Financial Terminology is very important for MBA aspirants.

As future managers you are

expected to know the meanings of terms related to finance, accounts, economics, etc.
irrespective of the stream of education you belong to.

These definitions could really help you in your interviews.

WORD MEANING

A group shares Stocks having very high liquidity.

Company having large equity base

and large public holding.

Company having consistantly good

performance over the years

Alpha factor Concept which measures the

inherent volatility of share.A share
with alpha factor of 1.5 is slated to
rise in prise by 50% in a year on
its inherent strength,such as
growth in eps,regardless of the
behavior of the market.

Asset management Account An account which has both

broking and banking facilities. It
allows debit or credit card,
automatic transfer of excess funds
into a money management account
and margin loans also called
central assets account.

B1 GROUP SHARES Shares having high liquidity

Company having an equity above

Rs.30million
Company having fundamentals and
financial parameters in line with the
industry.

B2 GROUP SHARES Shares having low trading volume

at the EXCHANGES indicating
low investor intrest

Shares trading below par value(face

value)
Company having an equity below
Rs.30million
Company’s shares being not widely
held
Company having surveillance
measure initiated against it by the
EXCHANGES for suspected price
manipulations.

Barren money Money that is not currently

earning interest.
BLACK KNIGHT An unwelcome takeover bidder

Bull Spread An option strategy designed to

profit from a rise in security’s
price by buying a near month
futures contract and selling a
deferred month futures contract.

CIRCUIT BREAKER a system to curb excesive

speculation in the stock
market,applied by the stock
exchange.when the index spurts or
plunges more than a % decided by
the authorities,then the trading is
then suspended for some time to
let the market cool.
Cold money Money which flows in a country
for long term as capital and is
generally invested in assets.

Delta shares The least liquid shares of stock

market.
Disinflation Decrease in the rate of inflation.
Should not be confused with
deflation which is decrease in the
prices.In disinflation prices keep
increasing but at a lower rate.

ECU(European currency unit) A basket of european community

memners’ currencies which served
as the unit of account for the
community members before
‘Euro’ was introduced. European
exchange rate mechanism
attempted to minimise the
fluctuation between members’
currencies and common currency.

Face amount certificate A debt security where the debt

holder agrees to make payment
periodically to the issuer and the
issuer agrees to pay the face value
at maturity. Mutual fund issuing
this type of security is called a face
amount certificate company.
Fiat Money Money which is issued without
being backed with any tangible
asset such as gold, silver etc. The
issuing Govt decrees that the
money is legal. Value of fiat
money depends totally on
confidence and expectation of the
economy.

Front money The cash used to start a business

GAMMA STOCKS shares of small companies which

are traded infrequently

GREEN SHOE OPTION A provision in an agreement with

the underwriters of an issue which
states that in event of exceptional
investor interest the issuer will
authorise additional share for
distribution.
Hot money In finance, hot money refers to
funds which flow in a country to
take advantage of favourable
interest rates.They influnce the
balance of payments and exchange
rate of a country. They are highly
volatile and are shifted to another
market as interest rates
change.They were the largely
responsible for currency crisis in
Mexico and Asia during 1990s. In
crime world they refer to stolen
currency that can be easily tracked
to crime such as marked bills or
new currency with consecutive
serial numbers.

Hyperinflation As evident from term, extremely

rapid or out of control inflation.
German hyperinflation from
Jan’1922 to Nov’1923 is the most
famous example when prices rose
by a factor of 20billion.

Institutional Fund A mutual fund that targets pension

funds, endowments, and other high
net worth entities and
individuals.Institutional funds
usually have lower operating costs
and higher minimum investments
than retail
K-Ratio Developed by Lars Kestner, this
one examines the consistency of of
an equity’s return over time. Data
for the ratio is derived from value
added monthly index(VAMI)

Kondratieff’s long-wave cycle (K- A wave/cycle analysis of an

cycle). economy’s performance. It
predicts and analyses the
performance of any economy viz
boom, depression, bounce etc over
a period of 50-54 years

LAY OFF Selling off unsubscribed portions

of a rights offer by the issuer to the
underwriter at the offer price.

Logistics This term originated in a military

context, referring to how personnel
acquire, transport and store
supplies and equipment. In the
business community, the term is
used to refer to how resources are
acquired, transported and stored
along the supply chain. By having
an efficient supply chain and
proper logistical procedures, a
company can cut costs and
increase efficiency.

Love money Seed money or capital money

given by family or friends to an
entrepreneur to start a business.
M1 money supply(also called
NARROW MONEY)
One measure of the money supply
that includes all coins, currency
held by the public, traveler’s
checks, checking account
balances, NOW accounts,
automatic transfer service
accounts, and balances in credit
unions.

M2 money supply(also called One measure of the money supply

BROAD MONEY) that includes M1, plus savings and
small time deposits, overnight
repos at commercial banks, and
non-institutional money market
accounts. A key economic
indicator used to forecast inflation,
since it is not as narrow as M1 and
still relatively easy to track. All the
components of M2 are very liquid,
and the non-cash components can
be converted into cash very easily.

M3 money supply One measure of the money supply

that includes M2, plus large time
deposits, repos of maturity greater
than one day at commercial banks,
and institutional money market
accounts.

Mom and Pop An adjective denoting a small

scale and a family like atmosphere,
often used to describe these types
of businesses and investors.
Near money Highly liquid assets which are not
cash but can easily be converted
into cash, such as bank deposits
and Treasury Bills. similar to cash
equivalents.

NEER( Nominal Effective Exchange It is the weighted average of a

Rate) currency’s value against a number
of currencies in the basket.
Weights being the value of trade
with the relevant country.

Open Repo Repo which can be terminated by

either party at any time, and which
has an unspecified repurchase
date.
Overnite Repo A repo with a term of one day.

REER( Real Efective Exchange Rate) It is the weighted average of a

currency’s value against a number
of currencies in the basket adjusted
with inflation. Weights being the
value of trade with the relevent
country.

Reflation An economic policy whereby a

Govt uses fiscal or monetary
action(reducing tax rates, changing
money supply and interest rates in
order to expand a country’s output.
Repo A contract in which the seller of
securities, such as Treasury Bills,
agrees to buy them back at a
specified time and price. also
called repurchase agreement or
buyback.

Reverse Merger The acquisition of a public

company by a private company,
allowing the private company to
bypass the usually lengthy and
complex process of going public.

Reverse repo A purchase of securities with an

agreement to resell them at a
higher price at a specific future
date. This is essentially just a loan
of the security at a specific rate.
also called reverse repurchase
agreement.

Smart money Experienced investors and traders,

who tend to spot trends and find
investment opportunities before
everyone else.

Term Repo A repo with a term of more than

one day.
Turnkey Project A situation where the high level
management of a firm is in charge
of the planning and execution of
all business strategy. The client,
who buys a franchise or part of the
business, only has to “turn the
key” for the operation to start.e.g.
Franchise Business. ADD TO
THIS…