Term
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Definition
| The financial supply chain (purchase-to-pay cycle) is crucial to financial viability following a disaster. The treasury area plays a pivotal role in managing the organization's financial supply chain, through working capital management practices and by ensuring adequate liquidity sources. |
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Term
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Definition
| These accounting reports summarize a company's operating results and financial position providing insights into: 1) how well the company has managed its liquidity position, 2) how effectively it used and financed its assets, 3) whether it had a proper balance between debt and equity financing, 4) how well it controlled operating and financing costs, and 5) whether the profit it earned was satisfactory in relation to the levels of revenue it experienced and the investment in assets that support its operations. |
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Term
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Definition
| These financial transactions are similar to forwards in that the payoff profile from a long and short position in a futures contract looks exactly the same as the payoff from a forward contract. Futures differ, however, in the following ways. First, they are standardized contracts (ie, standard assets, amounts and delivery dates. Second, they are typically traded on exchanges rather than over-the-counter. Finally, they are generally not settled with delivery of the underlying asset. |
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Term
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Definition
| FCF is a performance measurement ratio (similar to residual income analysis). But in addition to accounting for capital costs, it also includes adjustments for non-cash items and for working capital investments. Its primary objective is to determine the amount of effective cash flow available to a company after all necessary investments have been accounted for. To this end, it is used extensively in the analysis of new or high-growth companies, especially by the providers of venture capital. It is most commonly computed by adding net income tot depreciation and amortization less the change in working capital and capital expenditures. |
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Term
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Definition
| A forward contract is an agreement between tow parties to buy or sell a fixed amount of an asset to be delivered at a future date and at a price agreed upon today. The underlying asset can be a financial instrument (eg, a stock index fund or debt instrument), currency (eg, the euro or pound)or a commodity (eg, gold or coffee). |
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Term
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Definition
| A credit analysis process that considers character, capacity, capital, collateral and conditions of the potential borrower. |
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Term
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Definition
| A consumer-based payment system that operates through postal and/or banking channels and that transfers payments from one account to another using direct debits and credits. |
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Term
| Generally Accepted Accounting Principles (GAAP) |
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Definition
| In the United States, accounting standards are governed by a detailed set of rules referred to as GAAP. These principles are developed, agreed upon and published in the form of Accounting Standards Codification Topics. |
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Term
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Definition
| This is the process by which an organization uses financial instruments to reduce or eliminate risks associated with uncertain future cash flows and is a core principal of treasury financial risk management. |
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Term
| Government Accounting Standards Board (GASB) |
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Definition
| This is the authoritative standard-setting body for state and local government, as well as for public schools, state universities and other government-affiliated agencies. |
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Term
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Definition
| This legislative act provided for a phaseout of interest-rate ceilings for thrift institutions and commercial banks, and allowed savings institutions to make commercial and consumer loans. It also mandated all depository institutions to hold reserves at the Federal Reserve (Fed) and that the Fed price or eliminate their float in the check clearing system. The full title of this legislation is the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). |
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Term
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Definition
| This type of risk is typically divided into tow areas: funding liquidity risk and asset liquidity risk. Funding liquidity risk relates primarily to an organization's ability to raise necessary cash to meet its obligations as they come due. It is often linked to the ability to raise capital (both short- and long-term) in a timely manner, and it typically is managed by holding marketable securities or open (ie, available) lines of credit. Asset liquidity risk is defined earlier in the glossary. |
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Term
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Definition
| This represents the ability of an organization to convert assets into cash quickly and without a significant risk of loss. |
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Term
| International Accounting Standards Board (IASB) |
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Definition
| The IASB determines general accounting standards and is made up of board members from nine countries. Based in London, England, the IASB's mission is to develop a single set of global accounting standards published as pronouncements called international Financial Reporting Standards. |
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Term
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Definition
| This represents the price per share of a mutual fund or an exchange-traded fund. It is generally calculated as the total value of all the securities or assets in the fund (less any liabilities) divided by the number of shares outstanding. For most funds, the NAV will fluctuate as the market values of the securities in the fund portfolio change. The primary exception is a money market fund, which generally has a fixed NAV equivalent to one unit of the currency of denomination. |
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Term
| Multilateral netting system |
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Definition
