International trade terms
Greenmail
Buying shares on the open market in the hope that the target's business partners will buy back the shares at inflated prices.
Foreign-Source Income
Income earned from foreign operations.
Predatory Pricing
It is a form of price discrimination that requires selling below cost with the intention of destroying competition. However, predatory pricing is against law.
Tax Preference Items
Items such as tax-loss carry forwards and carry backs and investment tax credits that shield corporate taxable income from taxes.
Zaibatsu
Large family-owned conglomerates that controlled much of the economy of Japan prior to World War II.
Quid Pro Quo
Latin for "this for that." An exchange of one thing for another.
Operational Efficiency
Market efficiency with respect to how large an influence transactions costs and other market frictions have on the operation of a market.
Direct Exporting
Marketer takes direct responsibility for its products abroad by selling them directly to foreign customers or through local representatives in foreign markets.
Financial Markets
Markets for financial assets and liabilities.
Net Monetary Assets
Monetary assets less monetary liabilities.
Subsidy
Monetary assistance granted by the government to an individual or other entity in support of an activity that is regarded as being in the public interest.
Foreign Debt
Money owed by a nation to foreign investors, banks, or governments.
Opportunity Cost
Most valuable alternative that is given up. The rate of return used in NPV computation is an opportunity interest rate.
Return on Equity (ROE)
Net income after interest and taxes divided by average common stockholder's equity.
Effective Annual Yield
Calculated as (1+i/n)n, where i is the stated annual interest rate and n is the number of compounding periods per year. (Contrast with bond equivalent yield and money market yield.)
Discounting
Calculating the present value of a future amount. The process is the opposite of compounding.
Erosion
Cash-flow amount transferred to a new project from customers and sales of other products of the firm.
Economic Exposure
Change in the value of a corporation's assets or liabilities as a result of changes in currency values.
Translation (Accounting) Exposure
Changes in a corporation's financial statements as a result of changes in currency values.
Accounting Translation Exposure
Changes in a organizations or corporation's financial statements as a result of changes in currency values.
Transaction Exposure
Changes in the value of contractual (monetary) cash flows as a result of changes in currency values.
Contingent Claim
Claim whose value is directly dependent on, or is contingent on, the value of its underlying assets. For example, the debt and equity securities issued by a firm derive their value from the total value of the firm.
CAA
Clean Air Act (USA)
Tax Clienteles
Clienteles of investors with specific preferences for debt or equity that are driven by differences in investors' personal tax rates.
Codex
Codex Alimentarius Commission (a world food standards body)
Contingency Insurance
Contingency insurance protects the exporter in any situation in which exporter responsibility relied on the buyer to insure, but sustained a loss because of inadequate coverage from that source. It will cover situations in which the FOB endorsement.
CITES
Convention on the International Trade in Endangered Species
Direct Costs of Financial Distress
Costs of financial distress that are directly incurred during bankruptcy or liquidation proceedings.
Indirect Costs of Financial Distress
Costs of financial distress that are indirectly incurred prior to formal bankruptcy or liquidation.
Value Date
Date on which a foreign exchange contract is executed, i.e. seller delivers.
DFID
Department for International Development (UK)
Eurocurrencies
Deposits and loans denominated in one currency and traded in a market outside the borders of the country issuing that currency (like : Eurodollars).
Change in Net Working Capital
Difference between net working capital from one period to another.
DGFT
Directorate General of Foreign Trade, which is headed by the Director General of Foreign Trade. The office of the DGFT is responsible for formulating and execution of Foreign Trade Policy, including licensing. Formerly (till 1991), was known as the Chief
DSB
Dispute Settlement Body
DSP
Dispute Settlement Panel
DSU
Dispute Settlement Understanding
Indirect Diversification Benefits
Diversification benefits provided by the multinational corporation that are not available to investors through their portfolio investment.
Weight Note
Document issued by either the exporter or a third party declaring the weight of goods in a consignment.
Packing List
Document listing the contents of a consignment of goods. May be called for on a letter of credit.
Manifest
Document that lists in detail al the bills of lading issued by a carrier of its agent or master, i.e., a detailed summary of the total cargo of a vessel.
Compliant Documents
Documents presented under a letter of credit that comply with all its terms and conditions. The banks are only obliged to pay the beneficiary if documents are totally compliant.
Certificate of Origin
Documents that may be asked for by the authorities of the importing country, as evidence of the country of manufacture of the goods.
Certificate of Analysis/certificate of Inspection
Documents that may be asked for by the importer and/or the authorities of the importing country, as evidence of quality or conformity to specifications.
Eurodollars
Dollar-denominated deposits held in a country other than the United States.
Countervailing Duties
Duties levied on an imported good that has been unfairly subsidized by a foreign government. Imposing duties on the good is meant to raise the product's price to a "fair market value".
Maquiladoras
Duty-free assembly plants located mainly in the developing world. Maquiladoras are one type of foreign direct investment.
EPCG
EPCG refers to the Export Promotion Capital Goods (EPCG) Scheme, which gives the manufacturer facility for import of capital goods for export production at concessional rate of duty (5 per cent) against certain level of export .
Operating Cash Flow
Earnings before interest and depreciation minus taxes. It measures the cash flow generated form operations, not counting capital spending or working capital requirements.
Economic Freedom
Economic freedom occurs when individuals and businesses make most of the economic decisions in an economy.
Multinational Netting
Elimination of offsetting cash flows within the multinational corporation.
Restrictive Endorsement
Endorsement transferring title or right to a named party.
Multilateral Environmental Agreements (MEAs)
Environmental agreements negotiated by a number of countries.
Basis Point
Equal to 1/100 of one percent.
Spot Exchange-Rate
Exchange-rate today for settlement in two days.
Monopoly
Exclusive control or possession by one group of the means of producing or selling goods or services.
Sunk Costs
Expenditures that are at least partially lost once an investment is made.
Noncash Item
Expense against revenue that does not directly affect cash flow, such as depreciation and deferred taxes.
Indirect Exporting
Export products to foreign markets by using an intermediary, usually export trading company based in the exporter's country.
Exim Bank
Export-Import Bank of the India. Provides guarantees of working capital loans for Indian exporters, guarantees the repayment of loans or makes loans to foreign purchasers of Indian goods and services.
Dumping
Exporting/Importing merchandise into a country below the costs incurred in production and shipment.
Net Exposed Assets
Exposed assets less exposed liabilities. The term is used with market values or, in translation accounting, with book values.
Net Currency Exposure
Exposure to foreign exchange risk after netting all intracompany cash flows.
Managerial Flexibility
Flexibility in the timing and scale of investment provided by a real investment option.
FoB
Fob means Free on Board - i.e., when an exporter delivers goods "free on board", he pays all charges involved in getting them actually onto the ship.
Privileged Foreign (PF)
Foreign merchandise or non-tax paid domestic merchandise upon which the duty and applicable taxes have been determined at the time this status is approved.
Partnership
Form of business organization in which two or more co-owners form a business. In a general partnership each partner is liable for the debts of the partnership. Limited partnership permits some partners to have limited liability.
FTWZ
Free Trade and Warehousing Zone, a new scheme announced in the Foreign Trade Policy 2004-2009.
Manufacturer
Generally, the production of articles for use from raw or prepared materials by substantially transforming such materials into new forms.
Stabilization Policies
Government policies designed to promote economic growth, steady employment, and stable prices.
Gray-Market Imports
Gray-market imports are parallel distribution of genuine goods by intermediaries other than authorized channel members.
Right of Priority (ROP)
"The right of a patent holder of a patent issued in one country to intellectual property rights in a foreign market for one year, without filing for a local patent, even if someone from the foreign market files a local patent for the same process.
Overall Balance
(See official settlements balance.)
Trustee
A bank or trust company that holds title to or a security interest in leased property for the benefit of the lessee, lesser, and/or creditors of the lesser.
Correspondent Bank
A bank that, in its own country, handles the business of a foreign bank.
Advising Bank
A bank, operating in the exporter's country, that handles LETTERS OF CREDIT for a foreign bank by notifying the exporter that the credit has been opened in his or her favor.
Real Appreciation/Depreciation
A change in the purchasing power of a currency.
Export Trading Company (ETC)
A company that facilitates the export of goods and services. An ETC can either act as the export department for producers or take title to the product and export for its own account.
Trade Balance
A country's net balance (exports minus imports) on merchandise trade.
Clean Draft
A draft to which no documents have been attached.
Contract Manufacturing
A firm allowing another firm to manufacture a pre-specified product.
Patent
A government grant that gives inventors exclusive right of making, using, or selling the invention.
Decision Trees
A graphical analysis of sequential decisions and the likely outcomes of those decisions.
Indication pricing schedule
A schedule of rates for an interest rate or currency swap.
Discount
If a bond is selling below its face value, it is said to sell at a discount.
Embargo
A type of economic sanction that totally disallows the imports of a specific product or all products from a specific country.
Tax-Haven Affiliate
A wholly owned affiliate that is in a low-tax jurisdiction and that is used to channel funds to and from the multinational's foreign operations. (The tax benefits of tax-haven affiliates were largely removed in the United States by the Tax Reform Act of 1
Basic IRR
Accept the project if IRR is greater than the discount rate; reject the project if IRR is less than the discount rate.
Rule #1
Always keep track of your currency units.
Rights of Set-Off
An agreement defining each party's rights should one party default on its obligation. Rights of set-off were common in parallel loan arrangements.
Turnkey Contract
An agreement in which a contractor is responsible for setting up a facility from start to finish for another firm.
Franchise Agreement
An agreement in which a domestic company (the franchiser) licenses its trade name and or business system to an independent company (the franchisee) in a foreign market.
Britton Woods Agreement
An agreement made in 1944 year the end of World War II to promote exchange rate stability and facilitate the international flow of currencies. The world Bank and IMF(International Monetary funds ) come into the existence.
Joint Venture
An agreement of two or more companies to pool their resources to execute a well-defined mission. Resource commitments, responsibilities, and earnings are shared according to a predetermined contractual formula.
Booking
An arrangement with a steamship company for the acceptance and carriage of freight.
Commercial Invoice
An itemized list of goods shipped, usually among an exporter's COLLECTION PAPERS.
Import
Any resource, intermediate good, or final good or service that buyers in one country purchase from sellers in another country.
BTP
BTP means Biotechnology Park as notified by Director General of Foreign Trade on the recommendation of the Department of Biotechnology
Discretionary Reserves
Balance sheet accounts that are used in some countries to temporarily store earnings from the current year or the recent past.
Domestic Bonds
Bonds issued and traded within the internal market of a single country and denominated in the currency of that country.
Foreign Exchange Broker
Brokers serving as matchmakers in the foreign exchange market that do not put their own money at risk.
Voluntary Export Restraint (VER)
One country promises another country to limit its imports; this is often done when the promising country fears increased tariffs or quotas if it does not self-regulate.
Licensing
One firm gives another firm a permission, which allows the latter to engage in an activity otherwise legally forbidden to it. Such activities usually involve the transfer of intellectual and proprietary knowledge in return for royalty as revenue.
European Bank for Reconstruction and Development (EBRD)
One of four major regional development banks currently operating in the global economy.
Asian Development Bank (ABD)
One of four major regional development banks currently operating in the global economy; it is headquartered in Manila, Philippines.
Consignee
Party to whom goods are to be delivered.
Cash in Advance (CIA)
Payment for goods in which the price is paid in full before the shipment is made. This type of payment is usually only made for very small shipments or when goods are made in order.
Cash Against Documents (CAD)
Payment for goods where a commission house or other intermediary transfers title documents to the buyer upon payment in cash.
Royalty
Payment made for the use of a person or business's property based on an agreed percentage of the income arising from its use.
Avalisation
Payment undertaking given by a bank in respect of a bill of exchange drawn.
Social Capital
Physical or real capital that is owned by the public sector rather than by private firms.
Capital Budgeting
Planning and managing expenditures for long-lived assets.
Trade-in Allowance
Price discount granted for a new item by turning in an old item at the time of purchase.
Exogenous Uncertainty
Price or input cost uncertainty that is outside the control of the firm.
Endogenous Uncertainty
Price or input cost uncertainty that is within the control of the firm, such as when the act of investing reveals information about price or input cost.
