Guide to Analysing Companies

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BANK OF ENGLAND
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is also responsible for the stability of the UK’s financial system,
including the city of London, the world’s largest centre for in-
ternational finance. It does so by working closely with the Trea-
sury, which is a government department, and the financial
services authority.
Bankers are just like anybody else, except richer.
Ogden Nash
Bankruptcy
The condition of a bankrupt, that is, a person (or organisation in
some jurisdictions) who has been adjudged by a court to be
unable to pay his or her debts. A bankrupt is deprived of many
powers; for example, he or she cannot be a director of a
company for a number of years. A bankrupt’s property passes
into the hands of a trustee, who is authorised to divide it
among the creditors. 
Since the 1970s, legislation in many developed countries has
been made more flexible with the aim of giving individuals and
companies a chance to recover when they find themselves in-
solvent and in danger of bankruptcy. A model is the US
Bankruptcy Reform Act of 1978 (itself remodelled in 1984). Its
Chapter 11 enables insolvent companies to remain in control of
their businesses so that they can trade their way out of in-
solvency. Chapter 11 greatly increases management’s room for
manoeuvre mainly because it temporarily gives a company
protection from its creditors (and thus frees it from the burden
of having to pay interest on its debt). Continental Airlines
found Chapter 11 so appealing that it has entered, and left,
twice.
Bargain
A deal done at a good price. Also any transaction in stocks
and shares on the london stock exchange.
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BANKRUPTCY
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Here’s the rule for bargains: “do other men, for they would do you”.
Charles Dickens, 
Martin Chuzzlewit
Barter
Paying for goods or services with other goods or services. Barter
is at least as old as the Asian silk road, and often just as tortuous.
It enjoyed a renaissance with the opening-up of the former
Soviet Union and eastern Europe, regions with a huge demand
for imports (particularly of capital goods) but with little
foreign exchange to pay for them. In Argentina, the col-
lapse of the economy in 2001 and the scarcity of currency of
any kind forced people to resort to barter.
Financial organisations are not too keen on barter since it
threatens to reduce the need for their services. However, recog-
nising that it is here to stay, some institutions have set up spe-
cialist barter departments to make money out of complicated
trades, which they prefer to call countertrade.
Barter is growing fastest among small businesses, which
join exchanges that deal in surplus goods and services. Some
400 such exchanges exist in the United States alone. Some
even offer credit: for example, a barterer who owns a roofing
company and can work only during the milder summer
months draws on credit to get his vehicle repaired during
the winter and pays for it in kind when the weather im-
proves. Hotel rooms or unoccupied office space are easily
swapped over the internet for other goods and services. At a
local level, babysitting may be offered in exchange for other
services.
Basis
There are several meanings, as follows.
 The difference between the forward price of an option
or futures contract and the current (or cash) price of
the underlying asset; for example, the difference