| Similar to a bilateral system, but it involves more than two subsidiaries. Each subsidiary informs a central treasury management center of all planned, cross-border payments through an electronic system. Multilateral netting is used primarily for intracompany transactions. |
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Term
| Office of the Comptroller of the Currency (OCC) |
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Definition
| This is a bureau of the U.S. Treasury Department that was established by congress in 1863 to regulate the national banking system. It is the primary chartering authority and regulator for national banks and thrifts. |
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Term
| Off-balance sheet financing |
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Definition
| This type of arrangement is designed to provide financing that does not appear on the balance sheet. Examples of off-balance-sheet financing include joint ventures, research and development partnerships, sales of receivables (factoring) and operating leases (rather than purchases of capital equipment) |
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Term
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Definition
| A typical method of cash concentration in countries where banks can pay interest on excess demand deposit balances and charge interest on deficit balances. |
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Term
| Pension Benefit Guaranty Corporation (PBGC) |
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Definition
| This is the U.S. government agency that insures the pension plans of private U.S. corporations. Quarterly and annual PBGC reports set forth the computation of premiums due. |
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Term
| Payment Card Industry Data Security Standards (PCI DSS) |
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Definition
| A worldwide information security standard defined by the Payment Card Industry Security Standards Council. The standard was created to help organizations that process card payments prevent credit card fraud through increased controls around the data they hold and exchange. The standard applies to all organizations that hold, process or exchange cardholder information from any card branded with the logo of one of the major card brands. |
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Term
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Definition
| A measure of leverage that shows the responsiveness of operating profits to changes in sales. |
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Term
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Definition
| A put option gives the contract owner the right, but not the obligation, to sell (put) the underlying asset to the contract writer at a fixed price through the delivery date. |
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Term
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Definition
| An accounts receivable financing process whereby a third party operates the credit function in the seller's name rather than the seller administering a credit program in-house. |
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Term
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Definition
| Written identity theft prevention programs for financial institutions and other creditors that provide for the identification, detection and response to patterns, practices or specific activities (i.e., red flags) that could indicate identity theft. |
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Term
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Definition
| These are clauses in financing agreements that require a company to maintain a certain credit rating. Failure to maintain a specified rating may trigger a higher loan rate of force the company to post additional collateral, take another specified action or pay back the debt in full. |
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Term
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Definition
| A method for assessing investment risk, this type of "what-if" analysis assesses possible outcomes under a range of circumstances. It is used frequently to establish the lower bound (ie, worst case) and upper bound (ie, best case) of outcomes. Scenario analysis is similar to sensitivity analysis, but more than one variable is altered at a time. Scenario analysis usually starts with a base case - an expected value for each input variable affecting the final value. |
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Term
| Robinson Patman Act (1936) |
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Definition
| Legislation that specifically prohibits price discrimination among customers where a cost basis cannot be demonstrated as the reason for a price difference. |
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Term
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Definition
| In the context of an earnings credit computation, the reserve requirement represents a financial institution's compensation for the level of balances it is required to maintain with the Federal Reserve. The reserve requirement is currently 10%. |
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Term
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Definition
| An intracompany method of centralizing the responsibility for monitoring and collecting international accounts receivable to more effectively manage related foreign exchange exposures. |
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Term
| Securities and Exchange Commission (SEC) |
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Definition
| This is a federal agency designed to maintain a fair and orderly market for investors by regulating and supervising securities sales. |
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Term
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Definition
| Existing debt and equity issues are traded by retail and institutional investors in secondary markets through established exchanges or through over-the-counter markets. Since the securities are bought and sold among investors, the issuing firm neither experiences a cash flow nor a change in the number of securities outstanding. |
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Term
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Definition
| This approach is used by some organizations as an alternative to purchasing insurance. This practice is not technically a form of insurance because it does not involve a transfer of risk to an insurer or another separate entity, instead, the organization will cover its own losses. it is often used by large organizations for their employee health insurance programs. Also, the term self-insurance can describe any risk retention program, even quite informal, unfunded arrangements. Self-insured retention (SIR) is the component of loss covered by the insured in a policy. |
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Term
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Definition
