QuickStudy - Business Terminology.pdf - Books - emi876

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absolute advantage: Occurs when a country uses the

same level of resources to produce more goods than

another country

accounting: The recording, analysis and reporting of

financial transactions of a business

accounts payable: Money owed by a company for goods and

services purchased on credit from vendors

accounts receivable: Money owed by customers for goods or

services purchased on an open account

accrued interest: Interest that has accumulated and is added to a loan

adjustable rate mortgage (ARM): A mortgage in which the

interest rate is adjusted periodically based on a preselected index

advertising: Placement of announcements and persuasive mes-

sages (in time or space) communicated through media or nonmedia

forms; used to inform or persuade members of a target market or

audience about a good, service, organization or idea

advertising campaign: Series of coordinated advertising vehicles

in various media, scheduled for a certain time period, and related by

verbal and/or visual themes or common objectives

advertising strategy: An overview of the competitive frame,

target market and message to be used in an advertising campaign

affiliate marketing: An on-line marketing strategy that shares

revenue between on-line advertisers/merchants and on-line pub-

lishers/salespeople; compensation is usually based on perform-

ance (sales, clicks, registrations)

agents: Intermediaries who negotiate the purchase or sale of goods

for their clients, but who do not take title to the goods

amortization: Payment of a debt that allows the borrower to reduce

debt through regular payments over a certain period of time

annual percentage rate (APR): An interest rate that reflects the

cost of a loan as a yearly rate

appreciate: To increase in value or price

asset: Everything owned that has value, including tangible items

like cash, accounts receivable, inventory, land, buildings, equipment

audit: An examination and verification of a business’s accounting

records and procedures by a trained accountant or CPA (certified

public accountant)

awareness: First stage in the process of learning about a new good

or service that the consumer has gotten information about but not

yet formed an opinion on

behavioral analysis: An evaluation and control method used to

monitor sales force performance; involves evaluating the behavior of

salespeople and sales performance

benchmark: Something that serves as the standard to which all

other like items can be measured or compared

beneficiary: A person who is designated to receive benefits, profits

or advantages

beta: A measure of an asset’s risk in relation to the market

bill of lading: A contract between shipper and carrier detailing what

is being shipped, how it is being shipped, and terms of delivery

bill of materials: Document used by a company to authorize a set

of purchases to be made or to be taken from inventory to fulfill an

order

blended payment: A loan payment, consisting of principal and

interest, that is the same amount every month

blog: An Internet communication that combines a diary, column and

directory; short articles on various subjects with links to other

resources; updated often

blue-chip stocks: Common stock of well-known companies with a

history of growth and dividend payments

board of directors: Individuals elected by shareholders; responsible

for managing the president and high-level managers

body copy: The section of a print ad that contains text and more

detailed information than the headlines and subheads

bond: A government- or corporation-issued certificate of debt guar-

anteeing payment of the original investment plus interest by a certain

future date

bond mutual fund: Investment company that invests its sharehold-

ers’ monies in bonds

book value: Total assets minus intangible assets and liabilities; can

be more or less than market value

bottom line: An accounting term for the net profit or loss

brand: A mark, symbol, word or combination that separates one

company’s product from another’s

brand awareness: Having knowledge that a brand exists; consid-

ered first step in the sale process

brand category: Generic classification of goods or services; like

goods or services are in the same brand category

brand extension: Addition of a new product to an already estab-

lished line of products under the same brand name; new product

benefits from the older products’ established reputation

brand loyalty: Loyalty a consumer has to a specific brand over a

period of time

branding: A method of identifying products and differentiating

them from competing products

break-even point: The level of sales where revenue equals total

costs; can also be expressed in terms of units of product

budget deficit: Point at which spending exceeds revenues

business cycle: Period of time composed of a business upswing or

expansion, peak, downturn, trough and recovery

business plan: A document fully describing and analyzing a

particular business; provides complete, detailed information about

short- and long-term plans

bylaws: A set of regulations used by an organization to conduct its

business

back order: An item not currently in stock but to be sold

or delivered when it becomes available

balance of trade: The difference between a country’s

total imports and exports

balance sheet: A summary of a company’s financial condition at

a specific period of time; indicates the company’s assets, liabil-

ities and net worth

bankruptcy: A legal process in which a company (or person)

