Altman's Z-Score is a financial formula developed by Edward I. Altman in the 1960s that is used to predict the likelihood of a company entering bankruptcy within the next two years. Utilizing multiple corporate income and balance sheet values, this score provides an insight into the financial stability of a business.
An international bank that fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. Originally established to coordinate reparations payments post-WWI, the BIS now plays a key role in facilitating central bank cooperation and setting standards for global banking.
The Bank for International Settlements (BIS) aims to promote global monetary and financial stability through international cooperation among central banks and financial supervisory authorities.
The central bank of the United Kingdom, responsible for setting monetary policy, providing financial stability, and serving as the government's bank.
The Basel Accords are three versions, with numerous amendments, of international banking agreements developed by the Basel Committee. They seek to establish a stable international banking system by specifying capital requirements, internal measures of risk assessment, bank supervisory review standards, and market discipline through the disclosure of available capital, risk exposure, and assessments as a measure of the institution's capital adequacy.
The Basel Capital Accords include Basel I, Basel II, and Basel III. These agreements set international banking standards aimed at promoting financial stability through enhanced regulatory frameworks.
A critical metric used to evaluate a bank's ability to meet its liabilities, ensuring it maintains a sufficient buffer to absorb potential losses and protect the interests of depositors and creditors.
Capital gearing refers to the proportion of debt to equity in the capital structure of a company. It is a crucial indicator of financial stability and risk.
Capital maintenance in units of constant purchasing power (CUPP) is an approach that maintains the financial capital's purchasing power by adjusting for changes in the general price level or inflation.
The Capital Purchase Program (CPP) was an initiative under the Troubled Asset Relief Program (TARP) to stabilize the financial system by reinforcing the solvency of major banks through purchasing preferred stock and equity warrants.
A conglomerate is a large corporation formed by the merger or acquisition of smaller companies, each operating in distinct, often unrelated, industries. This structure is typically chosen to diversify risk and achieve financial stability across various market sectors.
Credit risk refers to the potential that a borrower or counterparty will fail to meet its obligations in accordance with agreed terms. This concept is crucial for lenders and investors as it impacts the stability and profitability of financial institutions and markets.
Creditor-days ratio provides an estimate of the average number of days credit an organization takes before paying its creditors. It's an essential measure of financial stability and cash flow management.
An assessment of a person's or a business's ability to pay for goods purchased or services received. Creditworthiness is often represented by a credit rating, which provides lenders insight into the risk of extending credit to the borrower.
Debt service refers to the cash required in a given period, usually one year, for payments of interest and current maturities of principal on outstanding debt. This includes obligations from mortgage loans, corporate bond issues, and government bonds. Understanding debt service is crucial for assessing the financial stability and repayment ability of an individual or entity.
Seemingly inexhaustible financial resources, permitting one to remain in business after a prolonged period of negative cash flow. Also, often in litigation, the party having money to pay the claim.
Deposit insurance is a safety net provided to protect depositors' funds in the event of a bank failure. This system maintains public confidence in the banking system by ensuring that depositors' money is safe up to a certain limit, even if their bank ceases operations. It is typically offered by a government agency or a privately-operated insurance fund.
The Discount Window is a facility provided by the Federal Reserve where banks can borrow money at the discount rate. This facility is meant for financial institutions that are in need of short-term funding to meet reserve requirements.
Legislation designed to assist large financial institutions to prevent failure and to signal to worldwide financial markets that the United States government would stand behind major American banks and other important financial entities to prevent disruptive collapses.
The European Central Bank (ECB) is the central bank responsible for monetary policy within the Eurozone, ensuring price stability and regulating member banks. It plays a critical role in European and global financial markets.
The European Monetary System (EMS) was a framework established to stabilize exchange rates, curb inflation, and prepare for Economic Monetary Union within the European Union.
The European Stability Mechanism (ESM) is an intergovernmental organization established to provide financial assistance to member countries of the Eurozone in financial distress. By offering support mechanisms, the ESM aims to maintain financial stability within the Eurozone.
An intergovernmental body established in September 2012 to provide permanent financial stability for the eurozone by offering financial assistance to member states facing economic difficulties.
The European System of Central Banks (ESCB) is a central banking system comprised of the European Central Bank (ECB) and the national central banks of all EU member states, established to conduct monetary policy, ensure financial stability, maintain a common currency, and promote economic growth.
The Federal Reserve Board, often referred to simply as the Fed, is the governing body of the Federal Reserve System, the central bank of the United States. Its major responsibilities include overseeing monetary policy, regulating banks, maintaining financial stability, and providing financial services.
