Glossary of Financial Terms
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BALANCE SHEET - Statement showing an organization's financial position (assets, liabilities and net assets) at the close of business on a particular date. Also known as statement of financial position. (This statement changes daily.)
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BALLOON - Final payment of a loan which is larger than the previous payments, arising when the amortization is longer than the maturity of the underlying note. See amortization.
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BASIS POINTS - A fraction of a percentage point, equal to one one-hundredth of a percent. Used to describe interest rates; i.e., 50 basis points is the same as ½%. See points.
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BOARD-DESIGNATED NET ASSETS/RESERVES - Unrestricted net assets that have a defined use or purpose, as determined by an organization’s board of directors.
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BORROWED MONEY/FUNDS - See debt.
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BORROWING BASE - A mechanism for monitoring that funds advanced under a line of credit bear some proportionality to either the asset being financed or the source of repayment. Usually defined as a percentage less than 100% of the available collateral, for instance, 80% of eligible accounts receivable. In order to fully secure a $100,000 line of credit using an 80% advance ratio, the borrower must have $125,000 in eligible accounts receivable at the time the loan is advanced. Typical advance ratios range from 50 to 80%. A borrowing base may be used as a control mechanism even if the loan is not secured by a lien on the receivables. See line of credit.
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BORROWING RESOLUTION - See authorization of borrowing and officer’s certificate.
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BRIDGE LOAN - Loan made on a short-term basis in anticipation of being paid out by permanent or long-term funding. Also refers to loans made against contract receivables or capital campaign pledges, expected to be repaid as those receivables or pledges are collected.
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BUILDING CODE - Regulations, ordinances or statutory requirements of a governmental unit relating to building construction and occupancy.
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BUILDING PERMIT - Permission granted by a local government to build or renovate a specific structure at a particular site. More than one permit may be required, depending on the situation.
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BUILDING RESERVE - A capital improvement reserve fund. Money set aside to pay for facility upkeep, where the amounts can be large, the ultimate need a certainty, but where the exact timing is uncertain. These are often big-ticket items, like replacing the roof, which are difficult to accommodate in a single year's budget. Also known as a replacement reserve. Typically, these are unrestricted, but board-designated funds.
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BY LAWS - A document outlining the governance of and what activities a legal entity may or may not engage in, including defining the officers, outlining the board composition and terms, the frequency of board meetings, the authority to enter into contracts for borrowing money and other purposes, and the number of signatures required to bind the entity legally.
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