owes more than its assets and is relieved from payment of debts by

transferring those assets to a trustee

banner ad: A graphical Internet advertising tool; users click on the

graphic to be directed to another Web site

call feature: A feature that gives the right to the issuer

to repurchase a bond before maturity

call to action: Statement normally found at the end of a

commercial message that encourages the consumer to act

cannibalization: Reduction in the sales volume, sales revenue or

market share of one product as a result of the introduction of a new

product by the same producer

capital budget: Allocated amount of funds to be used on pur-

chasing assets such as machinery, building, equipment, computers,

etc., that are needed for longer than one year

capital gain: Profit from the sale of an investment; the price

received from the sale of an investment minus the price paid

capitalism: Economic system based on private ownership of

businesses

carrying cost: Expense of keeping inventory on hand

cash cow: Good or service that generates a steady and predictable

income

cash flow statement: Financial statement that shows when cash

flows are received and disbursed by a business

category killer: A destination store, normally large, that concen-

trates on one category, enabling them to carry a broad assortment

and deep selection at a low price

certificate of deposit (CD): A document written by a financial

institution that shows a deposit with the issuer’s promise to return the

deposit plus earnings at a certain interest rate within a period of time

channel of distribution: Route a product follows to link producer

to end consumer

chapter 7: Part of U.S. Bankruptcy Code that deals with liquida-

tions of a company’s assets

chapter 11: Chapter in the U.S. Bankruptcy Code that allows a

business, an individual or a partnership to declare bankruptcy and

postpone debt payments while the reorganization takes place

charter: Document issued to incorporate a business; details

important aspects of the corporation

circulation: Number of copies distributed of a print advertisement

click-through rate (CTR): Number of clicks-through per ad

impression (refers to on-line ads)

co-branding: Pairing of two or more brands on a single good or

service

cold call: Unscheduled contact by phone or in person between

seller and prospective customer

commercial bank: Financial institution that raises funds by col-

lecting deposits from businesses and consumers; makes loans to

businesses and consumers; purchases corporate and government

bonds

commercial paper: Short-term unsecured note (2 to 270 days)

issued by companies with good credit standings

commissions: Compensation for meeting specific sales objectives

commodity: Bulk goods, such as wheat or metal, that investors

buy or sell usually via futures contracts

common stock: Type of security that gives partial ownership in

a company; has a vote in electing board of directors; entitles the

holder to share in company’s success through dividends and/or cap-

ital appreciation

communism: Economic system in which government owns and

operates all businesses

comparative advertising: Persuading an audience to purchase

a specific product by showing a brand’s superiority in comparison

with competing brands

competitive advantage: Advantage gained that makes a product

more desirable than the competition; persuading customers to buy it

instead; can include lower prices and superiority of goods or services

conglomerate: A company engaged in two or more unrelated

industries

conglomerate merger: When two companies in unrelated

industries join together

consumer: Person who uses a product but does not necessarily

buy it

consumer markets: Individuals or households that purchase

goods or services for consumption or use

consumer price index (CPI): Monthly government statistical

measure that shows the trend of prices of goods and services pur-

chased by consumers; measures inflation

consumer product: Product intended for and purchased by house-

holds for their use

contribution margin: Difference between variable revenue and

variable cost

conventional mortgage: Mortgage not insured or guaranteed by

the federal government

corporation: State-chartered entity that pays taxes and is legally

distinct from its owners

cost of goods sold (COGS): Cost of materials used in producing

a product or service

cost per click (CPC): Cost that advertisers pay each time a user

clicks an ad or link

creditors: Financial institutions (or individuals) that provide loans

critical path: Sequence of events in a project listed in order

according to completion time

current assets: Represents cash, accounts receivable, inventory,

prepaid expenses and other assets that can be converted to cash

within one year

current liabilities: Operating loans, accounts payable and

accrued charges (including outstanding checks, wages, long-term

debt payments and taxes) due within a year

current ratio: Indication of a company’s ability to meet short-term

debt obligations; the greater the ratio, the more liquid the company;

current assets divided by current liabilities

Current Ratio = Current Assets/Current Liabilities

customer: Person who buys a product but doesn’t necessarily use it

customer profile: Characteristics of the typical customer (based

on demographics)

customer relationship management (CRM): Integrated infor-

mation system designed to build customer loyalty by having cus-

tomer information in a central database

cyclical unemployment: Unemployment due to a recession; hap-

pens when the demand for labor declines

debt-to-equity ratio: Measures the amount of long-

term financing provided by debt relative to equity; long-

term debt divided by owner’s equity

Debt-to-Equity Ratio = Long-Term Debt / Owner’s Equity

demand-pull inflation: Increase in prices that occurs when

demand exceeds supply

demand schedule: Table or schedule indicating quantity of a

product that would be demanded at a certain price point

demographics: Characteristics of the human population or

specific segments of the population

depreciate: To decrease in value or price

depreciation: Decrease in the value of fixed assets because of

deterioration of assets over a period of time

direct marketing channel: Goods and services sold directly from

the producer to end user without involvement of an intermediary

discount rate: Interest rate attached to loans issued by the Federal

Reserve to commercial banks

disinflation: Falling inflation rate (prices are still rising)

