business language quick reference guide for small business 2007 148 slide ojo ojo ok ok ok.pdf
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Business Language
Quick Reference Guide forSmall Business
2oo7
Diana Jean GuthrieD J Arts Publication
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Business language reference guide
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From employees to management understanding the terminology creates
better understanding of small business and the !or" place#
$eputation if you !ear the name be careful ho! you play the game#
%&erything you say or do portrays a message to someone# Be sure thatyour actions portray the image that you !ant your business to ha&e#
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An organi*ation that pro&ides goods and ser&ices to earn profits#
Profits
+he differences bet!een businesses re&enue and its e,penses#
%conomic system
A nations system for allocating its resources among its citi*ens#
-abor .human resources/
+he physical and mental capabilities of people as they contribute to
economic production#
0apitol
+he funds needed to create and operate a business enterprise#
Factors of production
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$esources used in the production of goods and ser&iceslabor capitol
entrepreneurs physical resources and information resources#
%ntrepreneur
An indi&idual !ho accepts the ris"s and opportunities in&ol&ed increating and operating a ne! business &enture#
Physical resources
+angible things organi*ations use in the conduct of their business#
nformation resources
Data and other information used by business#
Planned economy
%conomy that relies on a centrali*ed go&ernment to control all or most
factors of production and to ma"e all or most production and allocation
decisions#
3ar"et economy
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%conomy in !hich indi&iduals control production and allocation
decisions through supply and demand#
3ar"et
3echanism for e,change bet!een buyers and sellers of a particular goodor ser&ice#
nput mar"et
3ar"et in !hich firms buy resources from supplier households#
4utput mar"et
3ar"et in !hich firms supply goods and ser&ices in response to demand
on the part of households#
Pri&ati*ation
Process of con&erting go&ernment enterprise into pri&ately o!ned
companies#
0apitalism
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3ar"et economy that pro&ides for pri&ate o!nership of production and
encourages entrepreneurship by offering profits as an incenti&e#
3i,ed mar"et economy
%conomic system featuring characteristics of both planned and mar"eteconomies#
5ocialism
Planned economic system in !hich the go&ernment o!ns and operatesonly selected ma)or sources of production#
Demand
+he !illingness and ability of buyers to purchase a good or ser&ice#
-a! of demand
Principle that buyers !ill purchase .demand/ more of a product as its
price drops and less as its price increases#
Demand cur&e
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Graph sho!ing ho! many units of a product !ill be demanded .bought/at different prices#
5upply
+he !illingness and ability of producers to offer a good or ser&ice forsale#
-a! of supply
Principle that producers !ill offer .supply/ more of a product for sale asits price rises and less as its price drops#
5upply cur&e
Graph sho!ing ho! many units of a product !ill be supplied .offered forsale/ at different prices#
Demand and supply schedule
Assessment of the relationships bet!een different le&els of demand andsupply at different price le&els#
%6uilibrium price .mar"et price/
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Profitma,imi*ing price at !hich the 6uantity of goods demanded andthe 6uantity of goods supplied are e6ual#
5urplus
5ituation in !hich 6uantity supplied e,ceeds 6uantity demanded#
5hortage
5ituation in !hich 6uantity demanded e,ceeds 6uantity supplied#
Pri&ate enterprise
%conomic system that allo!s indi&iduals to pursue their o!n interests
!ithout undue go&ernment restrictions#
0ompetition
ying among businesses for the same resources or customers#
Perfect competition
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3ar"et or industry characteri*ed by numerous small firms producing anidentical product#
3onopolistic competition
3ar"et or industry characteri*ed by numerous buyers and relati&elynumerous sellers trying to differentiate their products from those of
competitors#
4ligopoly
3ar"et or industry characteri*ed by a handfull of .generally large/
sellers !ith the po!er to influence the price of their products#
3onopoly
3ar"et or industry in !hich there is only one producer !hich can
therefore set the price of its product#
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8atural monopoly
ndustry in !hich one company can most efficiently supply all needed
goods and ser&ices#
Business cycle
Pattern of short term ups and do!ns .e,pansions and contractions/ in an
economy#
Aggregate output
+otal 6uantity of goods and ser&ices produced by an economic system
during a gi&en period#
5tandard of li&ing
+he total 6uantity of goods and ser&ices that a country9s citi*ens can
purchase !ith the currency used in their economic system#
Gross domestic product .GDP/
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+otal &alue of all goods and ser&ices produced !ithin a gi&en period bya national economy through domestic factors of production#
8ominal GDP
GDP measured in current dollars or !ith all components &alued atcurrent prices#
$eal GDP
GDP calculated to account for changes in currency &alues and pricechanges#
Producti&ity
3easure of economic gro!th that compares ho! much a systemproduces !ith the resources needed to produce it#
8ational debt
Amount of money that a go&ernment o!es its creditors#
5tability
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0ondition in an economic system in !hich the amount of moneya&ailable and the 6uantity of goods and ser&ices produced are gro!ing at
about the same rate#
nflation
4ccurrence of !ide spread price increases throughout an economic
system#
0onsumer price inde, .0P/
3easure of the prices of typical products purchased by consumers li&ing
in urban areas#
:nemployment
-e&el of )oblessness among people acti&ely see"ing !or" in an economic
system#
$ecession
Period during !hich aggregate output as measured by GDP declines#
Depression
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Particularly se&ere and longlasting recession#
Fiscal policies
%conomic policies that determine ho! the go&ernment collects and
spends its re&enue#
3onetary policies
Go&ernment economic policies that determine the si*e of a nation9s
monetary supply#
5tabili*ation policy
Go&ernment policy embracing both fiscal and monetary policies !hose
goal is to smooth out fluctuations in output and unemployment and tostabili*e prices#
%thics
Beliefs about !hat are right and !rong or good and bad in actions thataffect others#
%thical beha&ior
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Beha&ior conforming to generally accepted social norms concerningbeneficial and harmful actions#
:nethical beha&ior
Beha&ior that does not conform to generally accepted social normsconcerning beneficial and harmful beha&ior#
Business ethics
%thical or unethical beha&iors by a manager or employee of anorgani*ation#
3anagerial ethics
5tandard of beha&ior that guide indi&idual managers in their !or"#
5ocial responsibility
+he attempt of a business to balance its commitments to groups and
indi&iduals in its en&ironment including customers other businessesemployees in&estors and local communities#
4rgani*ational sta"eholders
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+hose groups indi&iduals and organi*ations that are directly affected bypractices of an organi*ation and !ho therefore ha&e a stea" in its
performance#
0onsumerism
Form of social acti&ism dedicated to protecting the rights of consumers in
their dealings !ith businesses#
0ollusion
llegal agreement bet!een t!o or more companies to commit a !rongful
act#
;histle blo!er
%mployee !ho detects and tries to put an end to a company9s unethical
illegal or social irresponsible actions by publici*ing them#
0hec" "itting
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llegal practice of !riting chec"s against money that has not yet beencredited at the ban" on !hich the chec"s are dra!n#
nsider trading
