This is a Financial Glossary defining terms relating to the banking profession.
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A fictitious or made up name for a bank.
Amalgamated Banks of South Africa Limited (Absa) is one of the four major banks in South Africa. Absa is listed on the JSE.
When assessing for credit purposes, a lender will look for indications of responsible or irresponsible handling of financial affairs by the client. Refer to drawer cheques, direct debits that were returned due to insufficient funds, the sums of money moving in and out of the account and the number of days the account remains in credit or debit all indicate how an account is conducted.
An authoritative statement issued by a governing accounting body that specifies how a particular type or category of financial transaction and other accounting matter should be reflected in financial statements.
For example, in South Africa, all companies listed on the Johannesburg Stock Exchange are required comply with the International Financial Reporting Standards. These accounting standards were issued by the International Accounting Standards Board.
Acid test ratio
The acid test ratio is one of a range of ratios used to measure the degree of liquidity of a company. In this case, the financial analyst is looking to see if the current assets, without the inventory, are capable of paying all current liabilities.
The acid test is an evolution from the current ratio by stripping out the asset value of inventory. Inventory tends to be either hard to sell or, in some cases, of little realisable value. The acid test ratio therefore tends to be a more stringent test than the current ratio.
1. A purchase of an asset.
2. The purchase by a company of another company or a controlling portion of another company.
2. Finance raised to purchase another company or a controlling portion of another company.
This is normally done with merchant and investment banks acting as the agents. There are usually three components to this finance: a secured bank loan, known as senior debt; equity finance (capital raised by issuing new ordinary shares); and mezzanine finance – capital loans from investors with a high rate of interest.