disposable income: Income left after expenses

distributor: Company or individual distributing a manufactur-

er’s goods to retailers

dividend: Portion of company’s profit paid to common and pre-

ferred shareholders

dividend policy: Decision by which a company determines how

much money it will pay as dividends

Dow Jones Industrial Average (DJIA): Best-known U.S. index

of stocks (blue-chip); contains 30 stocks that trade on the New York

Stock Exchange (NYSE); the Dow is a barometer of how shares of

the largest U.S. companies are performing

downsizing: Elimination of job positions within a company to

improve the bottom line

responsible for implementing the nation’s monetary policy and assist-

ing the nation in attaining its economic and financial goals

finance companies: Companies that make loans to individuals or

businesses

financial analysis: Analysis of a company’s financial statement

first in, first out (FIFO): Inventory system in which the first goods

purchased are the first ones sold

fixed annuity: Investment contract sold by insurance company that

guarantees fixed payments for life (or a specified period) to the

annuitant

fixed assets: Long-term, tangible assets held for business use and

not expected to convert to cash in the current or upcoming fiscal

year; items include real estate, equipment and furniture

fixed costs: Operating expenses that do not change in response to

the number of products produced

forecast: Predicated amount of revenue generation over a specified

period of time

foreclosure: Legal process by which mortgaged property is sold to

pay loan of defaulting borrower

forward contract: Contract that states an exchange of currency

will occur at a specified exchange rate at a future time

forward rate: Exchange rate a bank will offer at a future time

franchise: Business arrangement under authorization to sell or dis-

tribute a company’s goods or services; the owner allows others to use

its trademark, trade name or copyright

franchisee: Purchaser of a franchise; agrees to sell the product

according to the franchiser’s requirements

franchiser: Company that allows a license to individuals to operate

under the trademark and operating systems of that company

frictional unemployment: Temporary unemployment that occurs

when people are between jobs or in seasonal employment

futures: Contract to buy or sell a commodity or financial instru-

ment at a specific price on a specified date

earnings per share (EPS): Company’s income for a

period divided by the number of shares outstanding at the

end of the period

e-commerce: Use of electronic media (i.e., the Internet)

to produce or sell goods and services

economic growth: Change in the general level of economic activity

economies of scale: As the quantity produced increases, the cost

per unit decreases in the long run

electronic data interchange (EDI): Exchange of standardized

document forms between computers for business use

embargo: Government action stopping the import or export of a

certain commodity or commodities

entrepreneur: One who assumes all financial risk of the initia-

tion, operation and management of a given business undertaking

environmental analysis: Gathering and examining data about a

company, including political, cultural, social, demographic, economic,

legal, international and ecological factors

equal employment opportunity (EEO): Federal legislation pro-

hibiting employment discrimination based on race, sex, religion or

ethnic background

equilibrium price: Price at which the quantity of a good supplied

by firms equals the quantity of the product demanded by customers

equity: Difference between the fair market value of property and the

amount still owed; ownership interest in a business

equity contribution: Cash that the owner(s) or investor(s) has

(have) invested in the business in return for a share of ownership

esteem needs: Self-esteem, attention and recognition from others

exclusive distribution: Product distributed through one specific

wholesaler or retailer in a market area

exporting: Selling products or services to other countries

exposure: Any opportunity for consumer to see and/or hear an

advertising message in a certain media vehicle

Gantt chart: Bar graph that measures how long each task

in production process will take

generic generic brand: Product named by its generic class

goodwill: Amount representing the excess paid for a company, its

shares, or other assets over and above its net asset value

going public: Company’s initial stock issue to the public [ also see IPO ]

gross domestic product (GDP): Total value of all goods and

services produced in a country during a given period of time

gross income: Income before expenses

gross margin: Price of goods and services minus manufacturing cost

gross national product (GNP): Total value of goods and services

produced by U.S. nationals in the U.S. and abroad in a given period

of time

gross profit: Net sales minus cost of goods and services sold

gross sales: Total value of sales prior to deducting returns, allowances

or discounts

federal budget deficit: When federal government

spending exceeds the amount of taxes and other revenue

received by the federal government

Federal Deposit Insurance Corporation (FDIC): Federal

government agency that insures accounts at most commercial

banks and savings banks

federal ID number: Identification number that the IRS (or a state

taxing authority) assigns to businesses for taxpaying purposes

Federal Reserve System (“the Fed”): Central bank of the U.S.;

