Introduction to Finance

Automatic transfer service (ATS) accounts
used to make direct deposits to, and payments 
from, checkable deposit accounts
Balance of payments
Involves all of a coun-
try’s international trans actions, including for eign 
investment, private and govern 
ment grants, 
military spending overseas, and many other 
items besides the buying and selling of goods 
and services
Balance of trade
The net balance of exports 
and imports of goods and services
Balance sheet
Statement of a company’s fi nan-
cial position as of a particular date, usually at the 
end of a quarter or year
Bank liquidity
Refl ects the ability to meet 
depositor withdra wals and to pay off other liabil-
ities when they come due
Bank reserves
A depository institution’s 
vault cash and funds held at its regional Federal 
Reserve Bank
Bank solvency
Refl ects the ability to keep 
the value of a bank’s assets greater than its 
liabilities
Banker’s acceptance
Promise of future pay-
ment issued by a fi rm and guaranteed by a bank
Banking system
Commercial 
banks, 
S&Ls, 
savings banks, and credit unions
Bankruptcy costs
Explicit expenses, such 
as legal and accounting fees and court costs, 
along with implicit costs, such as the use of 
management time and skills in preventing and 
escaping bankruptcy
Barter
Exchange of goods or services without 
using money
Base case
For project analysis, the fi rm’s 
after-tax cash fl ows without the project
Bearer bonds
Have coupons that are 
“clipped” and pre sented, like a check, to the 
bank for payment; the bond issuer does not 
know who is receiving the interest payments