Guide to Analysing Companies

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RESERVES
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been set aside out of the company’s earnings. Financial insti-
tutions such as banks have to maintain reserves at a level or-
dained by their supervisors and regulators because they are the
first line of defence against a run on a bank. Countries hold re-
serves (of gold and foreign currency), which are held by the
central bank, to meet future expenditure in trading or to
support their currency’s exchange rate. Currencies in which
countries prefer to denominate their reserves (usually the
dollar) are called reserve currencies.
Restructuring
A rearrangement of an organisation’s financial or capital
structure. A company will often restructure itself when its busi-
ness becomes uncompetitive and the strain on its finances in-
tensifies. In this case, a company may bring in an investment
bank to advise it on its options (which may include selling a
subsidiary, a merger or a joint venture). The crucial distinction
between a restructuring and a rescheduling is that most of
the time the former is voluntary, whereas the latter is usually
done at the instigation of the lender (or lenders).
Retail bank
A bank whose main business is the provision of services (es-
sentially loans and money transmission) to individuals and
corporations. To be distinguished from wholesale banks (which
deal mainly in financial markets) and investment banks.
The business of retail banking has changed radically from the
days when banks simply took a turn on the money they re-
ceived from depositors and the money they lent to borrowers,
not least because of the increasing pace of technological change.
Retire
There are two meanings.
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