Vostro, Nostro and Loro accounts

letter of credit L/C. A binding document that a buyer can request from his bank in order toguarantee that the payment for goods will be tranferred to the seller. Basically, a letter of credit gives the seller reassurance that he will receive thepayment for the goods. In order for the payment to occur, the seller has topresent the bank with the necessary shipping documents confirming the shipment of goods within a given time frame. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country,customs, or political instability. Learn more about this term Usage Example When I purchased goods from another country the seller requested a letter of credit to give him reassurance that he would be paid. Term of the day 08-12-14 poverty Condition where people's basic needs for food, clothing, and shelter are not being met. Poverty is generally of two types: (1) Absolute poverty is synonymous with destitution and occurs when people cannot obtain adequateresources (measured in terms of calories or nutrition) to support a minimum level of physical health. Absolute poverty means about the same everywhere, and can be eradicated as demonstrated by some countries. (2) Relative poverty occurs when people do not enjoy a certain minimum level of living standards as determined by a government (and enjoyed by the bulk of thepopulation) that vary from country to country, sometimes within the same country. Relative poverty occurs everywhere, is said to be increasing, and may never be ... Learn more about this term Usage Example Many advocates are pushing to raise the minimum wage in the U.S. in hopes of propelling more people above the poverty line. Term of the day 07-12-14 Black Friday The day after Thanksgiving Day that signals the beginning of the Christmasshopping season. Retailers kick off the season by offering deep discounts onproducts for those shoppers lucky enough to obtain the limited supply. Brick and mortar stores traditionally open much earlier than normal business hours, including a few at 12:00 AM midnight. In recent years, e-commerce siteshave begun offering discounts and free shipping on Black Friday, as well as created their own shopping holiday in Cyber Monday. Usage Example On the Friday after Thanksgiving, crowds of shoppers rush to retail stores as soon as they open to take advantage of special Black Friday sales and discounts, which are known to be some of the best deals of the ye Term of the day 06-12-14 dividend A taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings, usuallyquarterly. Dividends are usually given as cash (cash dividend), but they can also take the form of stock (stock dividend) or other property. Dividends provide an incentive to own stock in stable companies even if they are not experiencing much growth. Companies are not required to pay dividends. The companies that offer dividends are most often companies that have progressed beyond the growth phase, and no longer benefit sufficiently by reinvesting their profits, so they usually choose to pay them out to their shareholders. also called payout. Usage Example Since the company earned more than expected last quarter, the company gave their shareholders a larger cash dividend than originally anticipated Term of the day 05-12-14 financial leverage The degree to which an investor or business is utilizing borrowed money.Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find newlenders in the future. Financial leverage is not always bad, however; it canincrease the shareholders' return on investment and often there are tax advantages associated with borrowing. also called leverage. Usage Example While many companies use debt to help finance, some try to avoid using debt as it increases their degree of financial leverage and negatively affects the company's bottom line.  Term of the day 04-12-14  Fiduciary money is conventionally possessed in trust. This form of money is normally invested by a person for his beneficiary. The fiduciary normally retains the assets for a certain beneficiary, who could even be an executor of the will. Payments of fiduciary money could also be made in commodity money like gold or fiat money. The conventional forms of fiduciary money are as follows: Bank Notes Checking Accounts The bank notes are provided by banks. In the nineteenth century they were a common form of currency and are still in use in some countries at present. The checks are now held as having monetary value, ones that could be used as a medium of exchange. The fiduciary plays an important role in the transactions involving fiduciary money. This person is very powerful with regard to the assets of his beneficiary. The fiduciaries are empowered by the laws to act as representatives of that individual. The conventional examples of fiduciaries are as follows: Agents Executors or Administrators Trustees Guardians Officers of Corporation Fiduciary money can be obtained from banks in the form of credible promises. These promises are eligible to be transferred and do perform the functions of conventional money. Bank money is also termed as fiduciary money since the entire business transaction is premised on the factor of trust. The present day world attaches more importance to the token money whose variations are fiduciary money and fiat money, which are significantly different from commodity money.            Term of the day 03-12-14 liquidate:- 1.To convert into cash by sale.2.To settle an obligation by payment or adjustment.3.To determine, by agreement or litigation, the amount of damages to be paid.  Term of the day 02-12-14 merger:- Voluntary amalgamation of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration. Term of the day   01-12-14 Bond  A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. The Federal government, states, cities,corporations, and many other types of institutions sell bonds. Generally, a bond promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bondsrequire a repayment of principal. When an investor buys a bond, he/she becomes a creditor of the issuer. However, the buyer does not gain any kindof ownership rights to the issuer, unlike in the case of equities. On the hand, a bond holder has a greater claim on an issuer's income than a shareholderin the case of financial distress (this is true for all creditors). Bonds are often divided into different categories based on tax status, credit quality, issuertype, maturity and secured/unsecured (and there are several other ways toclassify bonds as well)... Term of the  day 30-11-14 mortgage:-    A legal