Term B

Finance Glossary Terms Starting with B

Bond
Bonds are debt securities issued by corporations and governments.
Bonds are, in fact, loans that you and other investors make to the issuers in return for the promise of being paid interest, usually but not always at a fixed rate, over the loan term.
The issuer also promises to repay the loan principal at maturity, on time and in full.
Because most bonds pay interest on a regular basis, they are also described as fixed-income investments. While the term bond is used generically to describe all debt securities, bonds are specifically long-term investments, with maturities longer than ten years.

Baby bond
Bonds whose par values are less than $1,000 are often described as baby bonds, or, in the case of municipal bonds, as mini-munis.
Small companies that may not be able to attract institutional investors, such as banks and mutual fund companies, may offer baby bonds to raise cash from individual investors.
Some municipalities also use baby bonds to foster involvement in government activities by making it possible for more people to invest.

Budget
A budget is a written record of income and expenses during a specific time frame, typically a year.
You use a budget as a spending plan to allocate your income to cover your expenses and to track how closely your actual expenditures line up with what you had planned to spend.
An essential part of personal budgeting is creating an emergency fund, which you can use to cover unexpected expenses. You also want to budget a percentage of your income for saving and investing, just as you budget for food, housing, and clothing.
Businesses and governments also create budgets to govern their expenditures for a fiscal year — though like individuals they make regular adjustments to reflect financial reality. And like individuals, businesses and governments can find themselves in trouble if their spending outpaces their income.

Balance sheet
A financial statement that lists the assets, liabilities, and equity of a company at a certain point in time.

Bad Debt Expense
Losses for uncollectible accounts receivable.

Benefits
The total amount of indirect compensation that the business will provide to employees for each forecast year. Benefits are either statutory, such as payroll taxes and worker’s compensation; or discretionary, such as health insurance, life insurance, and 401(K) plans.

Bankruptcy
A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay. The most common form of individual bankruptcy is a Chapter 7, when an individual frees himself from most of his/her debts. Borrowers who have undergone bankruptcy usually cannot qualify for “A” paper loans until after two years after declaration and a re-establishment of credit.

Book Value
The value of an asset for accounting purposes. For assets where depreciation is taken or reserves booked, this is often expressed as a net book value. The book value of a company is the excess of assets over liabilities, which is equivalent to total owner’s equity.

Breakeven Analysis
An analysis tool that models how revenue, expenses, and profit vary with changes in sales volume. Breakeven analysis estimates the sales volume needed to cover fixed and variable expenses.

Breakeven Point
The sales level at which revenues equal expenses (fixed and variable).

Bridge Loan
An equity loan secured to solve short-term financing problem.

Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Budget Mortgage
A mortgage that includes a portion for taxes and insurance as well as principal and interest.

Buydown
Allows loans to be made at less-than-market interest rates by paying front-end discounts. The interest rate is brought down for a temporary period, usually from one to three years. In oder to acquire this discount, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment. After the discount period, the payment is calculated as the note rate.

Blanket Mortgage
A mortgage secured by the pledging of more than one property or collateral.

Biweekly Mortgage
Mortgage loan payments that requires a payment twice monthly, yielding thirteen payments per year instead of twelve. This significantly reduces the time a principal is paid off.