Banking Terminology – MCQ Questions

CA Foundation Business & Commercial Knowledge Study Material – Other Business Terminology

Other Business Terminology

Acquisition: Takeover of one firm by another.
Administration: The process of determining and executing the policies and programmes of an organisation.
Allowance: A fixed sum allowed by an employer to an employee e.g. house rent allowance.
Bankruptcy: A situation when a firm’s assets are insufficient to pay its liabilities.
Bottom line: Net profits.
Business environment: All forces and factors external to the firm but influence its working and performance.
Business facilitators: The individuals, organisations/institutions and arrangement that ease the setting up, operating and exit of business firms.
By products: Products recovered from material discarded in a main process e.g. molasses in sugar industry.
Corporate: A business entity distinct from its members e.g. a company.
Corporate governance: The system that ensures that a company’s operations are conducted in an ethical manner and as per the law. It consists of board of directors, independent audit and financial reporting.
Drawings: Cash or goods taken by the owner of the firm for personal/family use.
Electronic commerce: Commercial transactions conduced over the Internet.
Electronic filing: Fifing documents online e.g. fifing tax returns online.
Franchise: The license given by one company to another to use the former name and sell its product/ service in a specified territory in exchange for payment of fee.
Globalisation: The process of removing barriers to flow of goods, services, labour, capital and technology from one country to another leading to the emergence of a global economy.
Goodwill: Money Value of a company’s reputation.
Infrastructure: The basic facilities necessary for the operation of a society and business firms. It consists of buildings, roads, railways, posts, power supply, etc.
Joint sector: Business enterprises owned jointly by Government and private sector.
Joint products: Two or more products separated in the same processing operation which usually require further processing. For example, gasoline, lubricant, paraffin and kerosene are joint products, all produced from crude oil.
Liberalisation: Systematic removal of restrictions on private business operations.
Logistics: Movement of supplies to the production facilities (inbound logistics) and movement of products from centres of production to markets (outbound logistics).
Merger: Combination of two or more independent firms into a single firm.
Mission Statement: A statement that defines the business scope (who we are and what we do) of an organisation.
Multinational: A company which has business operations in a country otherwise the country of its incorporation.
Patent: An exclusive legal right to the inventor for use of the invention.
Pestle: Political (P), Economic (E), Social (S), Technological (T), Legal (L) and Ecological (E) Environment.
Privatisation: Selling of public enterprises to public sector.
Private sector: All business enterprises owned and controlled by private persons.
Public sector: All enterprises owned and controlled by the Government.
Proprietorship: A business owned and controlled by an individual. Also known as sole proprietorship. Retained earnings: Undistributed profits of a company.
Return: Rate of earning on an investment.
Risk: Possibility of loss on an investment.
Secondary sector: Manufacturing and construction industries.
Subsidiary: A company owned and controlled by another company.
Sustainable development: Development that can be sustained over generations or development
without compromising ecology or environment.
Term insurance: Insurance for a specific time period with no defrayal to the insured person and which become null on its expiry.
Triple bottom line: Profit, people and planet i.e. simultaneous development of economy, society and ecology.
Turnaround: Financial recovery of a loss making firm.
Vision: The roadmap of a company’s future.
Whole life insurance: An insurance policy the sum of which is payable after the death of the insured to his nominee.

CA Foundation Business & Commercial Knowledge Study Material Chapter 6 Common Business Terminologies – Banking Terminology

