Guide to Analysing Companies

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Withholding tax
A tax that is withheld at source; that is, before the taxpayer has
touched the income or capital to which the tax applies. With-
holding taxes are often imposed on bond interest and divi-
dends, and sometimes on bank interest too. They are attractive
to governments because they reduce the potential for tax
evasion. A double-taxation agreement between coun-
tries usually goes to some lengths to ensure that taxpayers are not
charged twice on income for which the tax has been withheld.
With recourse
A bank that discounts a bill of exchange for a customer
may do so with recourse; that is, the bank retains the right to
claim the amount for the bill from the customer if it is not hon-
oured at maturity.
Working capital
What is left over from a company’s paid-up capital and re-
serves after all its fixed assets have been paid for; that is,
what is left for the day-to-day running of the business. Working
capital bridges the gap between the time when a company
decides to produce a product or a service, and the time that
payment is received for the first sale.
Workout loans
An umbrella term for loans made by a financial institution
which are not being repaid strictly to the terms of their con-
tract. Workout loans include non-performing loans,
which give rise to certain regulatory requirements. They also
include loans which are overdue (or are not being repaid strictly
according to the terms of the contract) but are still considered to
be current (that is, not non-performing).
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World Bank
The common name for the International Bank for Reconstruc-
tion and Development (ibrd), a sibling of the international
monetary fund. It has its headquarters across the street
from the imf, on Washington’s H Street. The World Bank was
established in 1944 as part of the bretton woods agree-
ment to help countries rebuild their economies after the second
world war. It provides long-term loans (usually for 15–20 years)
to governments and government organisations. To fund its
lending, the bank borrows in the international capital
markets. 
The World Bank itself has two specialist siblings: the Interna-
tional Development Association (ida) and the International
Finance Corporation (ifc).
Writer
A person who issues an option, who at the end of the day has
to buy or sell (depending on whether it is a put option or a
call option) the asset on which the option is written,
should the person who holds the option wish to exercise it.
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