Transfer Prices
Prices on intercompany sales
Hedge Funds
Private investment partnerships with a general manager and a small number of limited partners.
Proprietary Knowledge
Private or exclusive knowledge that cannot be legally used or duplicated by competitors.
Payout Ratio
Proportion of net income paid out in cash dividends.
Leading and Lagging
Reduction of transaction exposure through timing of cash flows within the corporation.
DEPB
Refers to the Duty Entitlement Pass Book to neutralise the incidence of basic customs duty on the import content of export product. This is provided by way of grant of duty credit against the export product at specified rates. The DEPB Scheme
Deemed Exports
Refers to those transactions in which the goods supplied do not leave the country and the payment for the goods is received by the supplier in India.
Rules of Origin
Rules used to determine in what country a good will be considered as actually made for tariff and other trade purposes.
SEZs
SEZs means Special Economic Zones In principle approvals have already been given for setting up of 26 new SEZs (state government/private sector) at Nanguneri (Tamil Nadu), Paradeep (Orissa), Gopalpur (Orissa), Kulpi (West Bengal), Bhadohi (U
Micro Credit
Small loans, perhaps $50 or $100, that are extended to small businesses to finance a business start-up or other business activity.
Subsistence Agriculture
Small-scale agriculture designed to meet the consumption needs of individual households.
Non-Governmental Organizations (NGOs)
Special interest groups that operate in the global community.
Pegged Exchange Rate System
The International Monetary Fund's name for a fixed exchange rate system.
Debt capacity
The amount of debt that a firm chooses to borrow to support a project.
Deliverable Instrument
The asset underlying a derivative security. For a currency option, the deliverable instrument is determined by the options exchange and is either spot currency or an equivalent value in futures contracts.
Capital Rationing
The case where funds are limited to a fixed dollar amount and must be allocated among the competing projects.
Commercial Attachment
The commerce expert on the diplomatic staff of his/her country's embassy or large consulate.
Foreign Exchange
The currency or credit instruments of a foreign country.
European Exchange ate Mechanism (ERM)
The exchange rate system used by countries in the European Union in which exchange rates are pegged within bands around an ERM central value.
Power Distance
The extent to which a society accepts hierarchical differences.
Financial Engineering
The process of innovation by which new financial products are created.
Hedge Ratio
The ratio of derivatives contracts to the underlying risk exposure.
Interest Rate Risk
The risk of unexpected changes in an interest rate.
Currency (Foreign Exchange) Risk
The risk of unexpected changes in foreign currency exchange rates.
Market Risk Premium
The risk premium on an average stock; (E[RM]-RF).
Syndicate
The selling group of investment banks in a public securities offering.
Unique Identifier Number(UIN)
This inventory method controls merchandise in a zone by unique numbers and/or letters that identify merchandise admitted to a zone.
Assets-in-Place
Those assets in which the firm has already invested. (Compare to growth options.)
Total Cash Flow
Total cash inflow minus total cash outflow.
Advisory Capacity
Used to indicate that a shipper's agent or representative is not empowered to make definitive changes or adjustments without approval of the group or individual represented.
Shipper
Usually the supplier or owner of commodities shipped.
Bonded Warehouse
- a warehouse authorized for storage of good on which payment of duty is deferred until the goods are removed from the warehouse.
Air Waybill
A BILL OF LADING that covers both domestic and international flights transporting goods to a specified destination.
Equity-Linked Eurobonds
A Eurobond with a convertibility option or warrant attached. Eurobonds: Fixed rate Eurocurrency deposits and loans and Eurocurrencies with longer maturities than five years.
Distributor
A Foreign agent who sells for a supplier directly and maintains an inventory of the supplier's product.
Corporation (Public)
A State, political subdivision thereof, a municipality, a public agency of a State, political subdivision thereof, or municipality, or a corporate municipal instrumentality of one or more States.
On Board Bill of Lading
A bill of lading in which a carrier certifies that goods have been placed on board a certain vessel.
Ocean Bill of Lading
A bill of lading indicating that the exporter consigns a shipment to an int'l carrier for transportation to a specified foreign market.
Inland Bill of Lading
A bill of lading used in transporting goods overland to the exporter's international carrier.
Money Market Yield
A bond quotation convention based on a 360-day year and semiannual coupons. (Contrast with bond equivalent yield.)
Bond Equivalent Yield
A bond quotation convention based on a 365-day year and semiannual coupons. (Contrast with effective annual yield.)
Blanket Bond
A bond that coves a group of people, articles or properties.
Eurobond
A bond that is denominated in a currency other than that of the country of issue.
Global Bond
A bond that trades in the Eurobond market as well as in one or more national bond markets.
Current Account Balance
A broad measure of import-export activity that includes services, travel and tourism, transportation, investment income and interest, gifts, and grants along with the trade balance on goods.
Prospectus
A brochure that describes a mutual fund's investment objectives, strategies, and position limits.
Futures Commission Merchant
A brokerage house that is authorized by a futures exchange to trade with retail clients.
Licensing
A business arrangement in which the manufacturer of a product grants permission to some other group or individual to manufacture that product in return for specified royalties.
Sole Proprietorship
A business owned by a single individual. The sole proprietorship pays no corporate income tax but has unlimited liability for business debts and obligations.
Demand Management
A business process with the intention to coordinate and influence all sources of demand for a firm's products.
Index options
A call or put option contract on an index (such as a foreign stock market index).
Nominal Cash Flow
A cash flow expressed in nominal terms if the actual dollars to be received (or paid out) are given.
Real Cash Flow(RCF)
A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash flow is given.
Phytosanitary Inspection Certificate
A certificate, issued by the Indian Government Department of Agriculture to satisfy import regulations for foreign countries, indicating that a India shipment has been inspected and is free from harmful pests and plant diseases.
Alteration
A change in the boundaries of an activated zone or subzone.
Wharf age
A charge assessed by a pier or dock owner for handling incoming or outgoing cargo.
Wharfage Charge
A charge assessed by a pier or dock owner for handling incoming or outgoing cargo.
Indemnity Clause
A clause in which the one party indemnifies the other. In leasing, generally a clause whereby the lessee indemnifies the lesser from loss of tax benefits.
Strategic Alliance
A collaborative agreement between two companies designed to achieve some strategic goal. Strategic alliances include international licensing agreements, management contracts, and joint ventures as special cases.
Zone Lot Number (ZLN)
A collection of merchandise maintained under an inventory control method based on specific identification of merchandise admitted to a zone by lot and lot number.
Mixed Tariff
A combination of specific and ad valorem tariffs.
Futures Contract
A commitment to exchange a specified amount of one currency for a specified amount of another currency at a specified time in the future. Futures contracts are periodically marked-to-market,
Forward Contract
A commitment to exchange a specified amount of one currency for a specified amount of another currency on a specified future date.
Generally Accepted Accounting Principles (GAAP)
A common set of accounting concepts, standards, and procedures by which financial statements are prepared.
Comparative Advantage
A comparative advantage exists when a nation or economic region is able to produce a product at a lower opportunity cost compared to another nation or region.
Growing Perpetuity
A constant stream of cash flows without end that is expected to rise indefinitely. For example, cash flows to the landlord of an apartment building might be expected to rise a certain percentage each year.
Perpetuity
A constant stream of cash flows without end. A British consol is an example.
Currency Option
A contract giving the option holder the right to buy or sell an underlying currency at a specified price and on a specified date. The option writer (seller) holds the obligation to fulfill the other side of the contract.
Lease
A contract in which one party conveys the use of an asset to another party for a specific period of time at a predetermined rate.
Currency Swap
A contractual agreement to exchange a principal amount of two different currencies and, after a prearranged length of time, to give back the original principal. Interest payments in each currency are also typically swapped during the life of the agreement
Progressive Taxation
A convex tax schedule that results in a higher effective tax rate on high income levels than on low-income levels.
Applicant
A corporation applying for the right to establish, operate and maintain a foreign-trade zone.
Grantee
A corporation to which the privilege of establishing, operating, and maintaining a foreign-trade zone has been granted by the Foreign-Trade Zones Board.
Multinational Corporation
A corporation with operations in more than one country.
Operator
A corporation, partnership, or person that operates a zone or sub zone under the terms of an agreement with the Grantee.
Sunk Cost
A cost that has already occurred and cannot be removed. Because sunk costs are in the past, such costs should be ignored when deciding whether to accept or reject a project.
Fixed Cost
A cost that is fixed in total for a given period of time and for given volume levels. It is not dependent on the amount of goods or services produced during the period.
Variable Costs
A cost that varies directly with volume and is zero when production is zero.
National Treatment
A country accords no less favorable treatment to imported goods than it does to domestic goods.
Tax Haven
A country or region imposing low or no taxes on foreign source income.
Developing Country (DCs)
A country that is in the process of becoming industrialized; the poorer nations of the world.
Net Position
A currency position after aggregating and canceling all offsetting transactions in each currency, maturity, and security.
Convertible Currency
A currency that can be bought and sold for other currencies at will.
Convertible Currency
A currency that can be traded for other currencies at will.
Forward Premium
A currency whose nominal value in the forward market is higher than in the spot market. (Contrast with forward discount.)
Forward Discount
A currency whose nominal value in the forward market is lower than in the spot market. (Contrast with forward premium.)
Carnet
A customs document permitting the holder to carry or send merchandise temporarily into certain foreign countries without paying duties or posting bonds.
Devaluation
A decrease in a currency value relative to another currency in a fixed exchange rate system.
Depreciation
A decrease in a currency value relative to another currency in a floating exchange rate system.
Depository Receipt
A derivative security issued by a foreign borrower through a domestic trustee representing ownership in the deposit of foreign shares held by the trustee.
Internal Rate of Return (IRR)
A discount rate at which the net present value of an investment is zero. The IRR is a method of evaluating capital expenditure proposals.
Weighted Average Cost of Capital (WACC)
A discount rate that reflects the after-tax required returns on debt and equity capital.
Certificate of Inspection
A document certifying that merchandise was in good condition immediately prior to its shipment.
Import License
A document required and issued by some national governments authorizing the importation of goods into their individual countries.
Certificate of Product Origin
A document required by certain foreign countries for tariff purpose, certifying the country of origin of specified goods.
Consular Statement
A document required by some foreign countries, describing a shipment of goods and showing information such as the consignor, consignee, and value of shipment. Certified by a consular official of the foreign country, it is used by the country's officials
Transaction Statement
A document that clearly outlines the terms and conditions agreed upon between an importer and an exporter.
Transaction Statement
A document that delineates the terms and conditions agreed upon between the importer and exporter.
Bill of Lading (B/L)
A document that establishes the terms and conditions of a contract between a shipper and a shipping company under which freight is to be moved between specified points for a specified charge. The B/L is Negotiable or Non-Negotiable forms.
Letter of Credit(L/C)
A document, issued by a bank per instructions by a buyer of goods, authorizing the seller to draw a specified sum of money under specified terms, usually the receipt by the bank of certain documents within a given time.
Consular Invoice
A document, required by some foreign countries, describing a shipment of goods and showing information such as the consignor, consignee, and value of the shipment.
Time Draft
A draft that is payable on a specified future dare.
Sight Draft
A draft that is payable on demand.
Sight Draft
A draft that is payable upon presentation to the drawee.
Date Draft
A draft that matures in a specified number of days after the date it is issued, without regard to the date of "ACCEPTANCE".
Market Failure
A failure of arms-length markets to efficiently complete the production of a good or service. In the eclectic paradigm, the multinational corporation's market internalization advantages take advantage of market failure.
Unsustainable Debt
A financial condition in which a country is unable to service its foreign (external) debt without decimating its economy.
Foreign Exchange Dealer
A financial institution making a market in foreign exchange.
Market Maker
A financial institution that quotes bid (buy) and offer (sell) prices.
Intermediated Market
A financial market in which a financial institution (usually a commercial bank) stands between borrowers and savers.
Non-Intermediated Debt Market
A financial market in which borrowers (governments and large corporations) appeal directly to savers for debt capital through the securities markets without using a financial institution as intermediary.
Derivative Security
A financial security whose price is derived from the price of another asset.
Coupon Swap
A fixed-for-floating interest rate swap.
