Finance Glossary
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A
Arbitrage: Buying short term funds from one market and selling in another market.
B
Balance Sheet: Financial tables prepared and published by companies to show periodic operations (March 31st, June 30th, September 30th, and December 31st). These tables depicting the profile of a Company are called “t-tables” in accounting terminology.
Bill: Debentures issued in accordance with Commercial or Capital Market Laws by corporations to find funding with equal face value and same inscriptions.
C
Capital Market: It is a market regulated by Treasury and where usually long term funding needs are met.
Cross Rate: Exchange rate of two foreign currencies except the national currency.
Convertibility: Refers to ability of the national currency to convert to another currency and be used as a means of international exchange without approval of an official authority or the law for meeting international trade needs.
Corporate Investor: Refers to investment made by mutual funds, investment trusts, insurance companies, social security organizations, special pension funds, foundations, unions and similar institutions, and differs from personal investments.
CPI: Consumer Price Index
Currency Exchange: Standardized markets where foreign currency suppliers and demandants meet, and national currencies are converted into one another.
Current Assets: Total value of stocks and bonds, receivables, inventories, cash and other liquid assets marketable.
Current Exchange Rate: Real exchange rate. It is formed as a result of daily foreign exchange trading transactions.
D
Deflation: Opposite of inflation. While general price levels decrease, national income, production and employment also decrease.
Devaluation: Countries experiencing deficit in balance of payments may decide to decrease international purchasing power of the value of the national currency. As a result, price of imported goods increase and prices of domestic products decrease. While it means an increase in export volume, trading more goods for the same amount of foreign currency means exploitation of the national economy.
Disinflation: Reduction in inflation rate by applying non-hard measures.
E
Exchange Rate: Price of foreign currencies in terms of the national currency.
External Balance: Refers to a deficit/surplus in the balance of payments as a result of import and export activities of a country. External balance depends on the national income, exchange rate limits and exchange rate.
F
Factoring: Refers to cash purchasing of client (company) receivables by real persons or legal entities called factor. It is a financial service where a specialized financial intermediary called factor purchases receivables of a commercial entity on non-recourse basis.
Financial Policy: Refers to entire policies implemented so that the public authority can control the money supply by tax, expense and debt management. According to economists, it is more effective than monetary policy.
Financial Stability: In broad sense, it refers to balance of the financial system or its substructure while in narrow sense it means balance of the financial market. Financial systems make up the mechanisms (such as banks, cooperatives or money, bond) where savings are collected and transferred to investors or consumers.
Financial Statements: Standardized accounting records of which maintenance as well as preparation based on the periodic operations, and publication is required by Turkish Tax Law, Turkish Commercial Code and Capital Market Law for to show performance of companies (publicly held company, brokerage house etc). Main statements include balance of sheet, income statement, cost of goods sold, dividend distribution, funding and cash flow statements.
Foreign Debt: Countries may borrow funds from foreign governments or finance organizations with or without consideration in order to provide additional resources to domestic funds and obtain new purchasing power in foreign currency. Foreign debt concept in Turkey refers to international borrowing by public sector and private sector.
Foreign Exchange: Refers to transactions related to exchange of money or quasi money. It entails money trading transactions.
Forfeiting: It means unconditional transfer of receivable claims in Latin. Receivables generated as a result of export of goods and services on installment basis and collected in accordance with a particular payment plan are purchased by a bank or a specialized financial intermediary (forfeiter) on irrevocable basis (without condition and non-recourse basis) after a certain discount. In practice, forfeiting usually involves investment goods. It was born as a result of the international trade activities between the USA and European countries with the USSR in 1950s. It became wide spread in Far East and Latin America.
Founder’s Share: Founder’s shares are usually given to Company founders or individuals of great importance for Company free of charge. Such shares called as “ordinary shares” have no voting right but enjoy dividend payments.
Free Exchange Rate: Refers to convertible national money. Conversion of such money to other national currencies is free in the country, however there may be restrictions with respect to money transfers abroad.