| Many types of debt instruments are securitized to increase liquidity, thus lowering the cost of capital to borrowers. The primary corporate applications of securitization are accounts receivable and inventory. These are bundled together to collateralize securities, making them more liquid and attractive to investors. |
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Term
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Definition
| This is the practice where a company uses its profits to purchase existing shares of its stock either on the open market or directly from shareholders. This usually tends to increase the price of stock. |
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Term
| Society for Worldwide Interbank Financial Telecommunications (SWIFT) MT940 |
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Definition
| This is the major standardized SWIFT message format currently in use for the transmission of prior-day balance information for international transactions. |
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Term
| Single Euro Payments Area (SEPA) |
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Definition
| The European Payments Council established SEPA to provide a straight-through electronic payments system, as well as to harmonize fees and eliminate cross-border charges, SEPA enables customers to make cashless euro payments to anyone located anywhere in the euro zone using only a single bank account and a single set of payment instruments. Electronic payments within and across SEPA participant countries are treated as domestic funds transfers. SEPA is designed to process credit transfers, direct debits and card payments in euros. |
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Term
| Shared services center (SSC) |
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Definition
| A consolidated operation that supports standardized finance processes and controls (eg, accounting, payroll, etc)within an organization. |
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Term
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Definition
| This is an analytical exercise that assumes an adverse change in one or more of the firm's funding sources, or a major shock to the company's core business due to a competitor's action, litigation crisis, product recall, production plant disaster, financial crisis or other source of business trauma. The proposed change in funds availability may involve the loss of one or more of the firm's borrowing facilities, a sudden and large increase in borrowing costs, or both. Such changes may reduce the firm's credit rating, violate loan covenants or cause a technical default on a credit facility. |
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Term
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Definition
| In this process, a company replaces one existing share of stock with multiple shares of new stock. It is often done when a company's stock price is determined to be too high. The basic idea is to get the price of the stock down to a better trading range. |
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Term
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Definition
| Part of the Basel accord, this concept utilizes a "three pillars" approach to mitigating financial institution risk. The three pillars are focused on minimum capital requirements (addressing risk), supervisory review and market discipline. Focus on these three broad areas was through to promote greater stability in the financial system. |
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Term
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Definition
| This is an agreement between two parties to exchange (or swap) a set of cash flows at a future point in time. The most common type of swap is an interest rate swap. |
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Term
| Troubled Asset Relief Program (TARP) |
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Definition
| A program of the U.S. government designed to purchase assets and equity from financial institutions to strengthen the overall financial sector and to address the subprime mortgage crisis. |
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Term
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Definition
| This type of exposure is created when a foreign subsidiary's financial statements are converted (translated) into a parent company's home currency as part of the process of consolidating a company's financial statements. The exposure occurs because the value of the foreign assets and liabilities may change from one accounting period to the next as the underlying foreign exchange rates change. |
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Term
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Definition
| One of the four reasons for holding liquidity, the constant inflows and outflows of most organizations require some level of transaction balances on a daily basis. Transaction balances result from the collection of sales receipts and other inflows, while available funds must be maintained for disbursements to vendors, employees, tax authorities, investors and others. |
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Term
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Definition
| A special type of stock, which is a separate stock created by a parent company to track the financial progress of a particular piece of business. Despite being part of a publicly traded entity, tracking stocks trade under unique ticker symbols. These stocks are meant to create opportunities for investors to buy into a fast-growing unit without investing in the whole company. |
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Term
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Definition
| This is a process whereby a bank sets a forward value date on which the value of funds credited to an account is determined. The process also establishes a back value date on which the value of funds is debited from an account. |
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Term
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Definition
| This is the rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes, this is simply referred to as yield. |
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Term
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Definition
| This type of tax involves a separate tax that is charged at each discrete stage of production and/or distribution based on the increased value (ie, value added) occurring at that state. |
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Term
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Definition
| This is a risk management measurement that is used to determine how changing financial variables will affect a company's value. It is designed specifically to incorporate a wide range of risk factors and summarize their impact in a single measure. The VaR approach uses the probability and monetary impacts of specified adverse events over a period of time to assess risk. |
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