Currency Coupon Swap
A fixed-for-floating rate no amortizing currency swap traded primarily through international commercial banks.
Basis Swap
A floating-for-floating interest rate swap that pairs two floating rate instruments at different maturities (such as six-month LIBOR versus thirty-day U.S. T-bills).
Foreign Branch
A foreign affiliate that is legally a part of the parent firm. In the U.S. tax code, foreign branch income is taxed as it is earned in the foreign country.
European Terms
A foreign exchange quotation that states the foreign currency price of one U.S. dollar. (Contrast with American terms.)
Export Management Company
A foreign or domestic company that acts as a sales agent and distributor for domestic exporters in international markets.
Merger
A form of corporate acquisition in which one firm absorbs another and the assets and liabilities of the two firms are combined.
Consolidation
A form of corporate reorganization in which two firms pool their assets and liabilities to form a new company.
Forfaiting
A form of factoring in which large, medium- to long-term receivables are sold to buyers (forfaiters) that are willing and able to bear the costs and risks of credit and collections.
Greenfield
A form of investment in which the firm designs and builds a new factory from scratch, starting with nothing but a
Custom Union
A form of regional economic integration group that eliminates tariffs among member nations and establishes common external tariffs.
G-7
A formal organization of seven highly industrialized democracies: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
Synthetic Forward Position
A forward position constructed through borrowing in one currency, lending in another currency, and offsetting these transactions in the spot exchange market.
Stock Index Futures
A futures contract on a stock index.
Index futures
A futures contract that allows investors to buy or sell an index (such as a foreign stock index) in the futures market.
Delta-Cross-Hedge
A futures hedge that has both currency and maturity mismatches with the underlying exposure.
Cross-Hedge
A futures hedge using a currency that is different from, but closely related to, the currency of the underlying exposure.
Delta-Hedge
A futures hedge using a currency that matches the underlying exposure and a maturity date that is different from, but preferably close to, the maturity of the underlying exposure.
Export License
A general export license covers the exportation of goods not restricted under the terms of a validated export license. No formal application or written authorization is needed to ship exports under a general export license.
Globalization
A global movement to increase the flow of goods, services, people, real capital, and money across national borders in order to create a more integrated and interdependent world economy.
Export License
A government document that permits the "Licensee" to engage in the export of designated goods to certain destinations.
Exchange Permit
A government permit sometimes required by the importer's government to enable the importer to convert his or her own country's currency into foreign currency with which to pay a seller in another country.
Extraterritoriality
A government practice which applies its laws outside its territorial boundaries.
Trade Barrier
A governmental policy, action, or practice that intentionally interrupts the free flow of goods or services between countries.
Foreign Aid
A grant of money, technical assistance, capital equipment, or other assistance typically extended by richer nations to poorer nations.
Risk Profile
A graph with the value of an underlying asset on the x-axis and the value of a position exposed to risk in the underlying asset on the y-axis. Also used with changes in value. (Contrast with payoff profile.)
Payoff Profile
A graph with the value of an underlying asset on the x-axis and the value of a position taken to hedge against risk exposure on the y-axis. Also used with changes in value. (Contrast with risk profile.)
Organization for Economic Cooperation and Development (OECD)
A group of 30 countries that meets regularly to discuss global issues and make appropriate economic and social policies.
Steamship Conference
A group of steamship operators that operate under mutually agreed upon freight rates.
Economic Union
A group that combines the economic characteristics of a common market with some degree of harmonization of monetary and fiscal policies.
Aval
A guarantee of the buyer's credit provided by the guarantor, unless the buyer is of unquestioned financial standing. The aval is an endorsement note as opposed to a guarantee agreement.
Currency Cross-Hedge
A hedge of currency risk using a currency that is correlated with the currency in which the underlying exposure is denominated.
Money Market Hedge
A hedge that replicates a currency forward contract through the spot currency and Eurocurrency markets.
Full Payout Lease
A lease in which the lesser recovers, through the lease payments, all costs incurred in the lease plus an acceptable rate of return, without any reliance upon the leased equipment's future residual value.
Bargain Purchase Option
A lease provision allowing the lessee, to purchase the equipment for a price predetermined at lease inception, which is substantially lower than the expected fair market value at the date the option can be exercised.
Guideline Lease
A lease written under criteria established by the IRS to determine the availability of tax benefits to the lesser.
Constructive Transfer
A legal fiction which permits acceptance of a Customs entry for merchandise in a zone before its physical transfer to the Customs territory.
Letter of Credit (L/C)
A letter issued by an importer's bank guaranteeing payment upon presentation of specified trade documents (invoice, bill of lading, inspection and insurance certificates, etc.).
Irrevocable Letter of credit
A letter of credit in which the specified payment is guaranteed by the bank if all terms and conditions are met by the drawee.
Revocable Letter of Credit
A letter of credit that can be canceled or altered by the drawee (buyer) after it has been issued by the drawee's bank.
Confirmation of Letter of Credit
A letter of credit, issued by a foreign bank, whose validity has been confirmed by a Nationalized Indian bank.
Annuity
A level stream of equal dollar payments that lasts for a fixed time. An example of an annuity is the coupon part of a bond with level annual payments.
Packing List
A list showing the number and kinds of items being shipped, as well as other information needed for transportation purposes.
Parallel Loan
A loan arrangement in which a company borrows in its home currency and then trades this debt for the foreign currency debt of a foreign counterpart.
Advance Against Documents
A loan made on the security of the documents covering the shipment.
Blanket Contracts
A long-term contract in which the supplier promises to re-supply the buyers as needed at agreed-upon prices over the contracting time.
Association of South East Asian Nations (ASEAN)
A loose or low economic and geopolitical affiliation that includes Singapore, Brunei, Malaysia, Thailand, the Philippines, Indonesia, and Vietnam. Future members are likely to include Myanmar (Burma), Laos, and Cambodia.
Open Insurance Policy
A marine insurance policy that applies to all shipments made by an exporter over a period of time rather than to one shipment only.
Perils of the Sea
A marine insurance term used to designate heavy weather, stranding, lightning, collision, and seawater damage.
Oligopoly
A market dominated by so few sellers that action by any of them will impact both the price of the good and the competitors.
Internal Market
A market for financial securities denominated in the currency of a host country and placed within that country.
External Market
A market for financial securities that are placed outside the borders of the country issuing that currency.
Forward Market
A market for forward contracts in which trades are made for future delivery according to an agreed-upon delivery date, exchange rate, and amount.
Semi-Strong form Efficient Market
A market in which prices fully reflect all publicly available information.
Weak form Efficient Market
A market in which prices fully reflect the information in past prices.
Efficient Market
A market in which prices reflect all relevant information.
Integrated Financial Market
A market in which there are no barriers to financial flows and purchasing power parity holds across equivalent assets.
Liquid Market
A market in which traders can buy or sell large quantities of an asset when they want and with low transactions costs.
Spot Market
A market in which trades are made for immediate delivery (within two business days for most spot currencies).
Middle Market
A market segment generally represented by financing under $2 million. In leasing this sector is dominated by single investor leases.
Segmented Market
A market that is partially or wholly isolated from other markets by one or more market imperfections.
Draft (trade bill, bill of exchange)
A means of payment whereby a drawer (the importer) instructs a drawee (either the importer or its commercial bank) to pay the payee (the exporter).
Current Account
A measure of a country's international trade in goods and services.
Beta
A measure of an asset's sensitivity to changes in the market portfolio (in the CAPM) or to a factor (in the APT). The beta of an asset j is computed as bj = rj,k (sj/sk), where k represents a market factor (such as returns to the market portfolio in the C
Capital Account
A measure of change in cross-border ownership of long-term financial assets, including financial securities and real estate.
Sharpe Index
A measure of risk-adjusted investment performance in excess return per unit of total risk: SI = (RP - RF)/(sP).
Covariance
A measure of the co variability of two assets (sAB = sAsB rAB).
Correlation
A measure of the co variability of two assets that is scaled for the standard deviations of the assets (rAB = sAB / sAsB such that -1 < rAB < +1).
Gross Domestic Product (GDP)
A measure of the market value of goods and services produced by a nation. Unlike Gross National Product, GDP excludes profits made by domestic firms overseas, as well as the share of reinvested earning in domestic firms' foreign-based operations.
Real Exchange Rate (RER)
A measure of the nominal exchange rate that has been adjusted for inflation differentials since an arbitrarily defined base period.
Harmonized Tariff Schedule (HTS)
A method of classification used by many countries to determine tariffs on imports.
Economic Value Added
A method of performance evaluation that adjusts accounting performance with a charge reflecting investors' required return on investment.
Fundamental Analysis
A method of predicting exchange rates using the relationships of exchange rates to fundamental economic variables such as GNP growth, money supply, and trade balances.
Profitability Index
A method used to evaluate projects. It is the ratio of the present value of expected future cash flows after initial investment divided by the amount of the initial investment.
Factor Model
A model that assumes a linear relation between an asset's expected return and one or more systematic risk factors.
Eurocurrency Market
A money market for currencies held in the form of deposits in countries other than that where the currency is issued.
Kyoto Protocol
A multilateral environmental agreement; its goal is to control global warming by reducing greenhouse gases emitted into the Earth's atmosphere.
GATT/General Agreement on Tariffs And Trade
A multilateral treaty intended to help reduce trade barriers between the signatory countries and to promote trade through tariff concessions.
Geocentric Multinational
A multinational in which the subsidiaries are neither satellites nor independent city states, but parts of a whole whose focus is on worldwide objectives as well as local objectives, each part making its unique contribution with its unique competence.
Closed-End Fund
A mutual fund in which the amount of funds under management is fixed and ownership in the funds is bought and sold in the market like a depository receipt.
Open-end Fund
A mutual fund in which the amount of money under management grows/shrinks as investors buy/sell the fund.
Negative-NPV Tie-in Project
A negative (-) NPV infrastructure development project that a local government requires of a company pursuing a positive (+) NPV investment project elsewhere in the economy.
Order Bill of Lading
A negotiable bill of lading made out to the order of the shipper.
Air Waybill
A no-negotiable instrument of domestic and international air transport that functions as a bill of lading, all information described about domestic and international trade.
Direct Financing Lease
A non-leveraged lease by a lesser in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria.
Straight Bill of Lading
A nonnegotiable bill of lading in which the goods are consigned directly to a named consignee.
Franchising
A parent company grants another independent entity the privilege to do business in a pre-specified manner, including manufacturing, selling products, marketing technology and other business approach.
Beneficiary
A party who receives a legal benefit Domestic or foreign Dealings.
Banker's Draft
A payment instrument used to make international payments.
Margin Requirement
A performance bond paid upon purchase of a futures contract that ensures the exchange clearinghouse against loss.
Customhouse Broker
A person or firm obtains the license from the treasury department of its Country when required, and help clients (importers) to enter and declare goods through customs.
User
A person or firm using a zone for storage, handling or processing of merchandise.
Alongside
A phrase referring to the side of a ship. Goods to be delivered "alongside" are to be placed on the dock or barge within reach of the transport ship's tackle so that they can be loaded aboard the ship.
Foreign Trade Zone
A physical area in which the government allows firms to delay or avoid paying tariffs on imports.
Phytosanitary Measure
A piece of legislation, regulation, or procedure with the purpose of preventing the introduction or spread of pests. Phytosanitary procedures often include the performance of inspections, tests, surveillance, or other treatments.
Foreign-Trade Zone/Free Trade Zone
A port designated by the government of a country for duty-free entry of any non-prohibited goods. Merchandise may be stored, displayed, or used for manufacturing, etc., within the zone and re-exported without duties being paid.
Market Portfolio
A portfolio of all assets weighted according to their market values.
Long Position
A position in which a particular asset (such as a spot or forward currency) has been purchased.
Short Position
A position in which a particular asset (such as a spot or forward currency) has been sold.
Hedge
A position or operation that offsets an underlying exposure. For example, a forward currency hedge uses a forward currency contract to offset the exposure of an underlying position in a foreign currency. Hedges reduce the total variability of the combined
General Agreement on Tariffs and Trade (GATT)
A post-World War II agreement designed to promote freer international trade among the nations of the world. The GATT was replaced by the World Trade Organization (WTO) in 1994.