llegal practice of using special "no!ledge about a firm for profit or gain#
4bstructionist stance
Approach to social responsibility that in&ol&es attempts to deny or co&er
up &iolations#
Defensi&e stance
Approach to social responsibility by !hich a company meets only
minimum legal re6uirements in its commitments to groups andindi&iduals in its social en&ironment#
Accommodati&e stance
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Approach to social responsibility by !hich a company if specificallyas"ed to do so e,ceeds legal minimums in its commitments to groups
and indi&iduals in its social en&ironment#
Proacti&e stance
Approach to social responsibility by !hich a company acti&ely see"s
opportunities to contribute to the !ell being of groups and indi&iduals in
its social en&ironment#
5ocial audit
5ystematic analysis of a firm9s success in using funds earmar"ed for
meeting its social responsibility goals#
5mall business administration .5BA/
Federal agency charged !ith assisting small business#
5mall business
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ndependently o!ned and managed business that does not dominate itsmar"et#
Business plan
Document in !hich the entrepreneur summari*es his or her businessstrategy for the proposed ne! &enture and ho! that strategy !ill be
implemented#
enture 0apitol 0ompany
Group of small in&estors !ho in&est money in companies !ith rapid
gro!th potential#
5mall business in&estment company .5B0/
Go&ernmentregulated n&estment 0ompany that borro!s money from
5BA to in&est in or lend to small business#
5mall business de&elopment center .5BD0/
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Program designed to consolidate information from &arious disciplinesand ma"e it a&ailable to small business#
Franchise
Arrangement in !hich a buyer .franchisee/ purchases the right to buyand sell the good or ser&ice of the seller .franchiser/#
General partnership .acti&e partner/
Partner !ho acti&ely manages a firm and !ho has unlimited liability forits debts#
-imited partner
Partner !ho does not share in a firm9s management and is liable for itsdebts only to the limits of said partner9s in&estments#
5ole proprietorship
Business o!ned and usually operated by one person !ho is responsiblefor all its debts#
:nlimited liability
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-egal principle holding o!ners responsible for paying off all debts of abusiness#
-imited liability
-egal principle holding in&estors liable for a firm9s debts only to thelimits of their personal in&estments in it#
0orporation
Business that is legally considered an entity separate from its o!ners andis liable for its o!n debts# 4!ner9s liability e,tends to the limits of their
in&estments#
+ender offer
4ffer to buy shares made by a prospecti&e buyer directly to a target
corporation9s shareholder !ho then ma"e indi&idual decisions about
!hether to sell#
Double ta,ation
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5ituation in !hich ta,es may be payable both by a corporation on itsprofits and by shareholders on di&idend incomes#
0losely held corporation .or pri&ate/
0orporation !hose stoc" is held by only a fe! people and is nota&ailable for sale to the general public#
Publically held corporation .or public/
0orporation !hose stoc" is !idely held and a&ailable to the generalpublic#
5 0orporation
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Form of o!nership allo!ing professionals to ta"e ad&antage of corporatebenefits !hile granting them limited business liability and unlimited
professional liability#
3ultinational 0orporation .transnational/
Form of corporation spanning national boundaries#
0orporation go&ernance
$oles of shareholders directors and other managers in corporatedecision ma"ing#
5toc" holder .or shareholders/
4!ner of shares or stoc" in a corporation#
5toc"
5hare of o!nership in a corporation
Preferred stoc"
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5toc" that offers its holders fi,ed di&idends and priority claims o&erassets but no corporate &oting rights#
0ommon stoc"
5toc" that pays di&idends and guarantees corporate &oting rights butoffers last claims o&er assets#
Board of directors
Go&erning body of a corporation that reports to its share holders anddelegates po!er to run its daytoday operations !hile remaining
responsible for sustaining its assets#
0hief e,ecuti&e officer .0%4/
+op manager hired by the board of directors to run a corporation#
5trategic alliance
5trategy in !hich t!o or more organi*ations collaborate on a pro)ect for
mutual gain#
Joint &enture
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5trategic alliance in !hich the collaboration in&ol&es )oint o!nership of ane! &enture#
%mployee stoc" o!nership plan .%54P/
Arrangement in !hich a corporation holds its o!n stoc" in trust for itsemployees !ho gradually recei&e o!nership of the stoc" and control its
&oting rights#
nstitutional in&estor
-arge in&estor such as a mutual fund or a pension fund !hich purchases
large bloc"s of a corporate stoc"#
3erger
+he union of t!o corporations to form a ne! corporation#
Ac6uisition
+he purchase of one company by another#
Di&estiture
5trategy !hereby a firm sells one or more of its business units#
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5pinoff
5trategy of setting up one or more corporate units as ne! independent
corporations#
Globali*ation
Process by !hich the !orld economy is becoming a single independent
system#
mport
Product made or gro!n abroad but sold domestically#
%,port
Product made or gro!n domestically but shipped or sold abroad#
General agreement on tariffs and trades .GA++/
nternational trade agreement to encourage the multilateral reduction or
elimination of trade barriers#
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8orth American free trade agreement .8AF+A/
Agreement to gradually eliminate tariffs and other trade barriers among
:nited 5tates 0anada and 3e,ico#
%uropean :nion .%:/
Agreement among ma)or !estern %uropean nations to eliminate or ma"e
uniform most trade barriers affecting group members#
;orld trade organi*ation .;+4/
4rgani*ation through !hich member nations negotiate trading
agreements and resol&e disputes and trade policies and practices#
Absolute ad&antage
+he ability to produce something more efficiently than any other country
can#
0omparati&e ad&antage
+he ability to produce some products more efficiently than others
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8ational competiti&e ad&antage
nternational competiti&e ad&antage stemming from a combination of
factor conditions demand conditions related and supporting industries
and firm strategies structures and ri&alries#
Balance of trade
%conomic &alue of all products a country e,ports minus the economic
&alue of all products it imports#
+rade deficit
5ituation in !hich a country9s imports e,ceed its e,ports creating a
negati&e balance of trade#
+rade surplus
5ituation in !hich a country9s e,ports e,ceed its imports creating a
positi&e balance of trade#
Balance of payments
Flo! of all money into or out of a country#
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%,change rate
$ate at !hich the currency of one nation can be e,changed for the
currency of another country#
%uro
A common currency shared among most of the members of the %uropean
:nion .e,cluding Denmar" 5!eden and the :nited =ingdom#
%,porterFirm that distributes and sells products to one or more foreign countries#
mporter
Firm that buys products in foreign mar"ets and then imports them forresale in its home country#
nternational firm
Firm that conducts a significant portion of its business in foreigncountries#
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3ultinational firm
Firm that designs produces and mar"ets products in many nations#
-icensing agreement
Arrangement in !hich firms choose foreign indi&iduals or organi*ations
to manufacture or mar"et their products in another country#
Branch office
Foreign office set up by an international or multinational firm#
5trategic alliance
Arrangement .also called )oint &enture/ in !hich a company finds a
foreign partner to contribute appro,imately half of the resources neededto establish and operate a ne! business in the partner9s country#
Foreign direct in&estment .FD/
Arrangement in !hich a firm buys or establishes tangible assets in
another country#
>uota
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Business practice la!
