Important Banking Terms

Important banking Terms

AGM -Annual General Meeting, it is the year meeting held by every registered company. Agenda is to explain the performance during the year, presentation of annual financial statements, voting on important financial decisions. Any shareholder can participate in AGM.

Asset turnover ratio - This ratio can be explained as Net assets / Total turnover or sales. This ratio measures the operational efficiency of business assets. In simple terms this measures how many time total assets turned in a year and how efficiently the assets are used in a business.

Acid test ratio - This is one of the important ratio to measure business liquidity. Business liquidity is defined as ability of a business to pay its short term debts.

Asset Management Company - AMC is a company that pools and invests investormoney in pre-determined goals. Pool of funds is known as Mutual fund.

Audit - Financial statement and physical stock is checked annually by professionalauditor (Chartered Accountant affiliated by ICAI in India)

Current asset –It is an asset that can be converted into cash. Forexample - debtors, stock etc.

Credit rating - A ranking applied to an individual, business or a nation based upon its credit history and current financial position. There are various credit rating companies in India such as Crisil.

CPI - Consumer price index is a measure to find price of a bundle of commodities. CPI is used to measure the inflation in a country.

Depreciation - Depreciation is reduction in value of an asset due to wear and tear over aperiod of time.

Dividend - Dividend is the amount per share paid by a company to its shareholders.

Dividend value is based upon company's profitability.

Equity - Value of a business. Equity = Total assets - Total liabilities

Face value -The amount mentioned on face of abond certificate.

Fixed assets - Assets which can be seen such as machinery

Financial year - A period of 12 months from 1st April to 31st march

Fiscal policy - Income and expenses management by Government.

Floating rate - Rate of interest which changes with the change in market rate.

Gross profit = Net sales - Net purchases - Direct expenses

GDP - Gross domestic product is the aggregate value of goods and services produced by every person of a nation.

GST - Goods and services tax is the same tax system for everything.

IPO - Initial public offer is issue of stocks for the first time in the market.

Intangible assets – Assets which can’t be seen but have value for business.

KYC – Know Your Customer policy is mandatory in India and for every investor irrespective of his investment volume needs to furnish his identity and residence details.

Liquidity – Ability of a business to pay off its short term debts with current assets.

Monetary policy - Set of actions by Central bank of a country (RBI in case of India)to control the supply of money. These actions included increase in interest rate, openmarket purchases, changing commercial bank's reserve funds ratio (SLR) etc.