Free in (F.I.)
A pricing term indicating that the charter of a vessel is responsible for the cost of loading and unloading goods from the vessel.
Cost And Freight (C & F)
A pricing term indicating that the cost of the goods and freight charges are included in the quoted price.
Cost, Insurance, Freight
A pricing term indicating that the cost of the goods, insurance, and freight are included in the quoted price.
Cost and Insurance (C & I)
A pricing term indicating that the cost of the product and insurance are included in the quoted price.
Free Alongside(F.A.S.)
A pricing term indicating that the quoted price includes the cost of delivering the goods alongside a designated vessel.
Cost and Freight(C&F)
A pricing term that indicates that the cost of the goods and freight charges are included in the quoted price.
Export Management Company
A private firm that transacts export business on behalf of its client companies in return for a commission, salary, or retainer.
Random Walk
A process in which instantaneous changes in exchange rates are normally distributed with a zero mean and constant variance.
Scenario Analysis
A process of asking What if? using scenarios that capture key elements of possible future realities.
Nationalization
A process whereby privately owned companies are brought under state ownership and control. (Contrast with privatization.)
Privatization
A process whereby publicly owned enterprises are sold to private investors. (Contrast with nationalization.)
Organization of Petroleum Exporting Countries (OPEC)
A producer cartel that produces and sells oil.
Independent Project
A project whose acceptance or rejection is independent of the acceptance or rejection of other projects.
Free Trade Area of the Americas (FTAA)
A proposed hemispheric trade zone that would cover all of the countries in North, South, and Latin America. The FTAA is highly controversial.
Outright Quote
A quote in which all of the digits of the bid and offer prices are quoted. (Contrast with points quote.)
Corruption Perceptions Index (CPI)
A ranking of countries by level of corruption that is researched and published by Transparency International (TI), the world's leading non-governmental organization dedicated to fighting corruption.
Clean Bill of Lading
A receipt for goods issued by a carrier that indicates that the goods were received in apparently good order and without damage.
Warehouse Receipt
A receipt issued by a warehouse listing goods received for storage.
Warehouse Receipt
A receipt issued by a warehouse listing the goods received.
Dock Receipt
A receipt issued by an ocean carrier to acknowledge receipt of a shipment at the carrier's dock or warehouse.
Dock Statement
A receipt issued by an ocean carrier to acknowledge the receipt of a shipment at the carrier's dock or warehouse facilities.
Foul Bill of Lading
A receipt of goods issued by a carrier with an indication that the goods were damaged when received.
Pension Liabilities
A recognition of future liabilities resulting from pension commitments made by the corporation. Accounting for pension liabilities varies widely by country.
Tax Holiday
A reduced tax rate provided by a government as an inducement to foreign direct investment.
Inter-American Development Bank(IADM)
A regional development bank designed to promote sustainable economic development in the Western Hemisphere. Its headquarters are located in Washington, D.C.
North American Free Trade Agreement (NAFTA)
A regional trade pact among the United States, Canada, and Mexico.
Andean Pact
A regional trade pact that includes Venezuela, Colombia, Ecuador, Peru, and Bolivia.
Trademark
A registration process under which a name, logo, or characteristic can be identified as exclusive.
Validated Export Licence
A required document issued by the Indian Government authorizing the export of specific commodities.
Reactivation
A resumption of the activated status of an entire area that was previously deactivated without any change in the operator or the area boundaries.
Diversifiable (unique) (unsystematic) risk
A risk that specifically affects a single asset or a small group of assets. Also called unique or unsystematic risk.
License Agreement
A sales agreement in which a domestic company (the licensor) allows a foreign company (the licensee) to market its products in a foreign country in return for royalties, fees, or other forms of compensation.
Value-Added Tax (VAT)
A sales tax collected at each stage of production in proportion to the value added during that stage.
Public Securities Offering
A securities issue placed with the public through an investment or commercial bank.
Private Placement
A securities issue privately placed with a small group of investors rather than through a public offering.
Switching Options
A sequence of options in which exercise of one option creates one or more additional options. Investment-disinvestments, entry-exit, expansion-contraction, and suspension-reactivation decisions are examples of switching options.
Perfect Market Assumptions
A set of assumptions under which the law of one price holds. These assumptions include frictionless markets, rational investors, and equal access to market prices and information.
Tramp Steamer
A ship not operating on regular routes or schedules.
Through Bill of Lading
A single bill of lading covering both the domestic and international carriage of an export shipment.
Outsourcing
A situation in which a firm's functions are performed or provided by a person or group from outside the company.
Subzone
A special purpose zone established as part of a zone project for a limited purpose, that cannot be accommodated within an existing zone.
Expropriation
A specific type of political risk in which a government seizes foreign assets.
Standard International Trade Classification (SITC)
A standard numerical code system developed by the U.N. to classify commodities used in international trade.
Standard Industrial Classification (SIC)
A standard numerical code system used by the U.S. Government to classify products and services.
Standard Industrial Classification (SIC)
A standard numerical code system used by the U.S. government to classify products and services.
Balance Sheet
A statement showing a firm's accounting value on a particular date. It reflects the equation, Assets = Liabilities + Stockholders' equity.
Certificate of Manufacture
A statement that is usually notarised in which the producer of goods certifies that the goods have been produced and are now available to the buyer.
Most Favored Nation (MFN)
A status granted to one country by another; the granting country then accords the recipient's imports and exports the most favorable treatment that it accords any country.
Gradualism
A steady and calculated approach to transforming an economy from communism to capitalism.
Reciprocal Marketing Agreement
A strategic alliance in which two companies agree to co market each other's products in their home market. Production rights may or may not be transferred.
Debt-for-Equity Swap
A swap agreement to exchange equity (debt) returns for debt (equity) returns over a prearranged length of time.
Swap Book
A swap bank's portfolio of swaps, usually arranged by currency and by maturity.
Commodity Swap
A swap in which the (often notional) principal amount on at least one side of the swap is a commodity such as oil or gold.
Stock Index Swap
A swap involving a stock index. The other asset involved in a stock index swap can be another stock index (a stock-for-stock swap), a debt index (a debt-for-stock swap), or any other financial asset or financial price index.
Index swap
A swap of a market index for some other asset (such as a stock-for-stock or debt-for-stock swap).
Swaption
A swap with one or more options attached.
Bank-based Corporate Governance System
A system of corporate governance in which the supervisory board is dominated by bankers and other corporate insiders.
Market-Based Corporate Governance System
A system of corporate governance in which the supervisory board represents a dispersed set of largely equity shareholders.
Benchmarking
A systematic procedure of comparing a company's practices against the best practice and modifying actual knowledge to achieve superior performance.
Ad valorem Tariff
A tariff assessed as a percentage of the value of an import.
Specific Tariff
A tariff assessed at a specific amount per unit of weight.
Tariff-Quota
A tariff that is set at a lower rate until a specified quantity (the quota) of goods has been imported, at which point the tariff increases for additional imports.
Duty
A tax imposed on imports by the customs authority of a country.
Stamp Tax
A tax on a financial transaction.
Withholding Tax
A tax on dividend or interest income that is withheld for payment of taxes in a host country. Payment is typically withheld by the financial institution distributing the payment.
Convex Tax Schedule
A tax schedule in which the effective tax rate is greater at high levels of taxable income than at low levels of taxable income. Such a schedule results in progressive taxation.
Territorial Tax System
A tax system that taxes domestic income but not foreign income. This tax regime is found in Hong Kong, France, Belgium, and the Netherlands.
Worldwide Tax System
A tax system that taxes worldwide income as it is repatriated to the parent company. Used in Japan, the United Kingdom, and the United States.
Explicit Tax
A tax that is explicitly collected by a government; includes income, withholding, property, sales, and value-added taxes and tariffs.
Without Reserve
A term indicating that a shipper's agent or representative is empowered to make definitive decisions and adjustments abroad without approval of the group or individual represented.
Advisory Capacity
A term indicating that shipper's agent or representative is not empowered to make definitive decisions or adjustments without approval of the group or individual represented.
Sogo Sosha
A term referring to general trading companies that import and export merchandise.
Eclectic Paradigm
A theory of the multinational firm that posits three types of advantage benefiting the multinational corporation: ownership-specific, location-specific, and market internalisation advantages.
Banker's Acceptance
A time draft drawn on and accepted by a commercial bank.
Trade Acceptance
A time draft that is drawn on and accepted by an importer.
Stationary Time Series
A time series in which the process generating returns is identical at every instant of time.
Generalized Autoregressive conditional Heteroskedasticity
A time series model in which returns at each instant of time are normally distributed but volatility is a function of recent history of the series.
Open Account
A trade arrangement in which goods are shipped to a foreign buyer without guarantee of payment.
Trade Deficit
A trade deficit occurs when the value of a country's exports is less than the value of its imports.
Trade Surplus
A trade surplus occurs when the value of a country's exports is greater than the value of its imports.
European Currency Unit (ECU)
A trade-weighted basket of currencies in the European Exchange Rate Mechanism (ERM) of the European Union.
Continuous Quotation System
A trading system in which buy and sell orders are matched with market makers as the orders arrive, ensuring liquidity in individual shares.
Periodic Call Auction
A trading system in which stocks are auctioned at intervals throughout the day.
Deferred Payment Credit
A type of letter of credit which provides for payment some time after presentation of the shipping documents by the exporter.
Discounted Cash Flow
A valuation methodology that discounts expected future cash flows at a discount rate appropriate for the risk, currency, and maturity of the cash flows.
Value Chain
A value-added process in a firm to transform raw materials and other inputs to finished goods, which creates value to customers.
Public Relations
A variety of programs designed to promote and/or protect a company's image or its individual products.
Set-of-Contracts Perspective
A view of the corporation as the nexus of a set of legal contracts linking the various stakeholders. Important contracts include those with customers, suppliers, labor, management, debt, and equity.
Bonded Warehouse
A warehouse authorized by CUSTOMS authorities for storage of goods on which payment of DUTIES is deferred until the goods are removed.
Bonded Warehouse
A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed.
Project Financing
A way to raise nonrecourse financing for a specific project characterized by the following: (1) the project is a separate legal entity and relies heavily on debt financing and (2) the debt is contractually linked to the cash flow generated by the project.
Asia-Pacific Economic Cooperation (APEC)
APEC forum designed to promote economic growth, cooperation, and integration among member nations. The most prominent members are China, Japan, and Korea.
Ad Valorem
According to value
Economies of Scale
Achieving lower average cost per unit through a larger scale of production.
Economies of Vertical Integration
Achieving lower operating costs by bringing the entire production chain within the firm rather than contracting through the marketplace.
Advance Licence
Advance Licence is granted for import of inputs without payment of customs duties. It is issued in accordance with the Policy and procedures in force and subject to fulfillment of time-bound export obligation. Such licences can be issu
Advance Payment
Advance Payment is a Trading method in which the buyer pays for the goods before they are sent out , method is used when buyer is of unknown credit worthiness. It is applicable in International or domestic trade.
Location-Specific Advantages
Advantages (natural and created) that are available only or primarily in a single location.
Market Internalization Advantages
Advantages that allow the multinational corporation to internalize or exploit the failure of an arms-length market to efficiently accomplish a task.
Adventure
Adventure also define for marine adventure." It is a term of art in the marine insurance business. All insured cargo owners and every shipper on that vessel are part of the adventure.
Advising Bank
Advising Bank is usually in the country of the seller, whose primary function is to authenticate the letter of credit and advise it to the seller, Purchase and collection of Export Bills.
ACP
African, Caribbean, and Pacific countries.
Freight Shippers (Freight Forwarders)
Agents used to coordinate the logistics of transportation.
ATC
Agreement on Textiles and Clothing
Collection Papers
All documents submitted to a buyer for the purpose of receiving payment for a shipment.
Zone Project
All of the zone and subzone sites under a single grantee, normally in a single port of entry.
Operator's Bond
All zone operators must submit to Customs a bond to assure compliance with Customs regulations.
Duty Exemption/scheme Duty Free Import of Inputs
Allows duty-free import of inputs for exports under Advance Licence, Duty Entitlement Pass Book (DEPB) and Duty Free Replenishment Certificate (DFRC) Scheme.