-a! or regulation go&erning business practices in gi&en countries#
0artel
Association of producers !hose purpose is to control supply and prices#
Dumping
Practice of selling a product abroad for less than the cost of production#
Goal
4b)ecti&e that a business hopes and plans to achie&e#
5trategy
Broad set of organi*ational plans for implementing the decisions madefor achie&ing organi*ational goals#
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0orporate strategy
5trategy for determining the firm9s o&erall attitude to!ard gro!th and
the !ay it !ill manage its business on product lines#
Business strategy .or competiti&e strategy/
5trategy at the businessunit or productline le&el focusing on a firm9s
competiti&e position#
Functional strategy5trategy by !hich managers in specific areas decide ho! best to achie&e
corporate goals through producti&ity#
3ission statement
4rgani*ation9s statement of ho! it !ill achie&e its purpose in the
en&ironment in !hich it conducts business#
-ong term goal
Goal set for an e,tended time typically fi&e years or more into the future#
5hort term goal
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Goal set for the &ery near future typically less than one year#
ntermediate goal
Goal set for a period of one to fi&e years into the future#
5trategy formulation
0reation of a broad program for defining and meeting an organi*ational
goal#
5trategic goal
-ongterm goal deri&ed directly from a firm9s mission statement#
5;4+ analysis
dentification and analysis of organi*ational strengths and !ea"nesses
and en&ironmental opportunities and threats as a part of strategy
formulation#
%n&ironmental analysis
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Process of scanning the business en&ironment for threats andopportunities#
4rgani*ational analysis
Process of analy*ing a firm9s strengths and !ea"nesses#
5trategic plan
Plan reflecting decisions about resource allocations company priorities
and steps needed to meet strategic goals#+actical plan
General short range plan concerned !ith implementing specific aspects of
a company9s strategic plan#
4perational plan
Plan setting shortterm targets for daily !ee"ly and monthly
performance#
0ontingency plan
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dentifying aspects of a business or its en&ironment that might entailchanges in strategy#
0risis management
4rgani*ation9s methods for dealing !ith emergencies#
3anagement
Process of planning organi*ing and controlling an organi*ation9s
resources to achie&e its goals#Planning
3anagement process of determining !hat an organi*ation needs to do
and ho! best to get it done#
4rgani*ing
3anagement process of determining ho! best to arrange an
organi*ation9s resources and acti&ities into a coherent structure#
Directing
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3anagement process of guiding and moti&ating employees to meet anorgani*ation9s ob)ecti&es#
0ontrolling
3anagement process of monitoring an organi*ation9s performance toensure that it meets its goals#
+op manager
3anager responsible to the board of directors and stoc"holders for a
firm9s o&erall performance and effecti&eness#
3iddle manager
3anager responsible for implementing the strategies policies and
decisions made by top manager#
Firstline managers
3anager responsible for super&ising the !or" of employees#
+echnical s"ills
5"ills needed to perform speciali*ed tas"s#
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4rgani*ational structure
5pecification of the )obs to be done !ithin an organi*ation and the !ays
in !hich they relate to one another#
4rgani*ational chart
Diagram depicting a company9s structure and sho!ing employees !here
they fit into its operations#
0hain of command
$eporting relationships !ithin a company#
Job speciali*ation
+he process of identifying the specific )obs that need to be done and
designating the people !ho !ill perform them#
Departmentali*ation
Process of grouping )obs into local units#
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Profit center
5eparate company unit responsible for its o!n costs and profits#
0ustomer departmentali*ation
Departmentali*ation according to types of customers li"ely to buy a gi&enproduct#
Product departmentali*ation
Departmentali*ation according to specific products being created#
Process departmentali*ation
Departmentali*ation according to production processes used to create a
good or ser&ice#
Geographic departmentali*ation
Departmentali*ation according to areas ser&ed by a business#
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Functional departmentali*ation
Departmentali*ation according to groups9 functions or acti&ities#
$esponsibility
Duty to perform an assigned tas"#
Authority
Po!er to ma"e the decisions necessary to complete a tas"#
Delegation
Assignment of a tas" responsibility or authority to subordinate#
Accountability
-iability of subordinates for tas"s assigned by managers#
0entrali*ed organi*ation
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4rgani*ation in !hich most decisionma"ing authority is held by upperle&el management#
Decentrali*ed organi*ation
4rgani*ation in !hich a great deal of decisionma"ing authority isdelegated to le&els of management at points belo! the top#
Flat organi*ational structure
0haracteristics of decentrali*ed companies !ith relati&ely fe! layers of
management and relati&ely !ide span of control#
+all organi*ational structure
0haracteristic of centrali*ed companies !ith multiple layers of
management and relati&ely narro! spans of control#
5pan of control
8umber of people super&ised by one manager#
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-ine of authority4rgani*ational structure in !hich authority flo!s in a direct chain of
command from the top of the company to the bottom#
-ine departmentDepartment directly lin"ed to the production and sales of a specific
product#
5taff authority
Authority based on e,pertise that usually in&ol&es ad&ising line
managers#
5taff members
Ad&isors and counselors !ho aid line departments in ma"ing decisions
but do not ha&e the authority to ma"e final decisions#
0ommittee and team authority
Authority granted to committees or !or" teams in&ol&ed in a firm9s daily
operations#
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Functional organi*ationForms of business organi*ation in !hich authority is determined by the
relationships bet!een group functions and acti&ities#
Di&isional organi*ation4rgani*ational structure in !hich corporate di&isions operate as
autonomous businesses under the larger corporation umbrella#
Di&ision
Department that resembles a separate business in producing and
mar"eting its o!n products#
3atri, structure
4rgani*ational structure in !hich teams are formed and team members
report to t!o or more managers#
nternational organi*ational structure
Approaches to organi*ational structure de&eloped in response to the
need to manufacture purchase and sell in global mar"ets#
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nformal organi*ation8et!or" unrelated to a firms9 authority structure of e&eryday social
interactions among company employees#
Grape&ine
nformal communication net!or" that runs through an organi*ation#
ntrapreneuring
Process of creating and maintaining the inno&ation and fle,ibility of a
small business en&ironment !ithin the confines of a large organi*ation#
5er&ice operations
Acti&ities producing intangible and tangible products such as
entertainment transportation and education#
Goods production
Acti&ities producing tangible products such as radios ne!spapers
busses and te,tboo"s#
:tility
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A product9s ability to satisfy human !ants#
4perations management .production/
5ystematic direction and control of the process that transform resources
into finished products that create &alue and pro&ide benefits to
customers#
4perations manager .production/
3anagers responsible for production in&entory and 6uality control#
4perations process
5et of methods used in production of a good or ser&ice#
Analytic process
Production process in !hich resources are bro"en do!n into components
to create finished products#
5ynthetic process
Production process in !hich resources are combined to ma"e finished
products#
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Production schedule specifying the se6uence and critical path forperforming the steps in a pro)ect#
4perations control
Process of monitoring production performance by comparing results !ith
plans#
Follo! up