hierarchy of needs model: Human behavior theory pro-

posed by Abraham H. Maslow [ see Maslow’s hierarchy of

needs ]

horizontal merger: Merger of two or more companies in same

industry that produce the same type of good(s) or service(s)

income statement: Financial statement that reports

revenue, cost and profits over a period of time [ also

see Profit and Loss Statement (P & L) ]

incorporation: Process that makes a business a

separate legal entity from its owner

incremental cost: Additional business expense incurred by

taking a certain action

inflation: Rise in general level of prices of goods and services

over a specific period of time; can be estimated by measuring

percentage change in consumer price index (CPI)

infomercial: Program-length televised commercial advertising

goods and/or services; often includes a direct response offer

initial public offering (IPO): Company’s first sale of stock to

the public [ also see Going Public ]

insertion order: Instructions to publisher detailing the place-

ment of material for a print ad

inside board members: Board members who are also man-

agers in the company

inside sales: Sales done via phone

integrated marketing: Coordination of all promotion vehicles

to ensure consistent marketing message

intensive distribution: Product is distributed through all or most

wholesalers or retailers selling that product in the marketplace

interest: Fee charged for using an institution’s or individual’s

money or credit; expressed as percentage rate over a time period

international licensing agreement: Agreement that allows a

foreign entity to produce another company’s product according

to the exact standard of that company

inventory control: Process of maintaining sufficient inventory

at a level that minimizes costs

liquid: Asset that can be converted into cash quickly and with-

out any price discount

loan-to-value ratio (LTV): Relationship between the amount

of mortgage loan and appraised value of property (expressed as

a percentage)

macroeconomics: Study of economic aggregates

such as national production and price level

macroenvironment: Factors that influence an

organization but are outside that organization’s control

management: Administration and policymakers of company

or organization; utilizing employees and other resources in the

way that best achieves company’s plans and objectives

managers: Employees responsible for managing work tasks of

other employees, as well as for making key business decisions

market: Actual and potential buyers of a good or service

market coverage: Degree of product distribution among outlets

market research: Gathering, recording and analysis of data in

regard to a specific customer group; used to make marketing

decisions

market share: Company’s total sales as proportion of the total

market

marketing: Operations needed to get goods or services devel-

oped, priced, distributed and promoted to customers

marketing channel: Set of companies necessary to transfer

title to goods and move goods from point of production to point

of consumption

marketing concept: Philosophy that guides the attitude of

everyone in a company to stimulate and satisfy needs and wants

of every customer

marketing environment: Environments within and outside an

organization’s control that can directly or indirectly affect the

activities of that organization (includes macroenvironment,

microenvironment and internal environment)

marketing intermediaries: Independent firms that help the

flow of goods and services from producers to end users

(includes agents, wholesalers, retailers, marketing service agen-

cies and financial institutions)

marketing mix: Variables (4 Ps: product, place, price, promo-

tion) used to achieve sales in target market

Maslow’s hierarchy of needs: Human behavioral theory that

ranks needs in five categories (physiology, safety, social, self-

esteem, self-actualization); as each need is surmounted, motiva-

tion sets in to achieve next category

merchant: Marketing intermediary that takes title to and resells

merchandise

merger: Two or more companies combining to become one;

assets and liabilities of the selling firm(s) are absorbed by the

purchasing company

microeconomics: Study of the behavior of consumers and pro-

ducers operating in the individual markets of the economy

mission statement: Statement that communicates an organi-

zation’s purpose, goals, values and functions

money supply: Amount of money in circulation

monopoly: Market for a good or service that only has one

seller/supplier

mutual fund: Company that invests shareholders’ monies in

securities

job analysis: Determining the skills and attributes

needed for a specific employment position

joint venture: Agreement between two or more

companies to take on same business strategy and plan

of action

just-in-time (JIT): Strategy that reduces inventory levels by

working closely with suppliers to coordinate delivery of materi-

als just before use in manufacturing or supply process

last in, first out (LIFO): Inventory system in which

the last item purchased is the first item used

law of demand: Increase in price causes decrease in

quantity demanded

law of supply: Increase in price causes increase in quantity

supplied

lease: Written agreement renting assets for specified period of

time in exchange for payment, normally in the form of rent

leasehold improvement: Improvement(s) made on leased

property

liability: Anything that a company owes

limit order: Order to buy or sell a security at a specified price

or better

limited liability company (LLC) : Type of business owner-

ship combining features of a corporation and partnership; has

limited liability; avoids double taxation

limited partnership: Partnership with one general partner and

any number of limited partners; they can purchase interest and

be held liable only to the extent of their interest and not risk per-

sonal liability

line of credit: Agreement with bank or financial institution

that extends credit up to a certain amount and period of time to

a specified borrower

National Association of Securities Dealers

Automatic Quotation System (NASDAQ): Com-

puterized system that provides price quotations for

securities traded over-the-counter (OTC)