Free Float: In free floating currency system, value of the Money in a country is determined in the market. Interventions in a foreign Exchange market are performed to prevent unnecessary fluctuations in this market and soften the changes, not for ensuring the level of the exchange rate. In this system, monetary policy is more effective and amount of the international foreign currency reserves which a country should hold decreases. Down side of the free floating exchange rate system is that it adversely affects distribution of resources due to the fact that it increases ambiguity in international economic relations and risks.
Funding: Refers to finding funds by using equity capital. Companies issue stocks for this purpose. Companies find resources by borrowing or using their equity capital.
Fixed Foreign Exchange: Means adjustment of a national Money of a country by linking to a convertible foreign exchange based on certain parity.
G
Gross National Product (GNP): Total value of the goods and services produced in a national economy within a specified period (usually in a calendar year).
Growth: Increase in general data such as labor force, means of production and GNP. Growing economy physically expands.
H
Hyper Inflation: It is also called as galloping inflation, and refers to the extraordinarily high inflation where Money loses its value. In history of economics, such rates usually realize during or after wars, and requires establishment of a new currency.
I
Idle Money: Cash which is taken outside the money market and not invested.
IMF (International Monetary Fund): It is a multi-purpose organization founded for development of international trade and full employment, increase development rate, ensuring fixed currency system and ensuring currency stability, prevent one-way devaluation and solve balance of payments problem, and providing loans.
Inflation: While it refers to “Increasing trend of general price level” in daily usage, method of calculation of this trend in the economy is still subject to arguments. Wholesale Price Index (WPI) announced by the State Statistical Institute is considered as the inflation figure. There are four types of inflation: demand, cost, hidden and hyper.
Interest Payments: Refers to interest payments of the debts of Treasury, State Economic Enterprises, banks with foreign exchange position and other entities borrowing funds from abroad. It is a passive item in the budget.
Internal Debt: Refers to public debt of the government to individuals and entities in the country in terms of national currency. Economic characteristic of such borrowing is that purchasing power changes hands between private and public sectors. With internal borrowing, no additional source available for the whole country is generated. State can borrow funds by sale of paper based bills and bonds to people and entities and other non paper based methods. Internal borrowing is classified into three groups as short-long term, Secured-Non Secured, and Mandatory-Voluntary.
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Laisse Fairre Laisse Passes: Refers to the liberal point of view translated as “Let them do, Let them pass”
Leasing (Financial Leasing): It is a medium term financing method allowing firms to rent fixed assets which are needed for commercial and industrial activities instead of purchasing, and is alternative to bank loans. This method has been developed as a result of financing shortage in the World Economic Crisis taken place in 1930s and as a solution for technological and modernization expenses started following World War II. It has been mainly used be SMEs since 1985.
Loan: Assignment of a certain amount of purchasing power for a specified period to real persons or legal entities in exchange for a cost provided that it is repaid.
Loan Types: Loans are classified as secured vs non-secured based on collateral, private vs public based on the borrower, short vs long based on its term, production ve consumption based on the place of provision; commercial, industrial, construction and forest based on the place of use.
Lot: At stock exchange, 1.000 units of stocks make up one lot. As a result, 1 lot of stocks represents company capital amounting to TRL 1.000.000 and is the unit of transactions at İstanbul SEC. While stocks of less than one lot are traded during normal sessions, no quotation is given.
M
Monetary Policy: Refers to all of the policies implemented for changing the money supply volume in an economy. Open market operations whereby Central Bank cash bills, banking transactions and changing credit ceiling are included among the methods applied. Monetary policies are inadequate during depressions.
Money: It is the medium of exchange of goods and services. In an economy, demand deposits and credit cards are also included in elements of money in addition to coins and banknotes. Its main uses are medium of exchange, unit of account and store of value. Time deposits and government bonds are considered as quasi Money.
Money Market: Markets which are regulated generally by central banks and where demand and supply for short term funds (loans) operates.
Money Supply: Refers to money stock. It is the total of all mediums used as money in a particular time in an economy.
N
Nominal Value (Par Value): It is the value printed on securities, and represents the share of the capital per stock. İstanbul SEC considers nominal value of all stocks listed at the stock exchange as 1.000 Lira. However, while par value is used as 1.000 Lira for non listed companies in general, par values amounting to 500 Lira or 5.000 Lira are also used.