agreement that conveys the conditional right of ownership on an asset or property by its owner (the mortgagor) to a lender (the mortgagee) as security for a loan. The lender's security interest is recorded in the register of title documents to make it public information, and is voided when the loan is repaid in full. Virtually any legally owned property can be mortgaged, although real property (land and buildings) are the most common. When personal property (appliances, cars, jewelry, etc.) is mortgaged, it is called a chattel mortgage. In case of equipment, real property, and vehicles, the right of possession and use of the mortgaged item normally remains with the mortgagor but (unless specifically prohibited in the mortgage agreement) the mortgagee has the right to take its possession (by following the prescribed procedure) at any time to protect his or her security interest. In practice, however, the courts generally do not automatically enforce this right when it involves a dwelling house, and restrict it to a few specific situations. In the event of a default, the mortgagee can appoint a receiver to manage the property (if it is a business property) or obtain a foreclosure order from a court to take possession and sell it. To be legally enforceable, the mortgage must be for a definite period, and the mortgagor must have the right of redemption on payment of the debt on or before the end of that period. Mortgages are the most common type of debt instruments for several reasons such as lower rate of interest (because the loan is secured), straight forward and standard procedures, and a reasonably long repaymentperiod. The document by which this arrangement is effected is called a mortgage bill of sale, or just a mortgage. Term of the day29-11-14 tariff:- 1. General: Published list of fares, freight charges, prices, rates, etc.2.Foreigntrade:Popular term for import tariff and import tariff schedule.3. Shipping: Popular term for shipping tariff And shipping tariff schedule. Learn more about it Usage Example The imported item was more expensive than the domestic item due to the imposed tariff. Term of the day 28-11-14   liability:- An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed. In the case of a company, a liability is recorded on the balance sheet and caninclude accounts payable, taxes, wages, accrued expenses, and deferred revenues. Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period. See also: List of Key Accounting Terms and Definitions atInvestorGuide.com. Learn more about this term Usage Example Limited partnerships (LPs) have two sets of partners, namely one or more general partners who have personal liability and one or more limited partners who are not liable for debts. Term of the  day(27-11-14) Security  This article is about the negotiable instrument. For the legal right given to a creditor by a debtor, see  Security interest. A security is a tradable financial asset of any kind.Securities are broadly categorized into: debt securities, (e.g., banknotes, bonds and debentures) equity securities, (e.g., common stocks) derivative securities, (e.g., forwards, futures, options and swaps). The company or other entity issuing the security is called the issuer. A country's regulatory structure determines what qualifies as a security. For example, private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions. Term of the day(26-11-14) recession Period of general economic decline, defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer. Marked by highunemployment, stagnant wages, and fall in retail sales, a recession generally does not last longer than one year and is much milder than a depression. Although recessions are considered a normal part of a capitalist economy, there is no unanimity of economists on its causes. Learn more about this term Usage Example The United States recently recovered from a recession that began in 2008 after the housing bubble burst leading to the subprime mortgage crisis.

coming soon     amalgamation:- Combination of two or more firms, into either an entirely new firm or a subsidiary controlled by one of the constituent firms. liquidate:- 1.To convert into cash by sale. 2.To settle an obligation by payment or adjustment. 3.To determine, by agreement or litigation, the amount of damages to be paid. equity:- 1. Fairness and impartiality towards all concerned, based on the principles of evenhanded dealing. Equity implies giving as much advantage, consideration, or latitude to one party as it is given to another. Along with economy, effectiveness, and efficiency, Equity is essential for ensuring that extent and costs of funds, goods and services are fairly divided among their recipients. See also equitable. 2.Accounting: (1) Ownership interest or claim of a holder of common stock (ordinary shares) and some types of preferred stock (preference shares) of a company. On a balance sheet, equity represents funds contributed by the owners (stockholders) plus retained earnings or minus the accumulated losses. (2) Net worth of a personor company computed by subtracting total liabilities from the total assets. In case of cooperatives, equity represents members' investment plus retained earnings or minus losses. 3.Law: (1) The English system of justice that developed during 17th to 19th centuries, separate and distinct from the system of common law. Not bound by the precedents, it tempered the harshness and inflexibility of common law, especially in cases involving families and children. Although both systems of law merged by 1875, the rules of equity prevail in case of a conflict with the rules of common law. (2) Any right to an asset or property, held by a creditor, proprietor, or stockholder (shareholder). share:- A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses. Two major types of shares are (1) ordinary shares (common stock), which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings, and (2) preference shares (preferred stock) which entitle the shareholder to a fixed periodic income (interest) but generally do not give him or her voting rights. See also stock. stock:- 1.Equity capital raised through sale of shares. 2.The proportional part of a company's equity capital represented by fully paid up shares. 3.British term for (1) A fixed interest government debt security issued usually in denominations, and (2) Inventory. security:- 1. Finance: A financing or investment instrument issued by a company or government agency that denotes an ownership interest and provides evidence of a debt, a right to share in the earnings of the issuer, or a right in the distribution of a property. Securities include bonds, debentures, notes, options, shares, and warrants but not insurance policies, and may be traded in financial markets such as stock exchanges. 