What Are Back-to-Back Letters of Credit? Back-to-back letters of credit consist of two letters of credit (LoCs) used together to finance a transaction. A back-to-back letter of credit is usually used in a transaction involving an intermediary between the buyer and seller, such as a broker, or when a seller must purchase the goods it
What Is a Back-to-Back Loan? A back-to-back loan, also known as a parallel loan, is when two companies in different countries borrow offsetting amounts from one another in each other’s currency as a hedge against currency risk. While the currencies and interest rates (based on the commercial rates of each locale) remain separate, each loan
What Is a Backup Line? A backup line is a line of credit (LOC) that protects investors in the event that a company defaults on its commercial paper: a type of unsecured, short-term debt instrument issued by corporations typically to finance payroll, accounts payable and inventories, and meet other short-term liabilities. The company issuing the paper pays a bank a
What Is Back Up The Truck? Back up the truck is slang that refers to the purchase of a large position in a stock or other financial asset by an investor or trader. Typically, when an individual is willing to back up the truck on a financial asset, this implies an extremely bullish outlook on
What Is Backup Withholding? Backup withholding is a tax that is levied on investment income, at an established tax rate, as the investor withdraws it. For payments not subject to withholding, payers are required to withhold the tax. Backup withholding helps to ensure that government tax-collecting agencies, such as the Internal Revenue Service (IRS) or Canada
What Is Backwardation? Backwardation is when the current price, or spot price, of an underlying asset is higher than prices trading in the futures market. Key Takeaways Backwardation is when the current price of an underlying asset is higher than prices trading in the futures market.Backwardation can occur as a result of a higher demand
What Is Backward Induction? Backward induction in game theory is an iterative process of reasoning backward in time, from the end of a problem or situation, to solve finite extensive form and sequential games, and infer a sequence of optimal actions. Backward Induction Explained Backward induction has been used to solve games since John von
What Is Backward Integration? Backward integration is a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by businesses up the supply chain. In other words, backward integration is when a company buys another company that supplies the products or services needed for production. For example, a company
What Is a Bad Check? A bad check refers to a check that cannot be negotiated because it is drawn on a nonexistent account or has insufficient funds. Writing a bad check, also known as a hot check, is illegal. Banks normally charge a fee to anyone who writes a bad check unintentionally. The punishment
What Is a Bad Debt Expense? A bad debt expense is recognized when a receivable is no longer collectible because a customer is unable to fulfill their obligation to pay an outstanding debt due to bankruptcy or other financial problems. Companies that extend credit to their customers report bad debts as an allowance for doubtful