O
Open Market Operation: Market operations performed by the Central Bank to ensure stability in the value of Money. The Central Bank may sell/buy bonds or treasury bills to decrease/increase money supply.
Orthodox Stability Program: General name given for programs recommended by the International Monetary Fund since 1970s for countries combating inflation. The term Orthodox here refers to classical, cliché stability programs. IMF recommends in this program that wages are frozen, retarded exchange rate following a certain level of devaluation, and inflation is kept under control by decreasing consumption. This classic program has not been successful in many countries where it is applied, and has even increased the inflation rate.
Over The Counter-OTC:Non-standardized markets where negotiable instruments are traded.
P
Profit Transfer: Refers to transfer of revenues generated by foreign investors in their operations in Turkey.
Public Expenses: In its broadest sense, it refers to budgetary payments by government and other public institutions, payments by state economic Enterprises (SEC) and social security system, tax exemption and exceptions as well as incentives paid to private persons. In a narrow sense, payments by government and other public agencies (municipality, special provincial administration etc) as the cost of public services.
Public Offering: Refers to provision of funding by companies through stock issuing via equity capital in order to cover their funding needs. Companies meet their funding needs by borrowing from external sources against interest payment or through equity capital (by capital of the shareholders or revenue generated as a result of the activities). Dividend, specified at a certain minimum limit by shareholders, is paid out for funding via equity capital. If cost of the funds obtained by equity capital, in other words stock issue is less than the cost of borrowing, companies should prefer public offering of stocks.
Public Revenue: Refers to revenue items such as tax, dues, duties, fines, estate-business income, borrowings, assistance-donations, and differences arising out of devaluation which government generates in order to cover its expenses.
Purchasing Power Parity (PPP): Currency conversion rate which eliminates the price level differentiation between countries. When Money in hand is converted to another currency based on a Money parity rate, goods and services in the same basket can be purchased in all countries. PPP is the rate that eliminates the price level differences among countries and converts national currencies to one another.
R
Real Sector (Real Segment): Refers to the sector representing individuals acting as producers and consumers in agriculture, industry and service main segments in a national economy. Savings made by this segment are collected by the finance sector and reused in the real sector.
Revaluation: Refers to the process whereby value of the currency of a country increases in relation to other currencies.
S
Sliding Scale: Refers to increase in wages and salaries in the same rate as the increase in inflation to protect society against inflation.
Stock Exchange: Stock Exchange is an institutional market where security trading takes place. It is a market because of the fact that securities are traded there. It is institutionalized since it has its own rules and standards. Other commodities (trade goods) and instruments are traded at stock exchanges, not only securities. For example, bonds and treasury bills are traded at securities exchanges while foreign currencies are sold/purchased at currency exchanges and goods are sold/purchased at commodity exchanges.
Stock Exchange Listing: Securities which will be subject to public offering after approval of the stock exchange must be listed. Non-listed securities can not be traded. Being listed at a stock exchange means that particular security is recognized and is allowed for trading. Each stock exchange where securities are traded has its own rules.
T
Takasbank (Settlement & Custody Bank): Stocks listed in the stock exchange are stored at the stock exchange so that transactions are properly recorded and maintained. ISE Settlement and Custody Bank Inc, designated for storage of the stocks listed in the stock exchange, prevents additional physical circulation of stocks and thus companies don’t have to print the stocks since the bank stores major portion of all stocks.
Treasury Deficit: The Treasury is a virtual safe where expenses and proceeds of the state take place. Treasury deficit takes place when total payments made by the Treasury for public expenses exceed total public proceeds collected in a certain period.
U
Unrecorded Economy: All activities which are disguised from government, not recorded/unable to record and therefore can not be audited and inspected. It is also referred to as informal economy, illegal economy, unofficial economy, and hidden economy. In general, while unrecorded economy is a subject matter of production of goods and services, it is not fully calculated by traditional measures of economy and reflected in GNP volume.
W
World Bank: Refers to the International Bank for Reconstruction & Development established as a result of the Bretton-Woods System. It is founded to provide funds and facilitate capital investments in order to ensure development of the underdeveloped countries.
WPI: Refers to Wholesale Price Index. It is used to measure inflation.