The Finance Dictionary

This information provides users with thorough and reliable meanings to all the most common, and even uncommon, financial terms

Financial Terms Beginning With The Letter B

Back-end load fund

This type of mutual fund charges a redemption fee when the shares in the fund are eventually sold by the investor. This fee is also often called a deferred sales charge (DSC). It may be calculated based on the original investment cost, or on the market value of the investment at the time of redemption. The percentage amount of this fee is usually reduced each year that the fund is held, and can be zero if the fund is held long enough. Many back-end load funds will allow a portion of the investment to be redeemed each year without charge. Also, as with all mutual funds, trailer fees are paid annually by the fund to the advisor, broker or dealer where you hold your funds. See also front-end load fund, and no-load fund.

Balance sheet

A balance sheet is part of the financial statements. The balance sheet reports the amounts of assets, liabilities, and owners' equity at a specific date. The total of all assets is always equal to the total of liabilities plus owners' equity. This is a function of the double-entry accounting system.

Bank of Canada rate

The Bank of Canada rate that is quoted in the press is actually the target overnight rate. The Bank of Canada takes deposits from and lends money to financial institutions on a one-day basis. The rate that the Bank of Canada pays to financial institutions for funds on deposit is 1/4% lower than the target overnight rate, and the rate it charges to financial institutions is 1/4% higher than the target overnight rate. When the financial institutions borrow and lend funds on a one-day basis among themselves, this is done at the overnight rate. The overnight rate can vary from the target overnight rate, but will stay within the rates paid and charged by the Bank of Canada, which is a range of 1/2%. See also prime rate.

See the recent target overnight rates on the Bank of Canada website.

Bankers' acceptance

A acceptance is a short term debt instrument guaranteed by a bank, and sold through a brokerage company to investors.

Basis point

A basis point is 1/100th of 1%, or .01% (.0001), and is used to refer to changes in interest rates, such as the Bank of Canada prime rate, or the yield rate on bonds.

Bear market

A bear market is a declining market (prices are falling). A person who expects that the market will decline is called a bear.

Bearer security

A financial instrument, such as a bond, stock or other security that is not registered in any name. This means it is cashable by the person physically holding it.

Bid/ask

The bid price on a security is the price that a prospective buyer is willing to pay, and the ask price is the price that a prospective seller is willing to accept.

Blue chip

A blue chip stock is a stock which has a long record of being high quality, in terms of stability, dividends, earnings, etc.

Board lot

A board lot is usually 100 shares. Trades on stock markets are usually made in multiples of a board lot. See also odd lot.

Bond

A bond is interest-bearing debt issued by corporations, governments and institutions, with the principal (face value) to be repaid at a specified date (or dates) in the future. Interest is to be paid on the principal at a specified rate per period. Bonds may be secured (backed by a claim on specific assets) or unsecured (backed by the issuer but not by any specific collateral). Bonds may be sold for more (at a premium) or less (at a discount) than their face value. See also bond discount, bond premium, and strip bond.

Bond discount

When a bond sells for less than its face value, it is sold at a discount. The discount is the difference between the face value and the purchase price. Bonds sell at a discount when their coupon rate (rate of interest paid based on the face value of the bond) is less than the current market rate for that type of bond. When long term interest rates rise, bond prices generally decrease.

Bond premium

When a bond sells for more than its face value, it is sold at a premium. The premium is the difference between the purchase price and the face value. Bonds sell at a premium when their coupon rate (rate of interest paid based on the face value of the bond) is greater than the current market rate for that type of bond. When long term interest rates drop, bond prices generally increase.

Book value (of an asset)

The book value of fixed assets is original cost less accumulated depreciation.

Book value per share

This is the total shareholders' equity (as stated on the balance sheet), divided by the total number of common shares outstanding

Bull market

A bull market is a rising market (prices rising). A person who expects that the market will rise is called a bull.

Business investment loss

A business investment loss is a capital loss arising from an arm's length disposition of:

50% of a business investment loss is an allowable business investment loss, which can be written off against any income