Production control acti&ity for ensuring that production decisions are
being implemented#
3aterials management
Planning organi*ing and controlling the flo! of materials from design
through distribution of finished goods#
5tandardi*ation
:se of standard and uniform components in the production process#
Purchasing
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Ac6uisition of ra! materials and ser&ices that a firm needs to produce itsproducts#
5upplier selection
Process of finding and selecting suppliers from !hom to buy#
n&entory control
n&entory materials management recei&ing storing handling and
counting of ra! materials both partly finished goods and finished goods#
-ean system
Production system designed for smooth production flo!s that a&oid
inefficiencies eliminates unnecessary in&entories and continuously
impro&es production process#
Justintime production .J+/
Production method that brings together all materials and parts needed at
each production stage at the precise moment they are re6uired#
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3aterial re6uirements planning .3$P/Production method in !hich a bill of materials is used to ensure that the
right amounts of materials are deli&ered to the right place at the right
time#
Bill of materials
Production control tool that specifies the necessary ingredients of a
product the order in !hich they should be combined and ho! many of
each is needed to ma"e one batch#
>uality control
3anagement of the production process designed to manufacture goods
or supply ser&ices that meet specific 6uality standards#
>uality
A product9s fitness for use for its success in offering features that
consumers !ant#
+otal 6uality management .+>3/ .or 6uality assurance/
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+he sum of all acti&ities in&ol&ed in getting high 6uality products into the
mar"et place#
Performance 6uality
+he performance features offered by a product#
>uality reliability
0onsistency of a product9s 6uality from unit to unit#
>uality o!nership
Principle of total 6uality management that holds that the 6uality belongs
to each person !ho creates it !hile performing the )ob#
0ompetiti&e product analysis
Process by !hich a company analy*es a competitor9s products to identify
desirable impro&ements#
5tatistical process control .5P0/3ethods for gathering data to analy*e &ariations in production acti&ities
to see !hen ad)ustments are needed#
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0ontrol chart
Process control method that plots test samples on a diagram to determine
!hen a process is beginning to depart from normal operating conditions#
>uality(cost study
3ethod of impro&ing 6uality by identifying current costs and areas !ith
the greatest costsa&ing potential#
nternal failures
$educible costs incurred during production and before bad parts lea&e
the plant#
%,ternal failures
$educible costs incurred after defecti&e parts ha&e left the plant#
54 ?@@@
Program certifying that a factory laboratory or office has met the 6ualitymanagement standards of the nternational 4rgani*ation for
5tandardi*ation#
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Business process reengineering
$edesigning of business processes to impro&e 6uality performance and
customer ser&ice#
4utsourcing
5trategy of paying suppliers and distributors to perform certain business
processes or to pro&ide needed materials and resources#
5upply chain
Flo! of information materials and ser&ices that starts !ith ra! materials
suppliers and continues through other stages in the operations process
until the product reaches the end customer#
5upply chain management .503/
Principle of loo"ing at the supply chain as a !hole in order to impro&e
the o&erall flo! through the system#
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Job analysis
5ystematic analysis of )obs !ithin an organi*ation#
Job description
4utline of the duties of a )ob !or"ing conditions and the toolse6uipment and materials used to perform it#
Job specification
Description of the s"ills abilities and other credentials re6uired by a )ob#
$eplacement chart
-ist of each management position !ho occupies it ho! long that person
!ill li"ely stay in the )ob and !ho is 6ualified as a replacement#
%mployee information system .s"ills in&entory/
0omputeri*ed system containing information on each employee9s
education s"ills !or" e,perience and career aspirations#
$ecruiting
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Process of attracting 6ualified persons to apply for )obs an organi*ation is
see"ing to fill#
nternal recruiting
0onsidering present employees as candidates for )ob openings#
%,ternal recruiting
Attracting persons outside the organi*ation to apply for )obs#
alidation
Process of determining the predicti&e &alue of a selection techni6ue#
4nthe)ob training
+raining sometimes informal conducted !hile an employee is at !or"#
4ffthe)ob training
+raining conducted in a controlled en&ironment a!ay from the !or" site#
estibule training
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4ff the )ob training conducted in a simulated en&ironment#
Performance appraisal
%&aluation of an employee9s )ob performance in order to determine the
degree to !hich the employee is performing effecti&ely#
0ompensation system
5et of re!ards that organi*ations pro&ide to indi&iduals in return for
their !illingness to perform &arious )obs and tas"s !ithin the
organi*ation#
;ages
0ompensation in the form of money paid for time !or"ed#
5alary
0ompensation in the form of money paid for discharging the
responsibilities of a )ob#
ncenti&e program
5pecial compensation program designed to moti&ate high performance#
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Bonus
ndi&idual performance incenti&e in the form of a special payment made
o&er and abo&e the employee9s salary#
3erit salary system
ndi&idual incenti&e lin"ing compensation to performance in non sales
)obs#
ariable pay .or pay for performance/
ndi&idual incenti&e that re!ards a manager for especially producti&e
output#
Profitsharing plan
ncenti&e plan for distributing bonuses to employees !hen company
profits rise abo&e a certain le&el#
Gain sharing plan
ncenti&e plan that re!ards groups for producti&ity impro&ements#
Payfor"no!ledge plan
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ncenti&e program to encourage employees to learn ne! s"ills or become
proficient at different )obs#
Benefits
0ompensation other than !ages or salaries#
;or"ers9 compensation insurance
-egally re6uired insurance for compensating !or"ers in)ured on the )ob#
0afeteria benefit plan
Benefit plan that sets limits on benefits per employee each of !hom may
choose from a &ariety of alternate benefits#
%6ual employment opportunity
-egally mandated nondiscrimination in employment on the basis of race
creed se, or national origin#
Protected class
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5et of indi&iduals !ho by nature of one or more common characteristics
are protected under the la! from discrimination on the basis of that
characteristic#
%6ual employment opportunity commission .%%40/
Federal agency enforcing se&eral discriminationrelated la!s#
Affirmati&e action plan
Practice of recruiting 6ualified employees belonging to racial gender or
ethnic groups !ho are underrepresented in an organi*ation#
Act of 1?7@ .45
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Practice of instance or ma"ing un!elcome se,ual ad&ances in the !or"
place#
>uid pro 6uo harassment
Form of se,ual harassment in !hich se,ual fa&ors are re6uested in
e,change for )obrelated benefits#
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$ange of !or"ers9 attitudes &alues and beha&iors that differ by gender
race and ethnicity#
=no!ledge !or"ers
%mployees !ho are of &alue because of the "no!ledge they posses#
0ontingent !or"er
%mployee hired on something other than a fulltime basis to supplement
an organi*ation9s permanent !or" force#
-abor regulations
Process of dealing !ith employees !ho are represented by a union#
-abor union
Group of indi&iduals !or"ing together to achie&e shared )obrelated
goals such as higher pay shorter !or"ing hours more )ob security
greater benefits or better !or"ing conditions#
0ollecti&e bargaining
P b hi h l b d t ti t diti f
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Process by !hich labor and management negotiate conditions of
employment for union represented !or"ers#
0ost of li&ing ad)ustment .04-A/
-abor contract clause tying future salary or !age increases to changes in
consumer purchasing po!er#
