Investing Advice

Definitions of Investing, Legal, & Business Terms

  Investing Term Dictionary
Choose below the first letter of the investment term you would like defined.
 
B
Balance Sheet: A financial report of a company that shows what a company has (its assets), what the company owes (its liabilities) and the difference which is called its equity or net worth.
Bait and Switch Pricing: An illegal sales tactic used by unscrupulous companies. Customers are lured into a store with advertising promises of low prices for an item. However, when the customer arrives at the store, the item is reported unavailable and an alternate, often higher-priced or lower-quality product, is recommended in its place.
Balance of Trade: The difference between the amount of goods a country exports and imports. When the value of exports exceeds imports, the balance is positive. In the reverse, the balance is negative.
Balance Sheet: An overview of a company's assets, liabilities, and owner's equity at a specific point in time.
Balloon Payment: The term for the last payment on a loan if it is substantially larger than the previous series of payments. Generally, a balloon payment is negotiated when a large sum of money is anticipated before the payoff date, making such a payment possible.
Bankruptcy: When a company or person has extreme financial difficulty and so seeks the protection of the bankruptcy laws.
  • Chapter 11 Bankruptcy: A business is protected from creditors for 2 years while it works out a plan for partial payment of debts.
  • Chapter 7 Bankruptcy: Total liquidation of a company. It is rare for holders of common stock to receive anything since creditors, bondholders, and preferred shareholders are first in line. When an individual declares chapter 7 bankruptcy, the law allows him to keep many assets, while eliminating most or all of his debt.
  • Chapter 13 Bankruptcy: Similar to Chapter 11, but for individuals.
Barter: An agreement between two individuals or firms where products or services of equal value are exchanged, with no cash changing hands.
Basis Point: 1/100 of a percent or .01%, not 1%
Bear Market: When the value of the stock markets are going down over several months. Opposite of bull market.
Bearer Bond: A bond that is payable to the person having possession.
Beneficiary: The person entitled to collect the benefits of an insurance policy or for whose benefit property is held in trust.
Beta: A measure of a stock's volatility or changes in price, as compared with changes in other stocks. Stocks with a high beta are more likely to change dramatically.
Bid Price: What an investor or market maker is willing to pay for a security. The current price you can sell at.
Big Eight: Originally, the eight largest accounting firms in the U.S. Through mergers, they are now the Big Five: Arthur Andersen, Ernst & Young, Deloitte & Touche, KPMG Peat Mar-wick, Price Waterhouse, Coopers & Lybrand.
Binding Letter of Intent: Letter of intent that a court of law would uphold as the actual leasing of space, regardless of whether a lease document exists. 
Blue Chip: Shares of older, established companies such as General Motors or IBM. Most blue-chip companies pay regular dividends.
Blue-sky laws: State laws that require issuers of securities to register their offerings with the state before they can be sold to its residents.
Bond Discount: The difference between the face value of a bond (what it will pay at a specified future date) and its current lower market value.
Board of Directors: A group of advisors elected by stockholders to oversee the management of a public company. The Chief Executive Officer receives direction from the board.
Book Value: 1. The value of an asset calculated by subtracting cumulative depreciation from the original purchase price. 2. Net value of a business, assets less all liabilities and obligations.
Brand: The name, symbol, packaging, and promotional theme surrounding a product that create an identity for that product, separate from the parent company's name and identity.
Breach: The failure to perform certain duties as outlined in a contract, so that the contract is not fulfilled.
Break-even: The point at which revenues from a product exactly equal the cost to produce it. This calculation is frequently used to assess whether it is worth producing a product.
Broker: A licensed person who acts as an agent for an investor to buy and sell securities such as stocks, bonds, and mutual fund shares. He is paid a commission for this service.
Bridge Loan: A short-term loan provided while longer-term financing is being finalized. Allows for business to proceed uninterrupted.
Bubble: When the price of stocks rise to a level way far beyond any reasonable value, and speculators are buying at crazy prices and actually finding other fools to pay even more than they did. When the market then crashes, the bubble is said to have burst.
Bucket Shop: A brokerage firm that accepts customer buy and sell orders, but does not immediately execute them as the SEC requires. Instead, the firm waits until the price has increased or decreased to the point of allowing the firm to buy or sell the stock and pocket the difference. In extreme cases, the firm just takes the money, with no intention of executing the order. Such practices are illegal.
Bull Market: When the value of the stock markets are going up over several months. Opposite of a bear market.
Bylaws: The rules for running a company which are drafted when the business is incorporated. Items covered include the election of a board of directors, their responsibilities, and other committees to be established to assist in man- aging the company.
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