit ratings company helps investors decide how risky it is to invest money in a certain country and/or security. Three top agencies deal in credit ratings: Moody's, Standard & Poor's (S&P's) and Fitch Ratings. Each of these agencies aims to provide a rating system to help investors determine the risk associated with investing in a specific company, investing instrument or market. The ratings lie on a spectrum ranging between highest credit quality on one end and default or "junk" on the other. Long-term credit ratings are denoted with a letter: a triple A (AAA) is the highest credit quality, and C or D (depending on the agency issuing the rating) is the lowest or junk quality.

Public Finance

Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

Risk Management

Risk management is the process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for companies as well as individuals. For example, the recession that began in 2008 was largely caused by the loose credit risk management of financial firms.

Subprime

Risky. A classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well. Approximately 25% of mortgage originations are classified as subprime.

Sales and Trading

Sales & Trading, also known as Trading Desk, is a group selling securities, forming a link between Sellers (Government or Corporations) and Buyers (Investors). Traders at the trading desk meet the needs of Portfolio Managers, the Research group and the Institutional clients. Traders provide liquidity for facilitate client transaction as Market Makers.

Sales

Sales of investment vehicles in the financial markets represent highly refined value exchanges. Purchase of a home: a lending institution would sell financing, via a mortgage, to the homebuyer. Then, the lending institution likely sells that mortgage to another individual as an investment. An investment manager could earn a living trading bundles of mortgages and other kinds of debt financing.

Second Lien Debt

Second lien debt refers to debts that are subordinate to the rights of other, more senior debts issued against the same collateral, or a portion of the same collateral. If a borrower defaults, second lien debts stand behind higher lien debts in terms of rights to collect proceeds from the debt's underlying collateral.

Sell-Side

Sell side is the part of the financial industry involved with the creation, promotion, analysis and sale of securities. Sell-side individuals and firms work to create and service stock products that will be made available to the buy side of the financial industry. The sell side of Wall Street includes investment bankers who serve as intermediaries between issuers of securities and the investing public, analysts who perform stock research and make ratings, and the market makers who provide liquidity in the market.

Chief Business Development Officer

The CBDO is expected to have a broad and comprehensive knowledge of all matters related to the business of the organization with an eye towards identifying new sales prospects and driving business growth and requirements for product development that will be coordinated with R&D functions.

The Fortune 500

The Fortune 500 is an annual list of the 500 largest companies in the United States as compiled by FORTUNE magazine. The list is put together using the most recent figures for revenue and includes both public and private companies with publicly available revenue data. Exxon Mobil, Walmart, General Electric and Chevron have vied for the top spots on the list in recent years. To be a Fortune 500 company is widely considered to be a mark of prestige.

Goldman Sachs

The Goldman Sachs Group, Inc. is an American multinational investment banking firm that engages in global investment banking, investment management, securities and other financial services primarily with institutional clients. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street in the Lower Manhattan area of New York City, with additional offices in other international financial centers. Goldman Sachs was hit hard by the 2008 economic crisis, because of its involvement in subprime mortgages, and was subsequently rescued as part of a massive U.S. government bailout.

Securities and Exchange Commission

The SEC is a government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate. The statutes administered by the SEC are designed to promote full public disclosure and to protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce, through the mail or on the internet must be registered with the SEC.

Compliance Department

The department or unit within a brokerage firm, bank or financial institution that ensures compliance with all applicable laws, rules and regulations. The compliance department generally has a wide range of roles and responsibilities within a firm. Depending on the business of the financial institution, these duties may range from monitoring trading activity, preventing conflicts of interest and ensuring compliance with regulations at brokerage firms, to preventing money laundering and potential tax evasion at large banks.

Levered Free Cash Flow

The free cash flow that remains after a company has paid its obligations on its debt. The levered cash flow represents the amount of cash left over for stockholders and for investment after all obligations are covered. The levered cash flow can be negative while the operating cash flow is positive if the amount of cash paid to cover obligations exceeds the cash that comes from operations.

John Weiss

The head of Wells Fargo Securities, named in April 2014.

Fund Flow

The net of all cash inflows and outflows in and out of various financial assets. Fund flow is usually measured on a monthly or quarterly basis. The performance of an asset or fund is not taken into account, only share redemptions (outflows) and share purchases (inflows). Net inflows create excess cash for managers to invest, which theoretically creates demand for securities such as stocks and bonds.

Secutitization

The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. This process can encompass any type of financial asset and promotes liquidity in the marketplace.

Supply Chain

The supply chain is the network created amongst different companies producing, handling, and/or distributing a specific product. Encompasses the steps it takes to get a good or service from the supplier to the customer. An optimized supply chain usually translates to lower costs for the company.

Leverage

The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. OR The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home.

Short Selling

To bet against. Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security's price will decline, enabling it to be bought back at a lower price to make a profit. Short selling may be prompted by speculation, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short sale is theoretically infinite, short selling should only be used by experienced traders who are familiar with its risks.

Long Position

To bet on. A "long" is the buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value. 2. In the context of options, the buying of an options contract. Opposite of "short" (or short position).

Universal Bank

Universal banking is a banking system in which banks provide a wide variety of financial services, including both commercial and investment services. Universal banking is common in some European counties, including Switzerland. In the United States, however, banks are required to separate their commercial and investment banking services. Proponents of universal banking argue that it helps banks better diversify risks. Detractors think dividing up banks' operations is a less risky strategy. Big Four universal banks in the US: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo.

Wachovia to Wells Fargo

Wells Fargo and Wachovia announced on October 3, 2008, that they had agreed to merge in an all-stock transaction requiring no government involvement. Wells Fargo announced it had agreed to acquire all of Wachovia for $15.1 billion in stock. Wachovia considered Citigroup, but the Wells deal was better. The combined company retained the Wells Fargo name, and was based in San Francisco. However, Charlotte remained as the headquarters for the combined company's East Coast banking operations, and Wachovia Securities remained in Charlotte.

Wholesale Banking

Wholesale banking refers to banking services between merchant banks and other financial institutions. Wholesale banking deals with larger institutions, where as retail banking would focus more on the individual or smaller business. Some services might include currency conversion, working capital financing and large trade transactions.

Zero-Based Budgeting

ZBB. A method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base" and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one. ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organization, where costs can be first grouped, then measured against previous results and current expectations.