GlossaryG–2
company have more information
about the company and its prospects
than do investors.
at the money An option is at the
money when the share price equals
the strike price.
Australian government bonds Debt
instruments issued by the Australian
government.
Australian Payments Clearing
Association (APCA) A self-regulating
body that oversees most of the
payments systems for business in
Australia.
Australian Prudential Regulation
Authority (APRA) The Australian
regulatory body responsible for
overseeing the activities of banks,
credit unions, building societies,
general insurance and reinsurance
companies, life insurance, friendly
societies and most members of the
superannuation industry.
Australian Securities and Investments
Commission (ASIC) The Australian
government entity, charged with
enforcing and regulating company
and financial services laws to protect
Australian consumers, investors and
creditors, to be the corporate, markets
and financial services regulator for
Australia.
Australian Securities Exchange
(ASX) The primary stock exchange
operating in Australia for trading
shares in publicly listed companies.
automated clearinghouse (ACH)
debit transfer A pre-authorised
electronic withdrawal from the
payer’s account.
availability float The time between
deposit of a cheque and availability of
the funds to a company.
average age of inventory A measure
of inventory turnover, calculated by
dividing the turnover figure into 365,
the number of days in a year.average annual percentage rate
(AAPR) The stated annual rate
calculated by multiplying the
periodic rate by the number of
periods in one year.
average collection period (ACP) The
average amount of time that elapses
from a sale on credit until the
payment becomes usable funds for
a company. Calculated by dividing
accounts receivable by average daily
sales. Also called the average age of
accounts receivable.
average investment in accounts
receivable (AIAR) An estimate of the
actual amount of cash (variable cost)
tied up in accounts receivable at any
time during the year.
average payment period The average
length of time it takes a company
to pay its suppliers. It is calculated
by dividing the company’s accounts
payable balance by its average daily
purchases.
average tax rate A company’s tax
liability divided by its pre-tax income.B
balloon payment A large lump-sum
payment that pays back the entire
loan principal at the maturity of a
term loan that during its life requires
only periodic interest payments.
bank-accepted bill A commercial bill
on which a bank has placed its name
together with that of the issuer of
the bill, to indicate the borrower has
sufficient funds to repay the borrowing.
bank account analysis statement A
regular report (usually monthly)
provided to a bank’s commercial
customers that specifies all services
provided, including items processed
and any charges assessed.
Bank Bill Swap Rate (BBSW) This
is the average mid-point of banks’
bid and offer rates in the bank bill
secondary market in Australia.bank-endorsed bill A commercial
bill in which a bank has signed that
it will pay the funds at maturity to
any investor to whom it has sold
the bill once issued by the original
borrower.
bank overdraft or line of credit An
upfront commitment by a bank to
lend to a borrower in the future
bankrupt The situation that exists
when a company cannot meet its debt
obligations (US term).
basis In a futures contract, this is the
difference between the futures price
and the spot price.
basis point 1/100 of 1%; 100 basis
points equal 1.000%.
basis risk The possibility of
unanticipated changes in the
difference between the futures price
and the spot price.
bearer bonds Bonds that pay interest
to the bearer and both shelter
investment income from taxation and
provide protection against exchange
rate risk.
beta A standardised measure of
the risk of an individual asset
that captures only the systematic
component of its volatility; it
measures the sensitivity of the asset’s
return to movements in the overall
market.
bid price The price at which a market
maker offers to purchase a security;
the price at which an investor can sell
a security.
binomial option pricing model A model
that uses the principle of ‘no arbitrage’
to calculate call and put values.
board of directors Elected by
shareholders to be responsible for
hiring and firing managers and for
setting overall corporate policies.
bond ratings Letter ratings assigned
to bonds by specialised agencies that
evaluate the capacity of bond issuers