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Glossary Terms
Special> Coping With the Global Financial Crisis> Glossary Terms
UPDATED: April 17, 2009
A Glossary of Terms (IV)

Preference shares: A type of share that usually does not have voting rights, offers a fixed dividend, and in the event of liquidation of the company, is repaid ahead of ordinary shares.

Rating: Bonds are rated according to their safety from an investment standpoint - based on the ability of the issuing company or government to repay. Ratings range from AAA, the safest, down to D, a company that has already defaulted.

Real economy: Due to the credit crunch, the financial crisis is overflowing into the manufacturing and service sectors that make up the so-called real economy. As a result, many countries are facing a recession.

Recapitalization: To inject fresh money into a firm, thus reducing the debts of a company. When a government intervenes to recapitalize a bank, it might give cash in exchange for a stake in the company. Taxpayers can then benefit if the bank recovers.

Recession: A period of negative economic growth. In most parts of the world a recession is technically defined as two consecutive quarters of negative economic growth - when real output falls. In the United States, a larger number of factors are taken into account, like job creation and manufacturing activity. If GDP falls by 10 percent or more, the downturn is conventionally referred to as a depression.

Refinancing: Banks need regular infusions of new money, in order to provide new loans or pay out savings. They often find this money by going to their central bank, using deposits on hand or lending money to one another.

Retained earnings: Profits not paid out as dividends but held back for investment by the company.

Reverse auction: An auction where the winning bidder is the one willing to take the lowest price. In a reverse auction for subprime mortgage loans, for instance, a bank offering to sell a bundle of bad loans for 50 cents on the dollar would beat a bank offering to sell its loans for 60 cents on the dollar.

Rights issue: When a public company issues new shares to raise cash. The company might do this for a number or reasons - because it is running short of cash, or because it wants to make an expensive investment. By putting more shares on the market, a company dilutes the value of its existing shares. Existing shareholders are offered shares proportional to their current holding, usually at a discount.

(Agencies via China.org.cn November 13, 2008)

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