Financial Definitions; A thru E

The ever increasing number of investment products and financial services in the marketplace today can be confusing. We have put together this glossary of financial definitions designed to help you understand some of the more common investment and financial terms you may encounter. Your financial advisor can explain these terms more completely and discuss with you those which are relevant to your situation.

Accrued Interest – The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.

Acquisition – The acquiring of control of one corporation by another. In “unfriendly” take-over attempts, the potential buying company may offer a price well above current market values, new securities and other inducements to stockholders. The management of the subject company might ask for a better price or try to join up with a third company.

ADR – American Depositary Receipt – a security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.

American Stock Exchange (AMEX) – The second largest stock exchange in the United States, located in the financial district of New York City. (Formerly known as the Curb Exchange from its origin on a Manhattan street.)

Amortization – Accounting for expenses or charges as applicable rather than as paid. Includes such practices as depreciation, depletion, write-off of intangibles, prepaid expenses and deferred charges.

Annual Report – The formal financial statement issued yearly by a corporation. The annual report shows assets, liabilities, revenues, expenses, earnings – how the company stood at the close of the business year, how it fared profit-wise during the year and other information of interest to shareowners.

Arbitrage – A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock here and sell the same amount in London, making a profit of 50 cents a share, less expenses. Arbitrage may also involve the purchase of rights to subscribe to a security, or the purchase of a convertible security – and the sale at or about the same time of the security obtainable through exercise of the rights or of the security obtainable through conversion.

Assets – Everything a corporation owns or due to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, which are known as fixed assets; and patents and goodwill, called intangible assets.

Assignment – Notice to an option writer that an option holder has exercised the option and that the writer will now be required to deliver (receive) under the terms of the contract.

Auction Market – The system of trading securities through brokers or agents on an exchange such as the New York Stock Exchange. Buyers compete with other buyers while sellers compete with other sellers for the most advantageous price.

Averages – Various ways of measuring the trend of securities prices, one of the most popular of which is the Dow Jones average of 30 industrial stocks listed on the New York Stock Exchange. The prices of the 30 stocks are totaled and then divided by a divisor that is intended to compensate for past stock splits and stock dividends and that is changed from time to time. As a result, point changes in the average have only the vaguest relationship to dollar price changes in stocks included in the average.

Balance Sheet – A condensed financial statement showing the nature and amount of a company’s assets, liabilities and capital on a given date. In dollar amounts the balance sheet shows what the company owned, what it owed, and the ownership interest in the company of its stockholders.

Basis Point – One gradation on a 100-point scale representing one percent; used especially in expressing variations in the yields of bonds. Fixed income yields vary often and slightly within one percent and the basis point scale easily expresses these changes in hundredths of one percent. For example, the difference between 12.83% and 12.88% is 5 basis points.

Bear – Someone who believes the market will decline.

Bear Market – A declining market.

Bearer Bond – A bond that does not have the owner’s name registered on the books of the issuer. Interest and principal, when due, are payable to the holder.

Bid and Asked – Often referred to as a quotation or quote. The bid is the highest price anyone wants to pay for a security at a given time, the asked is the lowest price anyone will take at the same time.

Block – A large holding or transaction of stock – popularly considered to be 10,000 shares or more.

Blue Chip – A company known nationally for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends.

Why MBA in Finance Is Better Than CA As a Career Option?

Admission season is in full swing, with the onset of monsoon. Students are preparing for various exams that can give them a ticket to pursue higher studies in various fields. Chartered Accountancy or C.A. as it is popularly known is considered the highest qualification for a commerce student and it used to be the dream of a bright commerce student to pursue C.A. However, with the changing global trend many commerce students are now opting for MBA in finance as it gives them the opportunity to rise in the corporate hierarchy.

A crucial factor that has lead the commerce students divert their attention, energy and resources away from a reputed professional course like C.A and opting for MBA in finance is long duration. For pursuing C.A, you require a lot of work hard, perseverance and above all long years. It sometimes happens that some people who start to pursue C.A in their twenties and end up finishing it in their thirties. It is highly specialised where the aspirant has to give their 100% efforts and time.MBA is a two years programme and at the end of that you get a placement with some reputed business house.

Moreover, the course is more about the theory and less of practical learning. In corporate world working in real-life scenario matters more than having theoretical knowledge. Thus, they prefer candidate with MBA in finance as these professionals have an experience of working in stimulated situations like summer internships programme, thus have an eagle’s eye view of various business operations.

Doing MBA in finance definitely gives you the benefit of developing an insight into the world of business. As a part of management programme, you will learn about every single aspect of the business management and operations that will you versatility to handle not only the financial matters of the company, but also make you multi-tasking who can handle every matter of business.

Contrary to this while pursuing C.A, you would learn to various monetary like Taxation, International Accounting (GAAP), Internal Audit, — to name a few. But hardly develop an intuitiveness to deal with the real life financial crisis, due to the lack of practical learning. Thus, you do not develop acumen for planning strategic moves for the company in the time of any monetary crisis. Whereas, an MBA in finance can handle different financial operations and also have acumen and vision that make them brilliant strategists. Thus, many companies hire these professionals.

Above all these after completing your C.A, you can join a company and can climb up in the hierarchy and become a CFO, while an MBA in finance can take to the highest position in the chain of command and you can become a CEO. Thus, in corporate world a management professional have better prospects.

According to ICAI, the percentage of candidates clearing C.As examination is around 15-20%, whereas the number of designations for such qualification in the corporate world is not enough to accommodate everyone. While in companies MBA placement does not pose any problem there are number of designation from executive to managers who work as team to deal with the finances of the company.

The purpose of this article is not to degrade any profession or professional qualification as no profession is insignificant. I cannot imagine a smooth administration of the financial matters without a Chartered Accountant, who files my I.T returns and audit my monetary transactions efficiently. However, the aim is to project the advantages of an educational programme like MBA in finance which is not seen by many as a means to achieve growth, prestige and of course money.