;age reopener clause
0lause allo!ing !age rates to be renegotiated during the life of a labor
contract#
5tri"e
-abor action in !hich employees temporarily !al" off the )ob and refuse
to !or"#
%conomic stri"e
5tri"e usually triggered by stalemate o&er mandatory bargaining items#
5ympathy stri"e .secondary stri"e/
5tri"e in !hich one union stri"es to support action initiated by another#
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5tri"e brea"er
;or"er hired as permanent or temporary replacement for a stri"ing
employee#
3ediation
3ethod of resol&ing a labor dispute in !hich a third party suggests but
does not impose a settlement#
oluntary
3ethod of resol&ing a labor dispute in !hich both parties agree to submit
to the )udgment of a neutral party#
0ompulsory arbitration
3ethod of resol&ing a labor dispute in !hich both parties are legally
re6uired to accept the )udgment of a neutral party#
Psychological contract
5et of e,pectations held by an employee concerning !hat he or she !ill
contribute to an organi*ation .referred to as contributions/ and !hat the
organi*ation !ill in return pro&ide the employee .referred to as
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organi*ation !ill in return pro&ide the employee .referred to as
inducements/#
Job satisfaction
Degree of en)oyment that people desire from performing their )ob#
3orale
4&erall attitude that employees ha&e to!ards their !or" place#
+urno&er
Annual percentage of an organi*ation9s !or" force that lea&es and must
be replaced#
3oti&ation
+he set of forces that cause people to beha&e in certain !ays#
0lassical theory of moti&ation
+heory that !or"ers are moti&ated solely by money#
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p y y
+heory of moti&ation holding that people are moti&ated to !or" to!ards
re!ards that they !ant and that they belie&e that they ha&e a reasonable
chance of obtaining#
%6uity theory
+heory of moti&ation holding that people e&aluate their treatment by
employers relati&e to the treatment of others#
$einforcement
+heory that beha&ior can be encouraged or discouraged by means of
re!ards and punishments#
3anagement by ob)ecti&es .3B4/
5et of procedures in&ol&ing both managers and subordinates in setting
goals and e&aluating progress#
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+elecommuting
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Form of fle,time that allo!s people to perform some or all of a )ob a!ay
from the standard office setting#
-eadership
Process of moti&ating others to !or" to meet specific ob)ecti&es#
3anagerial style
Pattern of beha&ior that a manager e,hibits in dealing !ith subordinates#
Autocratic style
3anagerial style in !hich managers generally issue orders and e,pect
them to be obeyed !ithout 6uestion#
Democratic style
3anagerial style in !hich managers generally as" for input from
subordinates but retain final decision ma"ing po!er#
Freereinstyle
3anagerial style in !hich managers typically ser&e as ad&isers to
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subordinates !ho are allo!ed to ma"e decisions
0ontingency approach to managerial style
Approach to managerial style holding that the appropriate beha&ior in
any situation is dependant .contingent/ on the uni6ue elements of thatsituation#
3ar"eting
+he process of planning and e,ecuting the conception pricingpromotion and distribution of ideas goods and ser&ices to create
e,changes that satisfy indi&idual and organi*ational ob)ecti&es#
alue
$elati&e comparison of a product9s benefits !ith its costs#
0onsumer goods
Products purchased by consumers for personal use#
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ndustrial goods
Products purchased by companies to produce other products#
5er&icesntangible products such as time e,pertise or an acti&ity that can be
purchased#
$elationship mar"eting3ar"eting strategy that emphasi*es lasting relationships !ith customers
and suppliers#
%,ternal en&ironment
4utside factors that influence mar"eting programs by posing
opportunities or threats#
5ubstitute product
Product that is dissimilar to those of competitors but can fulfill the same
d
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need#
Brand competition
0ompetiti&e mar"eting that appeals to consumer perceptions of similar
products#
nternational competition
0ompetiti&e mar"eting of domestic products against foreign products#
3ar"eting manager
3anager !ho plans and implements the mar"eting acti&ities that result
in the transfer of products from producer to consumer#
3ar"eting plan
Detailed strategy for focusing mar"eting efforts on consumer needs and
!ants#
3ar"eting mi,
+he combination of product pricing promotion and distribution
t t i d t " t d t
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strategies used to mar"et products#
Product
Good ser&ice or idea that is mar"eted to fill consumer needs and !ants#
Product differentiation
0reation of a product or product image that differs enough from e,isting
products to attract consumers#
Distribution
Part of the mar"eting mi, concerned !ith getting products from
producers to customers#
+arget mar"et
Group of people that ha&e similar !ants and needs and that can be
e,pected to sho! interest in the same products#
3ar"et segmentation
Process of di&iding a mar"et into categories of customer types#
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Geographic &ariables
Geographical units that may be considered in de&eloping a segmentation
strategy#
Demographic &ariables
0haracteristics of populations that may be considered in de&eloping a
segmentation strategy#
Psychographic &ariables
0onsumer characteristics such as lifestyles opinions interests and
attitudes that may be considered in de&eloping a segmentation strategy#
0onsumer beha&ior
arious facets of the decision process by !hich customers come to
purchase and consume products#
Brand loyalty
Pattern of regular consumer purchasing based on satisfaction !ith a
product#
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$ational moti&es
$easons for purchasing a product that are based on logical e&aluation of
product attributes#
%motional moti&es
$easons for purchasing a product that are based on non ob)ecti&e factors#
Data !arehousing
Process of collecting storing and retrie&ing data in electronic files#
Data mining
Application of electronic technologies for searching sifting andreorgani*ing data in order to collect mar"eting information and target
products into the mar"etplace#
ndustrial mar"et
4rgani*ational mar"et consisting of firms that buy goods that are either
con&erted into products or used during production#
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$eseller mar"et
4rgani*ational mar"et consisting of intermediaries that buy and resell
finished goods#
nstitutional mar"et
4rgani*ational mar"ets consisting of non go&ernmental buyers of goods
and ser&ices such as hospitals churches museums and charitable
organi*ations#
Feature
+angible 6uality that a company builds into a product#
alue pac"age
Product mar"eted as a bundle of &alueadding attributes including
reasonable costs#
0on&enience good(ser&ice
ne,pensi&e product purchased and consumed rapidly and regularly#
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5hopping good(ser&ice
3oderately e,pensi&e infre6uently purchased product#
5pecialty good(ser&ice
%,pensi&e rarely purchased product#
%,pense item
ndustrial product purchased and consumed rapidly and regularly for
daily operations#
0apital item
%,pensi&e longlasting infre6uently purchased industrial product such
as a building#
Product mi,
Group of products that a firm ma"es a&ailable for sale#
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Product line
Group of similar products intended for a similar group of buyers !ho
!ill use them in similar !ays#
Discount
Price reduction offered as an incenti&e to purchase#
5peed to mar"et
5trategy for introducing ne! products to respond 6uic"ly to customer or
mar"et changes#
Product life cycle .P-0/
5eries of stages in a product9s profitproducing life#
Branding
Process of using symbols to communicate the 6ualities of a product made
by a particular producer#
Brand a!areness
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Brand a!areness
%,tent to !hich a brand name comes to mind !hen the consumer
considers a particular product category#
8ational brand
Brandnamed product produced by !idely distributed by and carrying
the name of a manufacturer#
-icensed brand
Brandname product for !hose name the seller has purchased the right