International Bank for Reconstruction and Development
Also called the World Bank, an international organization created at Breton Woods in 1944 to help in the reconstruction and development of its member nations.
First-to-Market Advantage
Also know as "first-mover advantage." The idea of first-mover advantage is that the initial occupant of a strategic position or niche (market segment) gains access to resources and capabilities that a follower cannot match.
Rule #2
Always think of buying and selling the currency in the denominator of a foreign exchange quote.
Contribution Margin
Amount that each additional product, such as a jet engine, contributes to after-tax profit of the whole project: (Sales price - Variable cost) X (1 - T), where T is the corporate tax rate.
Adjusted Present Value(APV)
An APV is a valuation method that separately identifies the value of an unlevered project from the value of financing side effects.
Points Quote
An abbreviated form of the outright quote used by traders in the interbank market.
Absolute Advantage(AB-AD)
An absolute advantage exists in condition of when a nation or other economic region of any country is able to produce a good or service more efficiently than a second (other) nation or its region.
Margin Account
An account maintained by an investor with a brokerage firm in which securities may be purchased by borrowing a portion of the purchase price from the brokerage, or may be sold short by borrowing the securities from the brokerage firm.
Foreign First (FOFI)
An accounting method based on an assumption regarding the flow of goods that foreign status merchandise is disposed of first.
First in-First Out (FIFO)
An accounting method based on an assumption regarding the flow of goods that older stock is disposed of first, in accordance with good merchandising policy.
Activity-Based-Cost (ABC)
An accounting method that allocates costs to specific products based on breakdowns of cost drivers.
Working Capital
An accounting term that indicates the difference between current assets and current liabilities.
Default
An act or omission that will result in a claim for duties, taxes, charges or liquidated damages under the FTZ Operator's Bond
Purchasing Agent
An agent who purchases goods in his or her own country on behalf of foreign importers such as government agencies and large private concerns.
Cartel
An agreement among, or an organization of, suppliers of a product.
Management Contract
An agreement by which one firm allows another to manage its foreign activities on behalf of it. The managing firm is forbidden to make capital investment or financing decisions.
Investment Agreement
An agreement specifying the rights and responsibilities of a host government and a corporation in the structure and operation of an investment project
Interest Rate Swap
An agreement to exchange interest payments for a specific period of time on a given principal amount. The most common interest rate swap is a fixed-for-floating coupon swap. The notional principal is typically not exchanged.
Swap
An agreement to exchange two liabilities (or assets) and, after a prearranged length of time, to reexchange the liabilities (or assets).
Dispatch
An amount paid by a vessel's operator to a charter if loading or unloading is completed in less time than stipulated in the charter party.
Free Trade Zone
An area designated by the government to which goods may be imported for processing and subsequent export on duty-free basis. Merchandise may be stored, used or manufactured in the zone and re-exported without duties being paid.
Free Port
An area such as a port city into which merchandise may be legally moved without payment of duties.
Free Port
An area such as a port city into which merchandise may legally be moved without payment of duties.
Arbitrage Pricing Theory (APT)
An asset pricing model that assumes a linear relation between required return and systematic risk as measured by one or more factors according to Rj = mj + b1jF1 + ... + bKjFK + ej.
Capital Asset Pricing Model (CAPM)
An asset pricing model that relates the required return on an asset to its systematic risk.
Mean-Variance Efficient
An asset that has higher mean return at a given level of risk (or lower risk at a given level of return) than other assets.
Open and Reform Policy
An economic policy enacted by the Chinese government combining central planning with market-oriented reforms to increase productivity, living standards, and technological quality without exacerbating inflation, unemployment, and budget deficits.
Capitalism
An economic system that is based on private ownership; economic development is proportionate to and dependent upon the accumulation and reinvestment of profits.
Command Economy
An economy based on government ownership and/or control of society's resources; during the 20th century, the dominant form of command economy was communism.
Market Economy
An economy in which resource allocations, prices and other marketing decisions are primarily determined by the free market.
Centrally Planned Economy
An economy in which the government, rather than free-market activity, controls the allocation of resources.
Seeking Stability Rather than Risk
An element of the Paris Convention for the Protection of Industrial Property that gives an inventor 12 months from the date of the first application filed in a Paris Convention country in which to file in other Paris Convention countries.
Emerging Market
An emerging market has a very high growth rate, which yields enormous market potential. It is distinguished by the recent progress it has made in economic liberalization.
Cumulative Translation Adjustment (CTA)
An equity account under FAS #52 that accumulates gains or losses caused by translation accounting adjustments.
European Monetary System (EMS)
An exchange rate system based on cooperation between European Union central banks.
Floating Exchange Rate
An exchange rate system in which currency values are allowed to fluctuate according to supply and demand forces in the market without direct interference by government authorities.
Freely Floating Exchange Rate System
An exchange rate system in which currency values are allowed to fluctuate according to supply and demand forces in the market without direct interference by government authorities.
Fixed Exchange Rate System
An exchange rate system in which governments stand ready to buy and sell currency at official exchange rates.
Floating Currency System
An exchange rate system under which a government is not obligated to declare that its currency is convertible into a fixed amount of another currency.
Gold Exchange Standard
An exchange rate system used from 1925 to 1931 in which the United States and England were allowed to hold only gold reserves while other nations could hold gold, U.S. dollars, or pounds sterling as reserves.
Gold Standard
An exchange rate system used prior to 1914 in which gold was used to settle national trade balances. Also called the classical gold standard.
SEPC
An exclusive Services Export Promotion Council announced in the Foreign Trade Policy to map opportunities for key services in key markets.
Hyperinflation
An extremely high rate of inflation, often exceeding several hundred or several thousand percent, that causes a country's money to become practically worthless.
Appreciation
An increase in a currency value relative to another currency in a floating exchange rate system.
Revaluation
An increase in a currency value relative to other currencies in a fixed exchange rate system.
SBA (Small Business Administration)
An independent agency of the U.S. federal government that aids, counsels, assists, and protects the interests of small business concerns to preserve free competitive enterprise and to maintain and strengthen the overall economy of the nation.
Freight Forwarder
An independent business that handles export shipment on behalf of the shipper without vested interest in the products. A freight forwarder is a good source of information and assistance on export regulations and documentation.
Freight Forwarder
An independent business which handles export shipments for compensation.
Non-Tariff Barrier
An indirect measure used to discriminate against foreign manufacturers, for example, extensive inspection procedures for foreign imports that create barriers to entering the market.
Carrier
An individual or entity that transports persons or goods for compensation under the contract of carriage.
Custom House Agent (CHA)
An individual or firm licensed to enter and clear goods through Customs.
Export Broker
An individual or firm that helps to locate and introduce buyers and seller in international business for a commission but does not take part in actual sales transaction.
Foreign Sales Agent
An individual or firm that serves as the foreign representative of a domestic supplier and seeks sales abroad for the supplier.
Common Carrier
An individual, partnership, or corporation that transports persons or goods for compensation.
Stock Market
An institution that facilitates the buying and selling of stocks.
Ship's Manifest
An instrument in writing, signed by the captain of a ship, that lists the individual shipments constituting the ship's cargo.
Warehouse-to-Warehouse
An insurance policy that covers goods over the entire journey from the seller's to the buyer's premises.
European Union (EU)
An intergovernmental organization which coordinates foreign, economic, and judicial policy among its 25 member nations.
Britton Woods Conference
An international conference held in 1944 at Britton Woods, New Hampshire, and established the International Monetary Fund and the World Bank.
International Monetary Fund (IMF)
An international organization designed to promote global economic stability and development. It compiles statistics on cross-border transactions and publishes a monthly summary of each country's balance of payments.
Bank for International Settlements (BIS)
An international organization which promotes international monetary and financial cooperation among nations.
Special Drawing Right (SDR)
An international reserve created by the International Monetary Fund and allocated to member countries to supplement foreign exchange reserves.
Active Fund Management
An investment approach that actively shifts funds either between asset classes (asset allocation) or between individual securities (security selection).
Discounted Payback Period Rule
An investment decision rule in which the cash flows are discounted at an interest rate and the payback rule is applied on these discounted cash flows.
Payback Period Rule
An investment decision rule which states that all investment projects that have payback periods equal to or less than a particular cutoff period are accepted, and all those that pay off in more than the particular cutoff period are rejected.
Venture Capital
An investment in a start-up business that is perceived to have excellent growth prospects but that does not have access to capital markets.
Market Timing
An investment strategy of shifting among asset classes in an attempt to anticipate which asset classes) will appreciate or depreciate during the coming period.
Security Selection
An investment strategy that attempts to identify individual securities that are under priced relative to other securities in a particular market or industry.
Proforma Invoice
An invoice provided by a supplier prior to the shipment of merchandise, informing the buyer of the kinds and quantities of goods to be sent their value and important specifications.
Quotation
An offer to sell goods at a stated price and under specified conditions.
Re-Invoicing Centers
An offshore financial affiliate that is used to channel funds to and from the multinational's foreign operations.
Warrant
An option issued by a company that allows the holder to purchase equity from the company at a predetermined price prior to an expiration date. Warrants are frequently attached to Eurobonds.
Real Options (RO)
An option or option-like feature embedded in a real investment opportunity.
European Option
An option that can be exercised only at expiration. (Contrast with American option.)
Out-of-the-Money Option
An option that has no value if exercised immediately.
In-the-Money Option
An option that has value if exercised immediately.
At-the-Money Option
An option with an exercise price that is equal to the current value of the underlying asset.
Common Carrier
An organization that transports persons or goods for a fee.
Export Commission House
An organization which, for a commission, acts as a purchasing agent for a foreign buyer.
Total Quality Management (TQM)
An organization-wide approach to continuously improving the overall quality of its process, products, and service.
Just In Time (JIT)
An organization-wide practice that keeps the inventory to the minimum and provides customers the right goods or service at the right time.
Official Settlements Balance (Overall Balance)
An overall measure of a country's private financial and economic transactions with the rest of the world.
Draft
An unconditional order in writing from one person (the drawer) to another (the drawee), directing the drawee to pay a specified amount to a named drawer at a fixed or determinable future date.
Sensitivity Analysis (SA)
Analysis of the effect on the project when there is some change in critical variables such as sales and costs.
Break-Even Point Analysis
Analysis of the level of sales at which a project would make zero profit.
Counter Credit
Another name for back-to-back letter of credit.
Acceptance
Any agreement to purchase goods under specified terms. An agreement to purchase goods at a stated price and under stated terms.
Side Effect
Any aspect of an investment project that can be valued separately from the project itself.
Corporation (Private)
Any corporation which is organized for the purpose of establishing, operating and maintaining a foreign-trade zone and which is chartered under a special act of the State within which it is to operate such a zone.
Export Subsidies
Any form of government payment that helps an exporter or manufacturing concern to lower its export costs.
Technical Analysis
Any method of forecasting future exchange rates based on the history of exchange rates.
Destination Control Statement
Any of various statements that the U.S. Government requires to be displayed on export shipments and that specify the destinations for which export of the shipment has been authorized.
Subsidiary
Any organization controlled by another with more than 50 percent of its whose voting capital held by the latter.
Export
Any resource, intermediate good, or final good or service that producers in one country sell to buyers in another country.
AB
Appellate Body
Tax Arbitrage
Arbitrage using a difference in tax rates or tax systems as the basis for profit.
Drawback
Articles manufactured or produced in the India with the use of imported components or raw materials and later exported are entitled to a refund of the duty charged on the imported products or components.
ADB
Asia Development Bank, head quartered located in Manila, Philippines (ASIA).
APEC
Asia-Pacific Economic Cooperation
Non-Monetary Assets and Liabilities
Assets and Liabilities with non-contractual payoffs.
Monetary Assets and Liabilities(MAL)
Assets and liabilities with contractual payoffs.
Confirming Bank
Bank that adds its payment undertaking to a letter of credit.
Remitting Bank
Bank that sends the draft to overseas bank for collection.
Regional Development Banks
Banks that are owned and operated by member nations; they are designed to extend development loans and provide other assistance to member nations. The world's four regional development banks are the African Development Bank Group.
Registered Bonds (RB)
Bonds for which each issuer maintains a record of the owners of its bonds. Countries requiring that bonds be issued in registered form include the United States and Japan. (Contrast with bearer bonds.)