The Financial Services Action Plan (FSAP) is a comprehensive strategy designed by the European Union to enhance the integration, efficiency, and competitiveness of financial markets within the EU.
Quantitative measures that help determine whether a company or group is likely to meet its financial obligations, including interest, dividends, and capital repayments.
Gearing ratios, also known as leverage ratios, measure the relationship between a company's capital structure, particularly its debt and equity. These ratios are crucial for assessing a company's financial stability and risk level.
The Group of 20 (G-20) is an international forum for the governments and central bank governors from 19 countries and the European Union to discuss policy issues pertaining to the promotion of international financial stability.
Hard money, also known as hard currency or hard cash, can refer to both stable, highly trusted currencies and to gold or coins as contrasted with paper currency.
**Hunkering Down** is a slang term used in the context of business and economics to describe taking a defensive stance and adopting a conservative strategy, usually in anticipation of tough conditions or to weather through a downturn. Companies often hunker down by reducing expenditures, postponing expansion plans, and preserving resources to maintain stability until the business environment improves.
The International Monetary Fund (IMF) is an international financial institution that provides monetary cooperation and financial stability to its member countries, aiming to facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
Interest cover, also known as the fixed-charge-coverage ratio, is a financial metric used to assess a company’s ability to meet its interest obligations from its earnings before interest and tax (EBIT).
Established in 1983, the International Organization for Securities Commissions (IOSCO) is an influential body dedicated to setting international standards for the regulation of global securities and futures markets. Based in Madrid, IOSCO promotes the adoption of internationally-agreed accounting standards, facilitating multinational share offerings.
IOSCO is an international cooperative of securities regulatory agencies and organizations. It functions to develop, implement, and promote adherence to internationally recognized standards for securities regulation.
Legal capital represents the amount of a company's stockholders' equity which cannot be reduced by the payment of dividends, ensuring a company's financial stability and the protection of creditors.
Certain liquid assets, the structure and nature of which are defined by regulatory requirements, that a bank is required to maintain on its balance sheet. These requirements serve both as instruments of monetary control and protection against 'runs' on banks.
Mandatory Liquid Assets (MLA) are specific financial reserves and assets that regulatory authorities require banks and financial institutions to maintain to ensure liquidity and financial stability.
Moral hazard refers to the situation where an entity has the incentive to take on excessive risks because it does not fully bear the consequences of those risks. This is a common concern in sectors such as banking, insurance, and finance, particularly when entities are perceived as 'too big to fail' and expect potential government bailouts.
An in-depth exploration of official reserves which encompass deposits of gold, currency, and Special Drawing Rights (SDRs) held at the International Monetary Fund (IMF) by member countries.
Established in April 2013, the Prudential Regulation Authority (PRA) functions as the UK's prudential regulator for banks, building societies, credit unions, insurers, and major investment firms. It aims to promote the safety and soundness of these institutions and create a more resilient financial system.
Ratio analysis is the use of accounting ratios to evaluate a company's operating performance and financial stability. Examples include return on capital employed and gross profit percentage for profitability assessment. Additionally, the liquid ratio examines solvency, while gearing ratios evaluate the company's financial structure.
Reserve assets are financial instruments that a central bank or a government holds to implement monetary policy and ensure financial stability. These assets are crucial for maintaining liquidity, managing exchange rates, and backing up domestic currency.
Runaway refers to being out of control, typically used in reference to inflation or other undesirable economic phenomena.
Short-termism refers to policies and practices aimed at maximizing current profits rather than promoting long-term development and wealth creation. It can have significant negative implications on research and development, stakeholder interests, and overall company stability.
The ability of an investor to retain their investment during periods of declining value, ensuring that short-term market fluctuations do not force premature sales.
A Triple-A Tenant refers to a tenant with an excellent credit record, typically used in commercial real estate to indicate high financial stability and reliability.
The Troubled Asset Relief Program (TARP) was a U.S. government initiative aimed at stabilizing the financial system and restoring bank lending during the subprime mortgage crisis by purchasing up to $700 billion in troubled assets from financial institutions.
Undistributable reserves, often termed capital reserves, refer to specific reserves that cannot be distributed to shareholders as per the stipulations of the Companies Act, various statutes, or a company's constitutional documents. These reserves ensure the financial stability and compliance of a company.
A term used to describe individuals or entities that possess a significant amount of wealth and financial stability.
A zombie company is a business that continues to operate despite being insolvent or bankrupt, often propped up by banks or investors even though it does not generate sufficient revenue to service its debts.