Banking Terminology

Acceptance: A signed acknowledgement indicating the acceptance of all the terms and conditions of an agreement.
Accepting house: A bank or financial institution engaged in acceptance and guarantee of bills of exchange.
Account balance: The net amount standing on the credit/debit side of the bank account of a customer.
Account payee cheque: A cheque the payment of which can only be credited to the bank account of the payee.
Accrued interest: Interest earned but not yet paid, also known as interest receivable.
Administered rates: Rates of interest which can be changed through a contract between the lender and the borrower, or by the Government.
American depository receipt (ADR): A receipt equal to the specific number of shares issued by a company in a foreign country. ADRs are traded only in the United States of America.
Annuities: Periodic payments in exchange for deposit of a sum of money.
Automated clearing house: A nationwide electronic clearing house that administers and monitors the cheque and fund clearance between banks. Through it debit and credit balances are distributed automatically.
Automated teller machine (ATM): An electronic machine through which money can be withdrawn and deposited at any time and on any day.
Balance transfer: Transfer of funds from one account to another or repayment of a loan with the help of another loan.
Bank account: An account with a bank.
Bank draft: A cheque drawn by a bank on its own branch or on another bank. It is payable on demand and also known as demand draft.
Bank passbook: A book containing data of transactions between a bank and its customer.
Bank rate: The rate of interest at which commercial banks can draw from the Reserve Bank of India for a long time period.
Bank reconciliation statement: A statement prepared to reconcile the difference between balances shown in cash book and passbook.
Bank statement: A Statement showing transactions between a bank and its customer during a specified time period.
Basis point: A measure in interest rate, stock market indices and market rates. It is 1 /100 of one per cent e.g. Rs. 0.001.
Bearer cheque: A cheque that can be encashed by its holder on the bank counter. It is transferable by mere delivery.
Bill discounting: Encashing a bill of exchange at a discount before the date of its maturity.
Bridge finance: Finance raised to fill up the time gap between a short term loan and long term loan also known as gap finance.
Bounced cheque: A cheque which the bank refuses to encash due to lack of adequate balance or for any other valid reason.
Cap: A limit to which rate of interest can be changed.
Cash credit: A revolving credit arrangement under which a bank allows the customer to borrow upto the specified amount, interest is charged only on the amount actually withdrawn.
Cash reserve: The total amount of cash available in the bank account and can be withdrawn immediately.
Cashier’s cheque: A cheque drawn by a bank to make payments to the banks or any other party.
Cheque: A negotiable instrument that instructs the bank to pay the specified amount from the drawer’s account to the payee.
Certificate of deposit: A certificate of making deposit premising to pay the depositor the deposited amount along with interest.
Chattel mortgage: Loan against the movable assets as collateral.
Clearing: The process of transferring the amount of a cheque from the payer’s account to the payee’s account.
Clearing house: Meeting of representatives of different banks to clear and confirm balances with each other. It is managed by the country’s Central Bank.
Compound interest: Calculating interest on the principal amount and accumulated interest.
Current account: A bank account from which money can be withdrawn as many times a day as needed and overdraft can be obtained.
Debit card: An instrument obtained after making payment and used to buy things by swiping it. Deposit slip: A slip containing details of money deposited in a bank account.
Depositor: The person who deposits, money into a bank account.
Debt recovery: The process of recovering money from a debtor by selling of collators and other assets.
Debt repayment: The repayment of debt along with interest.
Debt settlement: The process of negotiating the amount which a lender accepts repayment below the amount of debt and accrued interest.
E-cash: Use of electronic networks to transfer funds and execute transactions. Also known as electronic cash, digital cash.
Early withdrawal penalty: The penalty charged from a customer who withdraws his/her fixed deposit the due date.
Earnest money deposit: The deposit made by a buyer of real estate with the seller driving negotiation stage.
Education loan: A loan given for the education of the borrower at a concessional rate of interest.
Global depository receipt: A receipt specifying the number of shares issued by a company in a foreign country. The receipt is tradable in Europe.
Guarantor: One who promises to repay a loan in case the borrower fails to repay.
Interest: The charge which a borrower pays to the lender for use of money. It is the cost of credit.
Internet banking: Banking transfer done by the Internet. It is also known as online banking or electronic (e)banking.
Letter of credit: A written promise by a bank to an exporter to pay the specified amount on behalf of the importer for the goods sold.
Line of credit: An arrangement under which a bank allows a borrower to borrow money from time to time without further negotiations and upto the specified limit.
Lock-in-period: The time period during which no change in the quoted mortgage rates will be made by the lender.
Market value: The value at which consumers are willing to buy and sellers are willing to sell. Decided by demand and supply.
Maturity: The date on which an investment/loan becomes repayable.
Mortgage: A legal agreement between a lender and a borrower under which real estate is used as a collactral to ensure repayment of the loan.
Online banking: Same as internet banking.
Overdraft: Withdrawal of money in excess of the balance in the borrower’s current account. Payee: The person to whom money is to be paid.
Personal identification number (PIN): A secret code number given to customers to perform transactions through the ATM.
Repo rate: The rate at which banks borrow money from the Reserve Bank of India for short periods upto two weeks by pledging government securities.
Reverse repo rate: The rate of interest which the Reserve Bank of India pays to banks which deposit their surplus funds for short periods.
Smart card: A card with a computer slip used for storage, processing and transmission of data.
Syndicated loan: A large amount of loan given by a group of small banks to a single corporate borrower.
Time deposit: A bank deposit made for a specific time period, cannot be withdrawn before the expiry of the period.
Value at risk (VAR): A sum the value of which is subject to loss due to changes in the rate of interest. Wholesale banking: Banks which offer services to companies, financial and other institutions.
Zero balance accounts: A bank account in which no minimum balance is required e.g. Jan Dhan Account.
Zero-down-payment mortgage: A mortgage in which the borrower makes no loan payment. The mortgage buys below the amount at the entire purchase price.