Convertible Bonds
Bonds sold with a conversion feature that allows the holder to convert the bond into common stock on or prior to a conversion date and at a pre specified conversion price.
Foreign Bonds
Bonds that are issued in a domestic market by a foreign borrower, denominated in domestic currency, marketed to domestic residents, and regulated by the domestic authorities.
International Bonds
Bonds that are traded outside the country of the issuer. International bonds are either foreign bonds trading in a foreign national market or Eurobonds trading in the international market.
Bearer Bonds
Bonds that can be redeemed by the holder. The convention in most West European countries is to issue bonds in registered form.
Pure Discount Bond
Bonds that pay no coupons and only pay back the face value at maturity. Also referred to as "bullets" and "zeros."
Backward Innovation
Building a more basic version of an existing product for a lesser-developed market.
Free Cash Flow
Cash flow after all positive-NPV projects have been exhausted in the firm's main line of business.
Blocked Funds
Cash flows generated by a foreign project that cannot be immediately repatriated to the parent firm because of capital flow restrictions imposed by the host government.
Cash Flow
Cash generated by the firm and paid to creditors and shareholders. It can be classified as (1) cash flow from operations, (2) cash flow from changes in fixed assets, and (3) cash flow from changes in net working capital.
Operating Exposure
Changes in the value of real (no monetary) assets or operating cash flows as a result of changes in currency values.
Keiretsu
Collaborative groups of vertically and horizontally integrated firms with extensive share cross-holdings and with a major Japanese bank or corporation at the center.
Clean Collection
Collection in which only the financial document is sent through the banks.
Culture
Collective mental paradigms that a society imparts to individuals in the form of behavior patterns, shared values, norms and institutions.
Portfolio
Combined holding of more than one stock, bond, real estate asset, or other asset by an investor.
Macro Country Risks
Country (or political) risks that affect all foreign firms in a host country.
Micro Country Risks
Country risks that are specific to an industry, company, or project within a host country.
Fixed Forward Contract
Currency is bought or sold at a given future date.
Foreign Exchange
Currency of another country, or a financial instrument that facilitates payment from one currency to another.
Net Working Capital
Current assets minus current liabilities.
Consignment
Delivery of merchandise from an exporter (consignor) to an agent (consignee) under agreement that the agent sell the merchandise for the account of the exporter.
Consignment
Delivery of merchandise from an exporter (the consignor) to an agent (the consignee) under agreement that the consignee sells the merchandise of the account of the consignor, while the consignor retains title to the goods until the consignee sells them.
Doc
Department of Commerce (USA)
Tenor
Designation of a payment as being due at sight, a given number of days after sight, or a given number of days after date.
EPZs/EOUs
EPZs means Export Processing Zones which are special enclaves, separated from the Domestic Tariff Area (DTA), to provide an internationally competitive duty-free environment for export production. EOU means Export Oriented Units.
Present Value Factor
Factor used to calculate an estimate of the present value of an amount to be received in a future period.
Promissory Note
Financial document in which the buyer agrees to make payment to the seller at a specified time.
Money Markets
Financial markets for debt securities that pay off in the short term (usually less than one year).
CHIPS (Clearing House Interbank Payments System)
Financial network through which banks in the United States conduct their financial transactions.
Income Statement
Financial report that summarizes a firm's performance over a specified time period.
Financial Risk
Financial risk refers to unexpected events in a country's financial, economic, or business life.
Subsidized Financing
Financing that is provided by a host government and that is issued at a below-market interest rate.
Non-Privileged Foreign (NPF)
Foreign Merchandise or non-tax-paid domestic merchandise upon which the duty and applicable taxes will be determined at the time of entry from the zone for consumption.
Merchandise, Mixed Status
Foreign Merchandise which has been combined with Domestic Merchandise in the zone.
Corporation
Form of business organization that is created as a distinct "legal person" composed of one or more actual individuals or legal entities. Primary advantages of a corporation include limited liability, ease of ownership, transfer, and perpetual succession.
Commercial Document
General term for documents describing various aspects of a transaction, e.g. commercial invoice, transport document, insurance document, certificate of origin, certificate of inspection etc.
Retail Trade
Generally, sales or offers to sell goods or services to individuals for personal use.
Incremental IRR
IRR on the incremental investment from choosing a large project instead of a smaller project.
Homogeneous Expectations
Idea that all individuals have the same beliefs concerning future investments, profits, and dividends.
Premium
If a bond is selling above its face value, it is said to sell at a premium.
Miller and Modigliani's Irrelevance Proposition
If financial markets are perfect, then corporate financial policy (including hedging policy) is irrelevant.
Merchandise, Foreign
Imported Merchandise which has not been properly released from Customs custody into the Customs territory of the India.
Collection Order
In a collection, the document in which the seller instructs the banks as to how the collection is to be conducted.
Cash Cover
In a letter of credit transaction, money deposited by the applicant with the issuing bank.
Acquisition Premium
In a merger or acquisition, the difference between the purchase price and the reacquisition value of the target firm or company.
Notional Principal
In a swap agreement, a principal amount that is only notional and is not exchanged.
Acquisition of Assets
In an acquisition of assets, one firm acquires the assets of another company. None of the liabilities supporting that asset are transferred to the purchaser.
Acquisition of Stock
In an acquisition of stock, one firm buys an equity interest in another.
Synergy
In an acquisition or merger, when the value of the combination is greater than the sum of the individual parts: Synergy = VAT - (VA + VT).
Political Risk
In export financing the risk of loss due to such causes as currency, inconvertibility, government action preventing entry of goods, expropriation or confiscation, war, etc.
Autarky
In models of international trade, a situation in which there is no cross-border trade.
Security Market Line (SML)
In the CAPM, the relation between required return and systematic risk (or beta): Rj - RF + bj (E[RM] - RF).
Controlled Foreign Corporation (CFC)
In the U.S. tax code, a foreign corporation owned more than 50 percent either in terms of market value or voting power.
Overall FTC limitation
In the U.S. tax code, a limitation on the FTC equal to foreign-source income times U.S. tax on worldwide income divided by worldwide income.
Passive Income
In the U.S. tax code, income (such as investment income) that does not come from active participation in a business.
Active Income
In the U.S. tax code, income from an active business as opposed to passive investment income.
Subpart F Income
In the U.S. tax code, income from foreign subsidiaries owned more than 10 percent and controlled foreign corporations that is taxed on a pro rata basis as it is earned.
Income Baskets
In the U.S. tax code, income is allocated to one of a number of separate income categories. Losses in one basket may not be used to offset gains in another basket.
High-Withholding-Tax Interest Income
In the U.S. tax code, interest income that has been subject to a foreign gross withholding tax of 5 percent or more.
Allocation Rules of Income
In the U.S. tax code, these rules define how income and deductions are to be allocated between domestic-source and foreign-source income.
Offering Statement
In the United States, a shortened registration statement required by the Securities and Exchange Commission on debt issues with less than a nine-month maturity.
Registration Statement (RS)
In the United States, a statement filed with the Securities and Exchange Commission on securities issues that discloses relevant information to the public.
Merchandise
Includes goods, wares, and chattels of every description except Prohibited Merchandise, building materials, production equipment and supplies for use in operation of a zone.
Documentary Against Acceptance (D/A)
Instructions given by a shipper to a bank indicating that documents transferring title to goods should be delivered to the buyer only upon the buyer's acceptance of the attached draft.
Credit Risk Insurance
Insurance designed to cover risks of nonpayment for delivered goods.
Cover Note
Insurance document evidencing that insurance cover for a consignment has been taken out, but not giving full details.
Marine Insurance
Insurance that compensates the owners of goods transported overseas in the event of loss that cannot be legally recovered from the carrier.
Credit Risk Insurance
Insurance that covers the risk of non-payment for delivered goods.
Simple Interest
Interest calculated by considering only the original principal amount.
Continuous Compounding
Interest compounded continuously, every instant, rather than at fixed intervals.
Real Interest Rate (RIR)
Interest rate expressed in terms of real goods; that is, the nominal interest rate minus the expected inflation rate.
Nominal Interest Rate
Interest rate unadjusted for inflation.
Compound Interest
Interest that is earned both on the initial principal and on interest earned on the initial principal in previous periods. The interest earned in one period becomes in effect part of the principal in a following period.
International Chamber of Commerce
International non-governmental body concerned with promotion of trade and harmonization of trading practice. Responsible for drafting and publishing.
Mutually Exclusive Investment Decisions
Investment decisions in which the acceptance of a project precludes the acceptance of one or more alternative projects.
Foreign Equity Requirements
Investment rules that limit foreign ownership to a minority holding is a company.
The Foreign Trade Data Bank
Is the Indian Government's most comprehensive source of Foreign Trade Data and export promotion information. Types of information on the FTDB include: International Market Research, Export Opportunities; Indices of Foreign and Domestic companies.
Anti-Dumping Laws
Laws that are enacted to prevent dumping-offering prices in the overseas market that is lower than that at which a product is sold in its home domestic market.
Private Export Funding Corporation(PEFCO)
Lends to foreign buyers to finance exports from U.S.
Marking
Letters, numbers, and other symbols on cargo packages to facilitate identification.
Import Licenses
Licenses required by some countries to bring in a foreign-made good. In many cases, import licenses are also used by the issuing country to control the quantity of imported items.
Implicit Tax
Lower (higher) before-tax required returns on assets that are subject to lower (higher) tax rates.
Capital Markets
Markets for financial assets and liabilities with maturity greater than one year, including long-term government and corporate bonds, preferred stock, and common stock.
Intellectual Property
Material or communicable result in forms of discoveries, inventions, designs and literary and art works of scientific, humanistic, literary, and artistic endeavor. It includes, but is not limited to, works in the form of scientific discoveries and invention.
Hedge Quality
Measured by the r-square in a regression of spot rate changes on futures price changes.
Direct Product Profitability
Measuring the direct costs associated with handling a product from the warehouse until a customer buys from the retail store.
Zone Restricted (ZR)
Merchandise admitted to a zone for the sole purpose of exportation or destruction.
Merchandise, Fungible
Merchandise which for commercial purposes is identical and interchangeable in all situations.
Merchandise, Domestic
Merchandise which has been produced in the India and not exported therefrom.
Merchandise/Operations, Restricted
Merchandise which may not be authorized for delivery from Customs custody without a special permit, or a waiver thereof by an agency of the Indian Government.
Merchandise/Operations, Prohibited
Merchandise, the importation of which is prohibited by law on grounds of public policy or morals, or excluded by order of the Foreign-Trade Zones Board..
Attributive Basis
Method of accounting for merchandise where direct identification of the goods with the shipment as admitted to the zone has been lost.
SWIFT (Society for Worldwide Interbank Financial Transactions)
Network through which international banks conduct their financial transactions.
Foreign Exchange Markets
Networks of commercial banks, investment banks, and other financial institutions that convert, buy, and sell currencies in the global economy.
Civil Society Organizations (CSOs)
Non-governmental and non-profit groups that work to improve society and the human condition.
World Bank
One of the "Big Three" international organizations designed to oversee economic relations among the countries of the world. Its goal is to improve the quality of life for people in the poorer regions of the world by promoting sustainable economic development.
OPIC
Overseas Private Investment Corporation. A US agency that assists US companies protect their investment against risk in a particular country besides providing other services.
Virtual Corporation
Partnerships so close those two partners become a single firm for all operational purposes.
Smoot Hawley Act
Passed in 1930, this protectionist act increased import duties to the highest rate ever imposed by the United States, resulting in the downfall of the world trade system.
Intellectual Property Rights
Patents, copyrights, and proprietary technologies and processes that are the basis of the multinational corporation's competitive advantage over local firms.
Cash with Order (C.W.O.)
Payment for goods in which the buyer pays when ordering and in which the transaction is binding on both parties.
Compounding
Process of reinvesting each interest payment to earn more interest. Compounding is based on the idea that interest itself becomes principal and therefore also earns interest in subsequent periods.
Manipulation
Processing wherein merchandise is packed, unpacked, repacked, cleaned, sorted, graded or otherwise changed in condition but not manufactured.
