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QuickStudy - Business Terminology
BarCharts, Inc.
®
WORLD’S #1
QUICK REFERENCE GUIDE
A must for business students, professionals or anyone looking to broaden their business vocabulary
A
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
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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
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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)
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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
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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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