2. Banking: An asset pledged to guaranty the repayment of a loan, satisfaction of an obligation, or in compliance of an agreement. Security gives a lender or obligee a legal right of access to the pledged asset and to take their possession and title in case of default for a foreclosure sale. 3.Computing: The extent to which a computer system is protected from data corruption, destruction, interception, loss, or unauthorized access. See also secure system. 4.The prevention of and protection against assault, damage, fire, fraud, invasion of privacy, theft, unlawful entry, and other such occurrences caused by deliberate action. See also safety moratorium:- Agreed upon or legally authorized temporary delay in performing an obligation or taking an action consortium:- 1.Short-term arrangement in which several firms (from the same or different industry sectors or countries) pool their financial and human resources to undertake a large project that benefits all members of the group. A consortium lasts for a period that is usually shorter than that for a syndicate. 2.Benefits the parties to an agreement or arrangement are entitled to receive from one another. hedge:- Investment made by taking a trading position in a futures or options market to minimize the impact of adverse changes in interest rates or in the prices of commodities or securities. See also hedging. derivative:- 1.Financial markets: Contract to buy or sell an asset or exchange cash, based on a specified condition, event, occurrence, or another contract. 2.Mathematics: Measure of the rate of change of a dependent variable with respect to an independent (explanatory) variable. debenture:- A promissory note or a corporate bond which (in the US) is backed generally only by the reputation and integrity of the borrower and (in the UK) by the borrower's specific assets. When unsecured, it is called a bare debenture or naked debenture; when secured by a charge on a specific property, it is called a mortgage debenture. Vostro, Nostro and Loro accounts Vostro Account: (Italian, from Latin, Voster; English, 'yours')  Account held by a foreign bank in a domestic bank is called Vostro account. A Vostro is our account of your money, held by us. A Vostro account with a credit balance (i.e. a deposit) is a liability, and a vostro with a debit balance (a loan) is an asset. For example Bank A(Barclays Bank of  UK) opening an account in Bank B(ICICI Bank of India), this is Vostro account for Bank B(ICICI Bank of India). Nostro Account: (Italian, from Latin, Noster ; English, 'ours') Account held by a particular domestic bank in a foreign bank is called Nostro account. A Nostro is our account of our money, held by you. A bank counts a Nostro account with a credit balance as a cash asset in its balance sheet. Here in the above example given in Vostro account the same account is a Nostro account for Bank A(Barclays Bank of UK), or if Bank B(ICICI Bank of India) opens an account in Bank A(Barclays Bank of UK) then that account is a Nostro account for Bank B(ICICI Bank of India). Nostro accounts are usually in the currency of the foreign country. This allows for easy cash management because currency doesn't need to be converted. Loro Account: (Italian, from Latin, Loro; English, 'theirs').  An account held by a domestic bank in itself on behalf of a foreign bank.The latter in turn would view this account as a Nostro account. A Loro is our account of their money, held by you. Loro account is a record of an account held by a second bank on behalf of a third party; i.e, my record of their account with you. In practice this is rarely used, the main exception being complex syndicated financing. If any other bank for the purpose of a transaction refer to an account maintained by yet another bank in some other countries it is known as loro account. An expression used, for example, by one bank when telling another bank to transfer money to the account of a third bank. In correspondent banking, an account held by one bank on behalf of another bank (the “customer bank”); the customer bank regards this account as its “Nostro account”. The Loro account is an account wherein a bank remits funds in foreign currency to another bank for credit to an account of a third bank. Mirror account:-Mirror accounting is used in European countries that require  changes in inventory to be immediately reflected in the  income statement. With mirror tables, you can combine the  creation of balance sheet inventory entries with the creation  of related entries to income statement accounts by  associating a pair of source accounts with a pair of mirror  accounts. Forex Reserves The amount of foreign currency, SDRs and gold that are held by the Reserve Bank of India or the Central Bank of any country is known as the foreign exchange reserves of a country. The foreign exchange reserves include three items; gold, SDRs and foreign currency assets. As of November, 2002 India has over US $ 65 billion of total reserves, foreign currency assets account the major share. Gold accounts for about US $ 3 billion. In July 1991, as a part of reserve management policy, and as a means of raising resources, the RBI temporarily pledged gold to raise loans. The gold holdings, thus have played a crucial role of reserve management at a time of external crisis. Since then, Gold has played passive role in reserve management. The level of foreign exchange reserves has steadily increased from US$ 5.8 billion as at end-March, 1991 to US$ 54.1 billion as at end-March 2002 and further to US$ 65 billion as of November, 2002. The traditional measure of trade based indicator of reserve adequacy, i.e., the import cover (defined as the twelve times the ratio of reserves to merchandise imports ) which shrank to 3 weeks of imports by the end of December 1990, has improved to about 11.5 months as at end-March 2002. The debt-based indicators of reserve adequacy show remarkable improvement in the 1990s. The proportion of short term debt (i.e., debt obligations with an original maturity up to one year) to foreign exchange reserves has substantially declined from 147 per cent as at end-March 1991 to 8 per cent as at end-March 2001. i.e. most of the foreign exchange reserves that we have right now have a repayment obligation that exceeds three years - which reflects a higher quality of reserves.