from an organi*ation or an indi&idual#
Pri&ate brand .or pri&ate label/
Brandname product that a !holesaler or retailer has commissioned from
a manufacturer#
Pac"aging
Physical container in !hich a product is sold ad&ertised or protected#
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Brea" e&en analysis
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Brea" e&en analysis
For a particular selling price assessment of the seller9s cost &ersus
re&enues at &arious sales &olumes#
Brea" e&en point
5ales &olume at !hich the seller9s total re&enue from sales e6uals total
costs .&ariable and fi,ed/ !ith neither profit nor loss#
Price s"imming
5etting an initially high price to co&er ne! product costs and generate a
profit#
Penetration pricing
5etting an initially lo! price to establish a ne! product in the mar"et#
Price lining
5etting a limited number of prices for certain categories of products#
Psychological pricing
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Psychological pricing
Pricing tactic that ta"es ad&antage of the fact that consumers do not
al!ays respond rationally to started prices#
4dde&en pricing
Psychological pricing tactic based on the premise that customers prefer
prices not stated in e&en dollar amounts#
Distribution mi,
+he combination of distribution channels by !hich a firm gets its
products to end users#
ntermediary
ndi&idual or firm that helps to distribute a product#
;holesaler
ntermediary !ho sells products to other businesses for resale to final
customer#
$etailer
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ntermediary !ho sells products directly to customers#
Distribution channel
8et!or" of independent companies through !hich a product passes
from producers to end users#
Direct channel
Distribution channel in !hich a product tra&els from producer to end
users !ithout intermediaries#
5ales agent(bro"er
ndependent intermediary !ho usually represents many manufacturers
and sells to !holesalers and retailers#
ndustrial distribution .business/
8et!or" of channel members in&ol&ed in the flo! of manufactured
goods to industrial customers#
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-arge product line retailer characteri*ed by organi*ation into speciali*ed
departments#
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Bargain retailer
$etailer carrying a !ide range of products at bargain prices#
5uper mar"et
-arge product line retailer offering a &ariety of food or food related items
in speciali*ed departments#
5pecialty store
5mall retail store carrying one product line or a category of related
products#
Discount house
Bargain retailer that generates large sales &olume by offering goods at
substantial price reduction#
0atalog sho!room
Bargain retailer in !hich customers place orders for catalog items to be
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pic"ed up at onpremises !arehouses#
Factory outlet
Bargain retailers o!ned by the manufacturers !hose products it sells#
;arehouse club .or !holesale club/
Bargain retailer offering large discounts on brandname merchandise to
customers !ho ha&e paid annual membership fees#
0on&enience store
$etail store offering easy accessibility e,tended hours and fast ser&ice#
Directresponse retailing
8onstore retailing by direct interaction !ith customers to inform them of
products and to recei&e sales orders#
3ail order .or catalog mar"eting/
Form of nonstore retailing in !hich customers place orders for catalog
merchandise recei&ed through the mail#
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+elemar"eting
8onstore retailing in !hich the telephone is used to sell directly to
customers#
%lectronic retailing
8onstore retailing in !hich information about the seller9s products and
ser&ices is connected to consumer9s computers allo!ing consumers torecei&e the information and purchase the products in the home#
ecatalog
8onstore retailing in !hich the internet is used to display products#
%lectronic storefront
0ommercial !eb site in !hich customers gather information about
products buying opportunities placing orders and paying for purchases#
;arehousing
Physical distribution operation concerned !ith the storage of goods#
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0ybermall
0ollection of &irtual storefronts .businesses and !ebsites/ representing a
&ariety of products and product lines on the internet#
nteracti&e mar"eting
8onstore retailing that uses a !eb site to pro&ide realtime sales and
customer ser&ice#
ideo mar"eting
8onstore retailing to consumers &ia standard and cable tele&ision#
Physical distribution
Acti&ities needed to mo&e a product efficiently from manufacturer to
customer#
Pri&ate !arehouse
;arehouse o!ned by and pro&iding storage for a single company#
Public !arehouse
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ndependently o!ned and operated !arehouse that stores goods for
many firms#
4rder fulfillment
All acti&ities in&ol&ed in completing sales transaction beginning !ith
ma"ing the sale and ending !ith ontime deli&ery to the customer#
Promotion
Aspect of the mar"eting mi, concerned !ith the most effecti&e
techni6ues for selling a product#
Positioning
Process of establishing an identifiable product image in the minds of the
consumer#
Promotional mi,
0ombination of tools used to promote a product#
Ad&erti*ing
Promotional tool consisting of paid nonpersonal communication used
by an identified sponsor to inform an audience about a product
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by an identified sponsor to inform an audience about a product#
Ad&erti*ing media
ariety of communication de&ices for carrying a seller9s message to
potential customers#
Direct mail
Ad&erti*ing medium in !hich messages are mailed directly to
consumers9 home or place of business#
3edia mi,
0ombination of ad&erti*ing media chosen to carry a message about aproduct#
Personal selling
Promotional tool in !hich a salesperson communicates oneonone !ithpotential customers#
4rder processing
Personal selling tas" in !hich salespeople recei&e orders and see to their
handling and deli&ery
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handling and deli&ery#
0reati&e selling
Personal selling tas" in !hich sales people try to persuade buyers to
purchase products by pro&iding information about their benefits#
3issionary selling
Personal selling tas" in !hich sales people promote their firms and their
products rather than try to close a sale#
5ales promotion
5hortterm promotional acti&ity designed to stimulate consumer buyingor cooperation from distributers and sales agents#
0oupon
5ales promotion techni6ue in !hich a certificate is issued entitling thebuyer to a reduced price#
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nternet
Gl b l d i i " i illi f i h
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Global data communication net!or" ser&ing millions of computers !ith
information on a !ide &ariety of topics and pro&iding communication
flo!s among certain pri&ate net!or"s#
%lectronic information technologies .%+/
nformationsystems applications based on telecommunications
technologies that use net!or"s of applications or de&ices to communicate
information by electronic means#
%lectronic conferencing
0omputer based system that allo!s you to communicate simultaneously
from different locations &ia soft!are or telephone#
Group!are
5oft!are that connects members of a group for shared email distribution
electronic meetings appointments and group !riting#
Data communication net!or"
Gl b l t " . h i t t/ th t it t d t d
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Global net!or" .such as internet/ that permits users to send to send
electronic messages and information 6uic"ly and economically#
nternet ser&ice pro&ider .5P/
0ommercial firm that maintains a permanent connection to the net and
pro&ides temporary connections to subscribers#
;orld ;ide ;eb
5ubsystem of computers pro&iding access to the internet and offering
multimedia and lin"ing capabilities#
;eb ser&er
Dedicated !or"station customi*ed for managing maintaining and
supporting !eb sites#
Bro!ser
5oft!are supporting the graphics and lin"ing capabilities necessary tona&igate the ;orld ;ide ;eb#
5earch engine
+ool that searches !eb pages containing the user9s search terms and then
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+ool that searches !eb pages containing the user s search terms and then
displays pages that match#
ntranet
Pri&ate net!or" of internal !eb sites and other sources of information
a&ailable to a company9s employees#