Product Cycle Theory
Product cycle theory views the products of the successful firm as evolving through four stages: (1) infancy, (2) growth, (3) maturity, and (4) decline.
Production Sharing
Production sharing occurs when a producer chooses to make a product in stages - and in different countries - so that the firm can employ the lowest-cost resources in the production process.
Ownership-Specific Advantages
Property rights or intangible assets, including patents, trademarks, organizational and marketing expertise, production technology and management, and general organizational abilities, that form the basis for the multinational's advantage over local firms
Protectionism
Protection of local industries through tariffs, quotas, and regulations that discriminate against foreign businesses.
QRs
QRs mean Quantitative Restrictions. QRs refer to specific limits imposed by countries on the quantity or value of goods that can be imported or exported. QRs are non-tariff measures which are taken to regulate or prohibit international.
Export Restraints
Quantitative restrictions imposed by exporting countries to limit exports to specified foreign markets, usually as a follow-up to formal or informal agreements reached with importing countries.
New Protectionism
Recent efforts to pressure national governments to exercise greater control over foreign trade and foreign direct investment.
Hedging
Reducing the risk of a cash position by using the futures instruments to offset the price movement of the cash asset.
Exim Policy
Refers to Export and Import (Exim) Policy. Exim Policy has got incorporated into the comprehensive Foreign Trade Policy, which was announced by the Commerce & Industry Minister on 31st August, 2004.
FTP
Refers to Foreign Trade Policy, announced by the Commerce & Industry Minister on 31st August, 2004. It is a 5-year Policy (September 2004 -- March 2009), which takes effect from September 1, 2004.
ITC(HS)
Refers to Indian Trade Classification (Harmonized System). It is a system of classification of products for the purposes of export and import.
NFE
Refers to Net Foreign Exchange. Net Foreign Exchange earning is calculated as a percentage of exports (NFEP).
Schedule - B
Refers to Schedule B, Statistical Classification of Domestic and Foreign Commodities Exported from the India.
AEZs
Refers to a scheme of Agricultural Export Zones.
E-Commerce
Refers to electronic commerce. In the context of Foreign Trade Policy, e-commerce relates to electronic filing and processing of applications etc.
ISO-9000
Refers to international standards, laid down by the International Standards Organisation.
DFRC
Refers to the Duty Free Replenishment Certificate Scheme which was introduced from 1/4/2000 replacing. Transferable Advance Licensing Scheme. The scheme is available to merchant exporters as well as to manufacturer exporters. However,
Trust Receipt
Release of merchandise by a bank to a buyer in which the bank retains title to the merchandise.
Retention Ratio
Retained earnings divided by net income.
Systematic Risk
Risk that is common to all assets and cannot be diversified away (measured by beta).
Unsystematic Risk
Risk that is specific to a particular security or country and that can be eliminated through diversification.
STPs
STP means Software Technology Parks
Factoring
Sale of an accounts receivable balance to buyers (factors) that are willing and able to bear the costs and risks of credit and collections.
Risk Averse
Seeking stability rather than risk.
Short Selling
Selling an asset that you do not own, or taking a short position.
Dumping
Selling goods or merchandise in another country at a price below the price at which the same merchandise is sold in the home market or selling such merchandise below the costs incurred in production and shipment. Dumping is an illegal trade practice.
Agent
Someone who represents business in domestic and overseas market. In corporate governance terminology, management is the agent of the principal stakeholders in a principal-agent relationship.
Growth Stocks
Stocks with high price/book or price/earnings ratios. Historically, growth stocks have had lower average returns than value stocks (stocks with low price/book or PE ratios) in a variety of countries.
Value Stocks
Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or PE ratios) in a variety of countries.
Normal Distribution
Symmetric bell-shaped frequency distribution that can be defined by its mean and standard deviation.
Tangibility
Tangible assets are real assets that can be used as collateral to secure debt.
Tariffs
Taxes on imported goods and services, levied by governments to raise revenues and create barriers to trade.
Tax Neutrality
Taxes that do not interfere with the natural flow of capital toward its most productive use.
Certificate of Acceptance
Term used in leasing. A document whereby the lessee acknowledges that the equipment to be leased has been delivered, is acceptable, and has been manufactured or constructed according to specifications.
Customs Territory
Territory of the India in which the general tariff laws of the India apply.
African Developmental Bank (ABD)
The ABD is one of four major regional developmental banks currently operating in the global economy; it is headquartered in Abidjan, Cote d'Ivoire.
Balance of Payments (BOP)
The BOP is the annual financial record of Foreign Payments and Foreign Receivables. Or The BOP is the International Money Fund's accounting system that tracks the flow of goods, services, and capital in and out of each country.
Roll's Critique
The CAPM holds by construction when performance is measured against a mean-variance efficient index. Otherwise, it holds not at all.
Foreign -Trade Zones Act
The Foreign-Trade Zones Act of June 18, 1934, (48 Stat. 998-1003; 19 U.S.C. 81a-81u) as amended.
G-8
The G-7 countries plus Russia.
Heavily Indebted Poor Countries (HIPC) Initiative
The HIPC Inititiative is a major international response to the burdensome external debt held by the world's poorest, most indebted countries. It originated in 1996 as a joint undertaking of the World Bank and the International Monetary Fund (IMF).
More Flexible Exchange Rate System
The International Monetary Fund's name for a floating exchange rate system.
Limited Flexibility Exchange Rate System
The International Monetary Fund's name for an exchange rate system with a managed float.
Regional Commissioner
The Regional Commissioner of Customs for the Customs Region in which the zone is located.
World Trade Organization (WTO)
The WTO is a multilateral organization that promotes free and fair trade among the nations of the world. It was created in 1994 by 121 nations at the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). The WTO is responsible for implementation.
Timing Option
The ability of the firm to postpone investment (or disinvestments) and to reconsider the decision at a future date.
Goodwill
The accounting treatment of an intangible asset such as the takeover premium in a merger or acquisition.
Foreign Direct investment (FDI)
The act of building productive capacity directly in a foreign country.
Repatriation
The act of remitting cash flows from a foreign affiliate to the parent firm.
Domestic Liquidity
The aggregate of money supply, quasi-money or savings and time deposits, and deposit substitutes.
Engagement
The assumption of payment responsibility in respect of a letter of credit, e.g.
Customs
The authorities designated to collect duties levied by a country on imports and exports.
Average Accounting Return (AAR)
The average project earnings after taxes and depreciation divided by the average book value of the investment during its life.
Hysteresis
The behavior of firms that fail to enter markets that appear attractive and, once invested, persist in operating at a loss. This behavior is characteristic of situations with high entry and exit costs along with high uncertainty.
Unlevered Beta (Systematic Business Risk)
The beta (or systematic risk) of a project as if it were financed with 100 percent equity.
London Interbank Bid Rate (LIBID)
The bid rate that a Euro market bank is willing to pay to attract a deposit from another Euro market bank in London.
Supervisory Board
The board of directors that represents stakeholders in the governance of the corporation.
Mercosur
The common market of the South, a customs union which includes Argentina, Brazil, Paraguay, and Uruguay in a regional trade pact that reduces tariffs on intrapact trade by up to 90 percent. Bolivia and Chile are associate members.
Product Life Cycle (PLC)
The complete life of a product, from early planning through sales build-up, maximum sales, declining sales, and withdrawal of the product. Product life cycle lengths and types can vary depending on the type of product, the frequency of replacement.
Clearance
The completion of customs entry requirements that results in the release of goods to the importer.
Financial Policy
The corporation's choices regarding the debt-equity mix, currencies of denomination, maturity structure, method of financing investment projects, and hedging decisions with a goal of maximizing the value of the firm to some set of stakeholders.
Agency Costs
The costs incurred to ensure that agents act in the best interest of the principal.
Hedge Portfolio
The country-specific hedge portfolio in the International Asset Pricing Model serves as a store of value (like the risk-free asset in the CAPM) as well as a hedge against the currency risk of the market portfolio.
Currency of Reference
The currency that is being bought or sold. It is most convenient to place the currency of reference in the denominator of a foreign exchange quote.
Maturity Date
The date on which the last payment on a bond is due.
Expiry Date
The date when a letter of credit is no longer valid - i.e. the date beyond which it cannot be used.
Dealing Desk or Trading Desk
The desk at an international bank that trades spot and forward foreign exchange.
Trading Desk (Dealing Desk)
The desk at an international bank that trades spot and forward foreign exchange.
Interbank Spread
The difference between a bank's offer and bid rates for deposits in the Eurocurrency market.
Balance of Trade (BOT)
The difference between a country's total imports and exports.
Bid-offer Spread
The difference between the interest rate at which the bank borrows money and lends money.
Time Value of an Option
The difference between the value of an option and the option's intrinsic value.
Difference Check
The difference in interest payments that is exchanged between two swap counter parties.
Digital Divide
The digital divide refers to the widening technological gap between the richer and the poorer countries of the world.
Unlevered Cost of Equity
The discount rate appropriate for an investment assuming it is financed with 100 percent equity.
Yield to Maturity
The discount rate that equates the present value of interest payments and redemption value with the present price of the bond.
Liquidity
The ease with which an asset can be exchanged for another asset of equal value.
Allocation efficiency
The efficiency with which a market channels capital toward its most productive uses.
Market Model (One-Factor Market Model)
The empirical version of the security market line: Rj = aj + bjRM + ej.
Indirect Customers
The end-users (e.g., consumers) of the products and services purchased from the wholesalers, retailers, and consignees -- the direct customers of the seller.
Risk Premium
The excess return on the risky asset that is the difference between expected return on risky assets and the return of risk-free assets.
Market Access
The extent to which a domestic industry can penetrate a related market in a foreign country. Access can be limited by tariffs or other non-trade barriers.
Uncertainty Avoidance
The extent to which a society tolerates uncertainty and ambiguity.
Gross Weight
The full weight of a shipment, including goods and packaging.
Inflation Rate
The general increase in the price level herein measured by the growth rate in the GNP Implicit Price Index or the general price deflator.
International Monetary System
The global network of governmental and commercial institutions within which currency exchange rates are determined.
Unbiased Expectations Hypothesis
The hypothesis that forward exchange rates are unbiased predictors of future spot rates.
Drawee
The individual or firm on whom a draft is drawn and who owes the stated amount.
Drawer
The individual or firm that issues or signs a draft and thus stands to receive payment of the stated amount from the drawee.
Economic Integration
The integration of commercial and financial activities among countries through the abolishment of economic discrimination.
Stated Annual Interest Rate
The interest rate expressed as a percentage per annum, by which interest payment is determined.
Global Economy
The international network of individuals, businesses, governments, and multilateral organizations which collectively make production and consumption decisions.
International Asset Pricing Model (IAPM)
The international version of the CAPM in which investors in each country share the same consumption basket and purchasing power parity holds.
Investment Philosophy
The investment approach-active or passive-pursued by an investment fund and its managers.
Lead Manager
The lead investment bank in a syndicate selling a public securities offering.
Discounted Payback
The length of time needed to recoup the present value of an investment; sometimes used when investing in locations with high country risk.
Leveraged Lease
The lesser provides an equity portion (usually 20 to 40 percent) of the equipment cost and lenders provide the balance on a nonrecourse debt basis.
Capital Market Line
The line between the risk-free asset and the market portfolio that represents the mean-variance efficient set of investment opportunities in the CAPM.
Characteristic Line
The line relating the expected return on a security to different returns on the market.
Offshore Financial Centers (OFCs)
The many types of financial institutions that operate without financial supervision by governments or other agencies.
Production Possibilities Schedule
The maximum amount of goods (for example, food and clothing) that a country is able to produce given its labor supply.
Efficient Frontier
The mean-variance efficient portion of the investment opportunity set.
Blank Endorsement
The method whereby a bill of lading is made into a freely negotiable document of title.
Capital Structure
The mix of the various debt and equity capital maintained by a firm. Also called financial structure. The composition of a corporation's securities used to finance its investment activities; the relative proportions of short-term debt, long-term debt, and
Input Output Norms
The norms which define the amount of input/inputs required to manufacture a unit of output.
London Interbank Offer Rate (LIBOR)
The offer rate that a Euro market bank demands in order to place a deposit at (or, equivalently, make a loan to) another Euro market bank in London.
