Some Important Banking Terms

C 

Capital - Wealth invested by an entrepreneur on his business. Capital =Assets -Liabilities

Capital gain - Gain by selling a capital asset in which a person is not doing business.

Income by selling a house by a bank employee is a capital gain whereas when a builder do the same thing it is Income from business and professional.

Current asset - An asset that can be converted into cash with 12 months. For example - 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 measure to find price of a bundle of commodities. CPI is used to measure the inflation in a country.

D

 Debt consolidation - Debt consolidation is a process by which various loans and converted into a single loan to reduce interest rate and installment value.

Depreciation - Depreciation is reduction in value of an asset due wear and tear over a period of time. For example a company purchased a machine in 2005 and planned to charge 20% depreciation. In 2010 the machine will be written off from the books of account.

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

Dividend value is based upon company's profitability.

Dividend payout ratio - It is the ratio of dividend paid per share and EPS ( Earning per share )

Double entry bookkeeping - It is a method of bookkeeping in which every transaction is recorded two accounts. Once in debit side and once in credit side.

E

Earning per share - Earnings made by a company in a financial year divided by number of issued shares.

Equity - Value of a business. 

Equity = Total assets - Total liabilities

Ex-divided - Ex-dividend means without dividend. When a seller makes a exdividend sales contract then he is entitled to get dividend or interest payment.

EBIT - Earning before interest and taxes

EBT - Earning before tax

EAT - Earning after tax

F 

Face value - The amount mentioned on face of a bond certificate.

Fixed assets - Assets which can be seen such as machinery

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

Fundamental analysis - Analysis of a company based upon financial and operational performance.

Fiscal policy - Income and expenses management by Government.

Flat rate - Rate of interest in a contract which remains same irrespective of market rate in future.

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

Fund manager - A person who manages a mutual fund and tries to maximize fund's returns while sticking to fund's objectives.