Fire!all
5oft!are and hard!are system that pre&ents outsiders from accessing a
company9s internal net!or"#
%,tranet
nternet allo!ing outsiders access to a firm9s internal information system#
3asscustomi*ation
Fle,ible production process that generates customi*ed products in high
&olume at lo! costs#
%nterprise resource planning .%$P/
-arge information system for integrating all the acti&ities of a company9s
business units#
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=no!ledge !or"er
%mployee !ho uses information and "no!ledge as ra! materials and
!ho relies on information technology to design ne! products or business
systems#
5ystem operations personnel
nformationsystem employees !ho run a company9s computer
e6uipment#
3anagement information system .35/5ystem used for transforming data into information for later use#
0omputeraided design .0AD/
0omputerbased electronic technology that assists in designing products
by simulating a real product and displaying it in threedimensional
graphics#
0omputeraided manufacturing .0A3/
0omputer system used to design and control e6uipment needed in the
manufacturing process#
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Decision support system .D55/
nteracti&e computerbased system that locates and presents information
needed to support decision ma"ing#
%,ecuti&e support system .%55/
>uic"reference informationsystem application designed specially forinstant access by upper le&el management#
Database
0entrali*ed organi*ed collection of related data#
Artificial intelligence .A/
0omputersystem application that imitates human beha&ior by
performing physical tas"s using thought processes sensing and
learning#
$obotics
0ombination of computers and industrial robots for use in manufacturing
operations#
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%,pert system
Form of artificial intelligence that attempts to imitate the beha&ior or
thought process of human e,perts in a particular field#
0omputer net!or"
All the computers and information technology de&ices that by !or"ingtogether dri&e the flo! of digital information throughout a system#
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Application program
5oft!are .such as ;ord for ;indo!s/ that process data according to a
user9s needs#
;ord processing program
Application program that allo!s computers to store edit and print
letters and numbers for documents created by users#
%lectronic spreadsheet
Application program !ith a ro!andcolumn format that allo!s users to
store manipulate and compare numeric data#
Database management program
Applications program for creating storing searching and manipulating
an organi*ed collection of data#
0omputer graphics program
Applications program that con&erts numeric and character data into
pictorial information such as graphs and charts#
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Presentation graphics soft!are
Applications that enable users to create &isual presentations that can
include animations and sound#
Des"top publishing
Process of combining !ordprocessing and graphics capability to
produce &irtually typeset6uality te,t from personal computers#
Graphical user interface .G:/
5oft!are that pro&ides a &isual display to help users select applications#
con
5mall image in a G: that enables users to select applications or
functions#
3ultimedia communication system
0onnected net!or" of communication appliances .such as fa,es or +9s/
that may be lin"ed to other forms of mass media .such as printpublications or + programming/#
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;ide area net!or" .;A8/
8et!or" of computers and !or"stations located far from one anotherand lin"ed by telephone or satellite#
-ocal area net!or" .-A8/
8et!or" of computers and !or"stations usually !ithin a company thatare lin"ed together by cable#
Boo" "eeping
$ecording of accounting transactions#
0lient ser&er net!or"
nformationtechnology system consisting of clients .users/ that are
electronically lin"ed to share net!or" resources pro&ided by a ser&er
such as a host computer#
Accounting
0omprehensi&e system for collecting analy*ing and communicating
financial information#
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Accounting information system .A5/
4rgani*ed means by !hich financial information is identified measured
recorded and retained for use in accounting statements and managementreports#
0ontroller .or chief accounting officer/
Person !ho manages all of a firm9s accounting acti&ities#
0ertified public accountant .0PA/
Accountant licensed by the state and offering ser&ices to the public#
Financial accounting system
Field of accounting concerned !ith e,ternal users of a company9s
financial information#
3anagerial accounting system .or management/
Field of accounting that ser&es internal users of a company9s financial
information#
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Audit
5ystematic e,amination of a company9s accounting system to determine
!hether its financial reports fairly represent its operations#
Generally accepted accounting principles .GAAP/
Accepted rules and procedures go&erning the content and form of
financial reports#
3anagement ad&isory ser&ices
5peciali*ed accounting ser&ices to help managers resol&e a &ariety of
business problems#
Pri&ate accountant
5alaried accountant hired by a business to carry out its daytoday
financial acti&ities#
0ertified management accountant .03A/
Professional recognition of management 6ualifications a!arded by the
institution of management accountants#
A t
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Asset
Any economic resource e,pected to benefit a firm or indi&idual !ho
o!ns it#
-iability
Debt o!ed by a firm to an outside organi*ation or indi&idual#
-i6uidity
%ase !ith !hich an asset can be con&erted into cash#
4!ner9s e6uity
Amount of money that o!ners !ould recei&e if they sold all of a firm9s
assets and paid off all of its debts#
Financial statement
Any of se&eral types of reports summari*ing a company9s financial status
and measuring its financial health#
B l h t
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Balance sheet
Financial statement dealing !ith a firm9s assets liabilities and o!ner9s
e6uity#
0urrent assets
Asset that can or !ill be con&erted into cash !ithin the follo!ing year#
Account recei&able .or recei&able/
Amount due from a customer !ho has purchased goods on credit#
3erchandise in&entory
0ost of merchandise that has been ac6uired for sale to customers and is
still on hand#
Prepaid e,pense
%,pense such as a prepaid rent !hich is paid before the upcoming period
in !hich it is due#
Fi,ed asset
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Fi,ed asset
Asset !ith long term use or &alue such as land buildings and
e6uipment#
Depreciation
Process of distributing the cost of an asset o&er its life#
ntangible asset
8onphysical asset such as a patent or trademar" that has economic
&alue in the form of e,pected benefit#
Good!ill
Amount paid for an e,isting business abo&e the &alue of its other assets#
0urrent liability
Debt that must be paid !ithin the year#
Account payable .or payable/
0urrent liability consisting of bills o!ed to suppliers plus !ages and
ta,es due !ithin the upcoming year#
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-ongterm liability
Debt that is not due for more than one year#
Paidin capital
Additional money abo&e proceeds from stoc" sale paid directly to a firm
by its o!ner#
$etained earning
%arnings retained by a firm for its use rather than paid as di&idends#
ncome statement .or profitandloss statement/
Financial statement listing a firm9s annual re&enues and e,penses so that
a bottom line sho!s annual profit or loss#
$e&enues
Funds that flo! into a business from the sale of goods or ser&ices#
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0ost of goods sold
+otal cost of obtaining materials for ma"ing the products sold by a firm
during the year#
Gross profit .or gross margin/
$e&enues obtained from goods sold minus the cost of goods sold#
4perating e,penses
0ost other than the cost of goods sold incurred in producing a good or
ser&ice#
4perating income
Gross profit minus operating e,penses#
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Financial ratio for e&aluating management9s use of a firm9s assets#
-i6uidity ratio
5 l ti i fi 9 bilit t it i di t d bt
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5ol&ency ratio measuring a firm9s ability to pay its immediate debts#
0urrent ratio
5ol&ency ratio that determines a firm9s credit!orthiness by measuring its