Devaluation
The official lowering of the value of one country's currency in terms of one or more foreign currencies.
Frequency Distribution
The organization of data to show how often certain values or ranges of values occur.
R-Square (the Coefficient of Determination)
The percent of the variation in a dependent variable (a y-variable) that is explained by variation in an independent variable (an x-variable).
All-in Cost
The percentage cost of a financing alternative, including any bank fees or placement fees.
Lease Rate
The periodic rental payment to a lesser for the use of assets. Others may define lease rate as the implicit interest rate in minimum lease payments.
Zone Site
The physical location of a zone or subzone.
Country Risk
The political and financial risks of conducting business in a particular foreign country.
Loanable Funds
The pool of funds from which borrowers can attract capital; typically categorized by currency and maturity.
Least-Developed Countries (LDCs)
The poorest of the developing countries. They are characterized by a low gross national product per capita, a reliance on subsistence agriculture, rapid population growth, inadequate infrastructure.
Capital Gain
The positive change in the value of an asset, a negative capital gain is a capital loss.
Standard Deviation
The positive square root of the variance. This is the standard statistical measure of the spread of a sample.
Growth Options
The positive-NPV opportunities in which the firm has not yet invested. The value of growth options reflects the time value of the firm's current investment in real assets as well as the option value of the firm's potential future investments.
Postal Parcel Receipt
The postal authorities' signed acknowledgment of delivery to receiver of a shipment made by parcel post.
Usury
The practice of charging or paying exorbitant interest on a loan or other transaction. Note: in Islamic societies, charging or receiving any amount of interest is considered usury.
Dual Pricing
The practice of selling identical products in different markets for different prices.
Discriminatory Pricing
The practice that selling a product or service at different prices that do not reflect a proportional difference in costs.
Net Present Value (NPV)
The present value of future cash returns, discounted at the appropriate market interest rate, minus the present value of the cost of the investment.
Striking Price
The price at which an option can be exercised (also called the exercise price).
Exercise Price
The price at which an option can be exercised (also called the striking price).
Reservation Price
The price below (above) which a seller (purchaser) is unwilling to go.
Direct Terms
The price of a unit of foreign currency in domestic currency terms, such as INR 45.70/USD for a India resident. (Contrast with indirect quote.)
Exchange Rate
The price of one currency in terms of another, i.e. the number of units of one currency that may be exchanged for one unit of another currency.
Exchange Rate
The price of one currency in terms of another, i.e., the number of units of one currency that may be exchanged for one unit of another currency.
Transfer Pricing
The price one unit of a company charges to another unit of the same company for goods or services exchanged between the two.
Purchasing Power Parity (PPP)
The principle that equivalent assets sell for the same price. Purchasing power parity is a measurement of a currency's value based on the buying power within its own domestic economy.
Law of one Price (Purchasing Power Parity)
The principle that equivalent assets sell for the same price. The law of one price is enforced in the currency markets by financial market arbitrage.
Separation Principle
The principle that portfolio choice can be separated into two independent tasks: (1) determination of the optimal risky portfolio, which is purely technical problem, and (2) the personal choice of the best mix of the risky portfolio.
Liberalization
The process by which certain business activities become more market driven.
Marking to Market
The process by which changes in the value of futures contracts are settled daily.
Arbitrage
The process of buying FOREIGN EXCHANGE, stocks, bonds and other commodities in one market and immediately selling them in another market at higher prices.
Financial Innovation
The process of designing new financial products, such as exotic currency options and swaps.
Capital Formation
The process of increasing the amount of capital goods - also called capital stock - in a country.
Arbitrage
The process of purchasing and selling foreign exchange, stocks, bonds and other commodities in several markets intending to make profit from the difference in price.
Capital (Financial) Structure
The proportion of debt and equity and the particular forms of debt and equity chosen to finance the assets of the firm.
Financial (Capital) Structure
The proportion of debt and equity and the particular forms of debt and equity chosen to finance the assets of the firm.
Spot Exchange
The purchase or sale of foreign exchange for immediate delivery.
Quota
The quantity of goods of a specific kind that a country permit to be imported without restriction or imposition of additional Duties.
Landed Cost
The quoted or invoiced cost of a commodity, plus any inbound transportation charges.
Bid rate
The rate at which a market maker is willing to buy the quoted asset.
Ask "offer" Rates
The rate at which a market maker is willing to sell the quoted asset.
Offer (Ask) Rates
The rate at which a market maker is willing to sell the quoted asset.
Holding-Period Return
The rate of return over a given period.
Unemployment Rate
The ratio of the total number of unemployed persons to the total number of persons in the labor force.
Employment Rate
The ratio, in percent, of the number of employed persons to total labor force.
Earnings Response Coefficient
The relation of stock returns to earnings surprises around the time of corporate earnings announcements.
Put-Call Parity
The relation of the value of a long call, a short put, the exercise price, and the forward price at expiration; CallTd/f - PutTd/f + Kd/f = FTd/f.
Cost of Equity Capital
The required return on the company's common stock in capital markets. It is also called the equity holders' required rate of return because it is what equity holders can expect to obtain in the capital market. It is a cost from the firm's perspective.
Corporate Social Responsibility
The responsibilities that corporations (including MNCs) have to workers and their families, to consumers, to investors, and to the natural environment.
Developed Countries
The richer, more industrialized countries in the world.
Call Option
The right to buy the underlying currency at a specified price and on a specified date.
Recourse
The right to demand return of money paid. In negotiation of a letter of credit, payment by the negotiating bank will normally be with recourse.
Put Option
The right to sell the underlying asset at a specified price and on a specified date.
Basis Risk
The risk of unexpected change in the relationship between futures and spot prices.
Commodity Price Risk
The risk of unexpected changes in a commodity price, such as the price of oil.
Financial Price Risk
The risk of unexpected changes in a financial price, including currency (foreign exchange) risk, interest rate risk, and commodity price risk.
Foreign Exchange (Currency) Risk
The risk of unexpected changes in foreign currency exchange rates.
Political Risk
The risk that a sovereign host government will unexpectedly change the rules of the game under which businesses operate. Political risk includes both macro and micro risks.
Exchange Risk
The risk that losses may result from the changes in the relative values of different currencies.
Counter Trade
The sale of goods or services that are paid for in whole or part by the transfer of goods or services from a foreign country.
Counter Trade
The sale of goods or services that are paid in whole or in part by the transfer of goods or services from a foreign country.
Open Account
The seller delivers the goods to the buyer and then bills the buyer according to the terms of trade.
Price Elasticity of Demand
The sensitivity of quantity sold to a percentage change in price; -%changeQ/%changeP.
Opportunity Set
The set of all possible investments.
Marketing Mix
The set of marketing tools that the firm uses to pursue its marketing objectives in the target market. One of the most popular classifications of marketing mix tools is called the "4 P's" of marketing: product, price, place, and promotion.
Investment Opportunity Set
The set of possible investments available to an individual or corporation.
Corporate Culture
The set of values, beliefs, relationships between individuals and functions that guide the decisions of a company to achieve its objectives.
Clearing
The settlement of a transaction, often involving exchange of payments and/or documentation.
Exhibition
The showing of merchandise within a zone, usually to prospective buyers.
Psychic Distance
The similarities or lack thereof between country markets. This concept takes into account geographic distance, cultural similarities, linguistic aspects, legal systems and methods of conducting business.
Basis
The simple difference between two nominal interest rates.
Euro
The single currency of the European Economic and Monetary Union (EMU) introduced in January 1999. EMU members are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain.
Zeitgeist
The spirit of the time; the general intellectual state and outlook of an era or generation.
Financial Contagion
The spread of a financial crisis from one country or region to other countries or regions.
Coupon
The stated interest on a debt instrument.
Zone Status
The status of merchandise admitted to a Foreign-Trade Zone, i.e., domestic (D), non-privileged foreign (NPF), privileged foreign (PF), or zone restricted (ZR) status.
Emerging Stock Markets
The stock markets of emerging economies. These markets typically have higher expected returns than established markets but also higher risk.
Consolidated Income
The sum of income across all of the multinational corporation's domestic and foreign subsidiaries.
Total Risk
The sum of systematic and unsystematic risk (measured by the standard deviation or variance of return).
Net Asset Value
The sum of the individual asset values in a closed-end mutual fund. Closed-end funds can sell at substantial premiums or discounts to their net asset values.
Asset Allocation Policy
The target weights given to various asset classes in an investment portfolio.
Home Asset Bias
The tendency of investors to over invest in assets based in their own country.
Annuity Factor
The term used to calculate the present value of the stream of level payments for a fixed period.
Force Majeure
The title of a standard clause in marine contracts exempting the parties for no fulfillment of their obligations as a result of conditions beyond their control, such as earthquakes, floods, or war.
Force Majeure
The title of a standard clause in marine contracts exempting the parties for non-fulfillment of their obligations as a result of conditions beyond their control, such as Acts of God, war.
Money Supply
The total amount of currency in circulation and peso deposits subject to check of the monetary system.
Aggregate Demand
The total demand of all potential buyers of a commodity or service. Includes all individuals and organizations that have the ability, willingness, and authority to purchase such products.
Operating Leverage
The trade-off between fixed and variable costs in the operation of the firm.
Signaling
The use of observable managerial actions in the marketplace as an indication of management's beliefs concerning the prospects of the company.
Intermodal
The use of two or more modes of transportation to complete a cargo move; truck/rail/ship, or truck/air, for example.
Face Value
The value of a bond that appears on its face. Also referred to as par value or principal.
Present Value
The value of a future cash stream discounted at the appropriate market interest rate.
Residual Value
The value of an asset at the conclusion of a lease.
Intrinsic Value of an Option
The value of an option if exercised immediately.
Implied Volatility
The volatility that is implied by an option value given the other determinants of option value.
Method of Payment
The way in which a merger or acquisition is financed.
National Tax Policy
The way in which a nation chooses to allocate the burdens of tax collections across its residents.
Corporate Governance
The way in which major stakeholders exert control over the modern corporation.
Financial Strategy
The way in which the firm pursues its financial objectives.
Tare Weight
The weight of a container and packing materials that excludes the weight of the goods it contains.
Tare Weight
The weight of a container and packing materials without the weight of the goods it contains.
Stakeholders
Those with an interest in the firm. A narrow definition includes the corporation's debt and equity holders. A broader definition includes labor, management, and perhaps other interested parties, such as customers, suppliers, and society at large.
Transfer
To take merchandise with zone status from a zone for consumption, transportation, exportation, warehousing, cartage or lighter age, vessel supplies and equipment, admission to another zone, and like purposes.
Barter
Trade in which goods or merchandise is exchanged directly for others import or export without use of money.
Deferred Payments Credit
Type of "LETTER OF CREDIT" providing for payment some time after presentation of shipping documents by exporter.
Asian Dollars
U.S. dollars deposited in Asia and the Pacific Basin.
Price Uncertainty
Uncertainty regarding the future price of an asset.
FoB Endorsement
Used with FOB, FAS, C&F, or CFR (but not CIF) quotations, FOB sales endorsement to an open marine policy can cover transit risk from the point of origin until title transfers. In these instances, the exporter relies on the importer to insure.
Value Addition
Value addition refers to the increment added in the process of manufacture of a particular item, which also becomes part of its price.
Future Value
Value of a sum after investing it over one or more periods. Also called compound value.
Compound Value
Value of a sum after investing it over one or more periods. Also called future value.
VKUJ
Vishesh Krishi Upaj Yojana, a new scheme introduced in the Foreign Trade Policy (2004-2009) as part of the package for agriculture.
Historical Volatility
Volatility estimated from a historical time series.
Deactivisation
Voluntary discontinuation of the activation of an entire zone or subzone by the grantee or operator.
CTD
WTO Committee on Trade and Development
Discrepancy - Letter of Credit
When documents presented do not conform to the letter of credit.
Forward Parity
When the forward rate is an unbiased predictor of future spot exchange rates.
Informational Efficiency
Whether or not market prices reflect information and thus the true (or intrinsic) value of the underlying asset.
Charter Party
Written contract between the owner of a vessel and a "chartered" who rents use of the vessel or a part of its freight space.
Effective Annual Interest Rate
the interest rate as if it were compounded once per time period rather than several times per period.
