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ILC Glossary of Financial Terms: B
- Balance Sheet:
A financial statement showing a company's assets, liabilities and shareholders' equity on a given date. It shows what the company owns and what debts it owes.
In some serial bond issues a balloon is an extra-large amount that may mature in the final year of the series.
- Bank of Canada:
The central bank of Canada, founded in the 1930s to facilitate the functioning of the financial system. The Bank of Canada issues and removes bank notes, acts as the federal government's financial advisor on debt management and foreign exchange, and conducts monetary policy to regulate the growth of the country's money supply and influence interest rates.
- Bank Rate:
The minimum rate at which the Bank of Canada will make short-term advances to the chartered banks and money market dealers. Since 1980 the bank rate has been set at _ of 1% (25 basis points) above the weekly average tender rate of 91-day Government of Canada treasury bills. The upward and downward trend of the bank rate affects the prime lending rates that chartered banks give to their most creditworthy borrowers, as well as rates on all types of bank deposits, short-term paper, bonds and mortgages.
- Bankers' Acceptance:
A type of short-term negotiable debt instrument issued by a non-financial corporation, such as Ford or General Motors, but guaranteed as to principal and interest by its bank. The guarantee reduces risk and therefore results in a higher issue price and consequent lower yield.
- Banking Group:
A group of investment dealers, each of which individually assumes financial responsibility for part of an underwriting of a new issue of securities for a corporation.
The legal status of an individual or company which is unable to pay its creditors and whose assets are therefore administered for its creditors by a trustee in bankruptcy.
- Basis Point:
A phrase used to describe differences in bond yields, with one basis point representing one-hundredth of a percentage point. Thus, if bond X yields 11.50% and bond Y yields 11.75%, the difference is 25 basis points.
- Bear Market:
A market in which prices are declining. A "bear" is a person who expects that the market or the price of a particular security will decline.
- Bearer Security:
A stock or bond which does not have the owner's name recorded in the books of the issuing company or on the security certificate itself. The holder of the certificate is the owner. Interest, dividends or any profits from sales are payable to the holder.
- Beneficial Owner:
The real owner of a security. An investor may have securities registered in the name of a broker, trustee or bank to facilitate transfer or to preserve anonymity, but the investor is the beneficial owner and will receive any dividends, interest or profits from sales.
A measurement that tells you how widely a stock or mutual fund's price deviates from the market index it's compared to. The Toronto Stock Exchange 300 Index is assumed to have a beta of 1.0. A stock in that group with a beta of 1.25, for example, would have a price that's expected to be 25% more volatile than the index. This stock would outperform the TSX Composite Index by 25% in a rising market, but fall 25% more when the market is falling. An investment with high volatility is generally considered to carry more risk than one with less volatility.
- Best Efforts Underwriting:
The underwriter agrees to use his or her best efforts to sell a new issue of securities, but does not guarantee to the issuing company that any or all of the issue will be sold. The underwriter acts as an agent for the issuer in distributing the issue to his clients.
The highest price a person is willing to pay for a security.
- Blue Chip Stocks:
Nationally-known common stock, usually with a continuous dividend payment record in good times and bad and other strong investment qualities. These stocks are usually high-priced but have a tendency to be low-yielding.
- Blue Sky:
A slang term for laws various Canadian provinces and American states have enacted to protect the public against securities frauds. The term "blue skyed" indicates that a new issue has been cleared by a securities commission and may be sold to the public.
- Board Lot:
A regular trading unit which has been decided upon by the stock exchanges. For example, one board lot on the Toronto Stock Exchange equals 1000 shares for shares priced under 10 cents each, 500 shares for shares priced between 10 cents and 99 cents, and 100 shares for shares of $1 and over.
A certificate which is evidence of a debt on which the issuer promises to pay the holder a specified amount of interest for a specified length of time, and to repay the loan on its maturity. Strictly speaking, assets are pledged as security for the loan, except in the case of government bonds, but the term is often loosely used to describe any debt issue. Bonds are issued by corporations and by federal, provincial and municipal governments. Bond holders are first in line before shareholders to claim any of a company's assets in the event of liquidation.
- Book Value:
The cash value of a business which, after all debts are paid, belongs to the owners of a company - or the shareholders - if the company is liquidated. This is calculated by looking at the balance sheet and subtracting the company's liabilities and value of preferred shares from its assets, and then dividing what is left by the total number of common shares outstanding.
- Bought Deal:
An entire issue of new stocks or bonds bought from the issuer by an investment dealer, frequently acting alone, for resale to its clients. The dealer risks its own money in a bought deal, and in the event that the price has to be lowered to sell out the issue, the dealer absorbs the loss.
- Broadened Base Earnings:
A concept whereby the earnings per share of a company are computed to include a pro rata share of the earnings of all unconsolidated subsidiaries and associated companies.
A securities firm or an investment advisor associated with a firm. When acting as a broker for the purchase or sale of listed stock, the investment advisor does not own the securities him or herself, but acts as an agent for the buyer and seller and charges a commission for these services.
- Bull Market:
A market in which prices are rising. A "bull" is a person who expects that the market or the price of a particular security will rise.
- Business Day:
Those days when most corporate and government offices are open for business, usually any day except Saturday, Sunday and legal holidays.
If the seller of a security fails to deliver the securities sold to another person within a specified number of days after the settlement date, the buyer may purchase the securities in the open market and charge the seller the cost of such purchases.