ability to pay current liabilities#
;or"ing capital
Difference bet!een a firm9s current assets and current liabilities#
Debt ratio
5ol&ency ratio measuring a firm9s ability to meet its longterm debts#
Debttoo!ner9s e6uity ratio .or debttoe6uity ratio/
5ol&ency ratio describing the e,tent to !hich a firm is financed through
borro!ing#
Debt
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A firm9s total liabilities#
-e&erage
Ability to finance an in&estment through borro!ed funds#
$eturn on e6uity
Profitability ratio measuring income earned for each dollar in&ested#
%arning per share
Profitability ratio measuring the si*e of the di&idend that a firm can pay
shareholders#
n&entory turno&er ratio
Acti&ity ratio measuring the a&erage number of times that in&entory is
sold and restoc"ed during the year#
Foreign currency e,change rate
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alue of a nation9s currency as determined by mar"et forces#
3oney
Any ob)ect that is portable di&isible and stable and ser&es as a medium
of e,change a store &alue and a unit of account#
31
3easure of the money supply that includes only the most li6uid
.spendable/ forms of money
0urrency
Go&ernment issued paper money and metal coins#
0hec"
Demand deposit order instructing a ban" to pay a gi&en sum to a
specified payee#
Demand deposit
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Ban" account funds that may be !ithdra!n at any time#
32
3easure of the money supply that includes all components of 31 plus
the forms of money that can be easily con&erted into spendable form#
+ime deposit
Ban" funds that cannot be !ithdra!n !ithout notice or transferred by
chec"#
3oney mar"et mutual funds
Fund of shortterm lo! ris" financial securities purchased !ith assets of
in&estoro!ners pooled by a nonban" institution#
0ommercial ban"
Federalorstatechartered financial institution accepting deposits that it
uses to ma"e loans and earn profits#
Prime rate
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nterest rate a&ailable to a ban"9s most credit!orthy customers#
5a&ings and loan .5C-/
Financial institution accepting deposits and ma"ing loans primarily for
home mortgages#
3utual sa&ings ban"
Financial institution !hose depositors are o!ners sharing in its profits#
0redit union
Financial institution that accepts deposits from and ma"es loans to only
its members usually employees of a particular organi*ation#
Pension fund
8ondeposit pool of funds managed to pro&ide retirement income for its
members#
nsurance company
8ondeposit institution that in&ests funds collected as premiums charged
for insurance co&erage#
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Finance company
8ondeposit institution that speciali*es in ma"ing loans to businesses and
consumers#
5ecurities in&estment dealer .bro"er/
8ondeposit institution that buys and sells and bonds both for in&estorsand for its o!n accounts#
ndi&idual retirement account .$A/
+a,deferred pension fund !ith !hich !age earners supplement otherretirement funds#
+rust ser&ice
Ban" management of an indi&idual9s in&estments payments or estate#
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Federal $eser&e 5ystem .the fed/
0entral ban" of the :nited 5tates !hich acts as the go&ernment9s ban"ser&es member commercial ban"s and controls the nation9s money
supply#
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Float
+otal amount of chec"s !ritten but not yet cleared through the federal
ser&ice#
3onetary policy
Policy by !hich the Federal $eser&e manages the nation9s money supply
and interest rates#
$eser&e re6uirement
Percentage of its deposits that a ban" must hold in cash or on deposit
!ith the Federal $eser&e#
Discount rate
nterest rate at !hich member ban"s can borro! money from the Federal$eser&e#
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4penmar"et operations
+he federal reser&es sales and purchases of securities in the open mar"et#
5electi&e credit controls
Federal $eser&e authority to set both margin re6uirements for consumer
stoc" purchases and credit rules for other consumer purchases#
Debit card
Plastic card that allo!s an indi&idual to transfer money bet!een
accounts#
Pointofsale terminal .P45/
%lectronic de&ise that allo!s customers to pay retail purchases !ith debit
cards#
5mart card
0reditcardsi*e plastic card !ith an embedded computer chip that can
be programmed !ith electronic money#
e0ash
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%lectronic money that mo&es bet!een consumers and businesses &ia
electronic transmission#
;orld Ban"
:nited 8ations agency that pro&ides a limited scope of financial ser&ices
such as funding national impro&ements in underde&eloped countries#
nternational monetary fund .3F/
:nited 8ations agencies consisting of 1@ nations that ha&e combined
resources to promote stable e,change rates pro&ide temporary short
term loans and ser&e other purposes#
5ecurities
5toc"s and bonds representing secured or assetbased claims by
in&estors against issuers#
Primary securities mar"et
3ar"et in !hich ne! stoc"s and bonds are sold#
5ecurities and %,change 0ommission .5%0/
Federal agency that administers :#5# securities la! to protect the
i i bli d i i hl f i i "
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in&esting public and maintain smoothly functioning mar"ets#
n&estment ban"s
Financial institution engaged in issuing and reselling ne! securities#
5econdary securities mar"et
3ar"et in !hich stoc"s and bonds are traded#
Par &alue
Face &alue of a share of stoc" set by the issuing company9s board of
directors#
3ar"et &alue
0urrent price of a share of stoc" in the stoc" mar"et
Boo" &alue
alue of a common stoc" e,pressed as total o!ner9s e6uity di&ided bythe number of shares of stoc"#
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Blue chip stoc"
0ommon stoc" issued by a !ellestablished company !ith a sound
financial history and a stable pattern of di&idend payouts#
0umulati&e preferred stoc"
Preferred stoc" on !hich di&idends not paid in the past must be paid to
stoc"holders before di&idends can be paid to common stoc"holders#
5toc" e,change
4rgani*ation of indi&iduals formed to pro&ide an institutional setting in
!hich stoc" can be traded#
Bro"er
ndi&idual or organi*ation that recei&es and e,ecutes buyandsell orders
on behalf of other people in return for commissions#
4&erthecounter mar"et .4+0/
4rgani*ation of securities dealers formed to trade stoc" outside the
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4rgani*ation of securities dealers formed to trade stoc" outside the
formal institution setting of organi*ed stoc" e,changes#
8ational association of securities dealers automated 6uotation system
.8A5DA>/
4rgani*ations of securities dealers !ho o!n buy and sell their o!n
securities o&er a net!or" of electronic communications#
Bond
5ecurity through !hich an issuer promises to pay the buyer a certain
amount of money by a specific future date#
Go&ernment bond
Bond issued by the federal go&ernment#
3unicipal bond
Bond issued by a state or local go&ernment#
0orporate bond
Bond issued by a company as a source of longterm funding#
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$egistered bond
Bond bearing the name of the holder and registered !ith the issuing
company#
Bearer bond
Bond re6uiring the holder to clip and submit a coupon to recei&e an
interest payment#
5ecured bond
Bond bac"ed by pledges of assets to the bondholder#
Debenture
:nsecured bond for !hich no specific property is pledged as security#
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Priceearnings ratio
0urrent price of a stoc" di&ided by the firm9s annual earnings per share#
" d
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3ar"et inde,
5ummary of price trends in a specific industry and(or the stoc" mar"et as
a !hole#
Bull mar"et
Period of rising stoc" prices
Bear mar"et
Period of falling stoc" prices#
Do! Jones industrial a&erage .DJA/
3ar"et inde, based on prices of @ of the largest industrial firms listed on
the .85%/#
5tandard C Poor9s composite inde,
3ar"et inde, based on the performance of @@ industrial firms @utilities @ financial institutions and 2@ transportation companies#
8A5DA> composite inde,
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> p
alue!eighted mar"et inde, that includes all 8A5DA>listedcompanies both domestic and foreign#
3ar"et order
4rder to buy or sell a security at the mar"et price pre&ailing at the timethe order is placed#
-imit order
4rder authori*ing the purchase of a stoc"