net present value (NPV): Used in a capital budget when the

present value (PV) of cash flow is subtracted from the initial

investment (I)

private company: Company whose shares are not traded on

the open market

private mortgage insurance (PMI): Required on almost

every conventional loan with less than 20% down payment; pro-

tects lender in case borrower defaults on loan

privatization: Process of selling government-owned businesses

to private companies

producer price index (PPI): Measure of average price of

goods bought by producers

product: Goods or services that satisfy a need

product differentiation: Attributes that make one product

different from another

product life cycle: Stages a product is thought to go through

from creation to death: introductory, growth, maturity and

decline

product line: Related goods or services offered by a single

company

product mix: Variety of goods or services offered by a company

profit and loss statement (P&L): Summary of a company’s

revenues, costs and expenses within an accounting period [ also

see Income Statement ]

program evaluation and review technique (PERT):

Method for analyzing tasks needed to complete a project and

time estimates to complete each task

promotion budget: Money reserved to pay for all promotion

methods over a given period of time

promotion mix: Communication techniques used to achieve

specific goals; include advertising, personal selling, sales pro-

motion and public relations

prospect: Company or individual in need of a particular good

or service; to seek out (through personal contact) potential

buyers of a good or service and try to sell to them

prospectus: Legal document that describes the securities

offered for sale, including information on investment objective,

policies, fees and services

proxy: Documents that provide shareholders with the necessary

information to vote in an informed manner on matters to be

brought up at a stockholders’ meeting; shareholders often give

management their proxy (i.e., responsibility and right to vote

their shares as outlined in the proxy statement)

public company: Company whose shares are traded on the

open market, following a public offering

public offering: Selling of securities to the public; must be

registered with the Securities and Exchange Commission (SEC)

public relations: Using publicity and other nonpaid forms of

promotion and information to create positive public image

public sector: Government-owned businesses

pull strategy: Promotion specifically directed at the target

market; used to build consumer demand for product

push strategy: Promotion of product directed at the whole-

saler or retailers; they in turn promote to consumer

NPV = PV - I

net profit margin: Measures how effective a company is at

cost control; usually expressed as a percentage, net profits

divided by net revenue

Net Profit Margin = Net Profits / Net Revenue

net sales: Gross sales minus returns, allowances and discounts

New York Stock Exchange (NYSE): Located on Wall Street

in New York City; also called the “Big Board”; 2,000 common

and preferred stocks traded

operating expenses: Expenses incurred in normal

day-to-day business

organizational chart: Graphic showing positions

within a company (by name and title) and the reporting

relationship

organizational structure: Way company is organized; identi-

fies functions for each position within a company and reporting

relationships between those positions

outside board member: Board members who are not man-

agers within the company

outside sales: Sales made by individuals visiting others in

person

outsourcing: Purchasing service(s) from outside vendor(s) to

replace having the task(s) done within an organization’s internal

operations

owner’s equity: Total assets minus total liabilities of a com-

pany or individual

par value: Amount an issuer of a bond agrees to pay

at the bond’s maturity; also, the stated issue price of

a security

partnership: Business ownership involving two or

more people who are fully liable for all business debts

pay-per-click (PPC): On-line advertising pricing model

where advertisers pay agencies based on the number of clicks

on a promotion

personal selling: Sales presentation that involves face-to-

face interaction with a customer

physiological needs: Basic needs for survival (food, water,

air, health and sleep)

points: Prepaid interest charged by a lender to lower the inter-

est rate of a loan; 1 point is equal to 1% of the loan amount

policies: Guidelines for how certain tasks should be completed

preferred stock: Capital stock that represents a partial own-

ership in a company; provides a specific dividend paid prior to

any dividends paid to common stockholders

premium: Gift to consumers who purchase a specific product

price index: Average level of prices relative to average level

in base time period

prime rate: Interest rate banks charge on loans to low-risk

borrowers

quality: Degree to which good or service meets the

specifications of the customer

quality control: Process that determines if a good or

service meets the desired level of excellence

quick ratio: Measures a company’s liquidity; used to evaluate

creditworthiness; equals quick assets (cash, marketable securi-

ties, accounts receivable) divided by current liabilities

Quick Ratio = Cash + Marketable Securities +

Accounts Receivable / Current Liabilities

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