Bank Letter of Credit Policy: An Overview A bank letter of credit policy is a guarantee by a U.S. bank that a buyer in a foreign transaction will be paid. This type of credit letter has become a routine part of international transactions, which often involve shipping large quantities of goods with a promise of
What Is a Balanced Investment Strategy? A balanced investment strategy combines asset classes in a portfolio in an attempt to balance risk and return. Typically, balanced portfolios are divided between stocks and bonds, either equally or with a slight tilt, such as 60% in stocks and 40% in bonds. Balanced portfolios may also maintain a
What Is a Balanced Scorecard (BSC)? The term balanced scorecard (BSC) refers to a strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes. Used to measure and provide feedback to organizations, balanced scorecards are common among companies in the United States, the United Kingdom, Japan, and
What Is a Balance Sheet? The term balance sheet refers to a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time. Balance sheets provide the basis for computing rates of return for investors and evaluating a company’s capital structure. In short, the balance sheet is a financial
What Are Balance Sheet Reserves? Balance sheet reserves, also known as claims reserves, are accounting entries that show money set aside to pay future obligations. Balance sheet reserves appear as liabilities on a company’s balance sheet, one of the three main financial statements. Balance sheet reserves are particularly relevant in the insurance industry because companies must have
What Is a Balance Transfer Fee? A balance transfer fee is the amount of money a lender charges a borrower to transfer existing debt from another institution. This fee is commonly charged by credit card companies when cardholders move balances from one card to another. The fee is usually a percentage of the total amount
What Is the Balassa-Samuelson Effect? The Balassa-Samuelson effect states that productivity differences between the production of tradable goods in different countries 1) explain large observed differences in wages and in the price of services and between purchasing power parity and currency exchange rates, and 2) it means that the currencies of countries with higher productivity
What Is a Balloon Loan A balloon loan is a type of loan that does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan. Balloon loans can be attractive to short-term borrowers
What Is a Balloon Option? A balloon option is a contract where the strike price increases significantly after the underlying asset’s price reaches a predetermined threshold. A balloon option increases the investor’s leverage on the underlying asset. Key Takeaways A balloon option is an option contract in which the strike price increases after the price
What Is a Balloon Payment? A balloon payment is the final amount due on a loan that is structured as a series of small monthly payments followed by a single much larger sum at the end of the loan period. The early payments may be all or almost all payments of interest owed on the
