Introduction To Business Vocabulary

Front 1

expenses

Back 1

resources that are used up as the result of business operations

Front 2

accrual-basis accounting

Back 2

the method of accounting that recognizes revenue when it is earned and matches expenses to the revenues they helped to produce

Front 3

revenue

Back 3

increases in a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn income

Front 4

income statement

Back 4

the financial statement that reports the revenues, expenses, and net income that resulted from a firm's operations over an accounting period

Front 5

owners' equity

Back 5

the claims a firm's owners have against their company's assets (often called "stockholders' equity" on balance sheets)

Front 6

liabilities

Back 6

claims that outsiders have against a firm's assets

Front 7

assets

Back 7

resources owned by a firm

Front 8

accounting equation

Back 8

Assets = Liabilities + Owners' Equity

Front 9

balance sheet

Back 9

a financial statement that reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owners' equity

Front 10

financial accounting standards board (FASB)

Back 10

the private board that establishes the generally accepted accounting principles used in the practice of financial accounting

Front 11

generally accepted accounting principles (GAAP)

Back 11

a set of accounting standards that is used in the preparation of financial statements

Front 12

financial accounting

Back 12

the branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stockholders

Front 13

accounting

Back 13

a system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization

Front 14

business plan

Back 14

a formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives

Front 15

communism

Back 15

an economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central government

Front 16

mixed economies

Back 16

economies that embody elements of both planned and market-based economic systems

Front 17

consumer price index (CPI)

Back 17

a measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month

Front 18

sustainable development

Back 18

doing business to meet the needs of the current generation, without harming the ability of future generations to meet their needs

Front 19

corporate responsibility

Back 19

business contributions to the community through the actions of the business itself rather than donations of money and time

Front 20

monopoly

Back 20

a market structure with one producer completely dominating the industry, leaving no room for any significant competitors

barriers to entry tend to be virtually insurrmountable

Front 21

oligopy

Back 21

a market structure with only a handful of competitors selling products that can be similar or different

barriers to entry are typically high

Front 22

supply

Back 22

the quantity of products that producers are willing and able to offer for sale at different market prices

Front 23

natural monopoly

Back 23

a market structure with one company as the supplier of a product because the nature of that products make a single supplier more efficient than multiple, competing ones

most natural monopolies are government sanctioned and regulated

Front 24

supply curve

Back 24

the graphed relationship between price and quantity from a supplier standpoint

on the graph, as price increases, quantity increases

x-axis is always quantity & y-axis is always price

supply curve is always in positive direction

Front 25

demand

Back 25

the quantity of products that consumers are willing and able to buy at different market prices

Front 26

demand curve

Back 26

the graphed relationship between price and quantity from a customer demand standpoint

on the graph, as price increases, quantity decreases

x-axis is always quantity & y-axis is always price

demand curve is always in negative direction

Front 27

equilibrium price

Back 27

the price associated with the point at which the quantity demanded of a product equals the quantity supplied

on the graph, both supply and demand curves are present

the equilibrium point is where the curves meet

the equilibrium price is where the equil. point is in relation to the y-axis

Front 28

foreign licensing

Back 28

authority granted by a domestic firm to a foreign firm for the rights to produce and market its product or to use as its trademark/patent rights in a defined geographical area

Front 29

socialism

Back 29

an economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare

Front 30

nonverbal communication

Back 30

communication that does not use words

common forms of nonverbal communication include:

~gestures

~posture

~eye contact

~tone of voice

~facial expressions

Front 31

productivity

Back 31

the basic relationship between the production of goods and services (output) and the resources needed to produce them (input) calculated via the following equation:

output = productivity

input

Front 32

producer price index (PPI)

Back 32

a measure of inflation that evaluates the change over time in the weighted average wholesale prices

Front 33

limited liability

Back 33

when owners are not personally liable for claims against their firm

owners with limited liability may lose their investment in the company, but their other personal assets are protected

Front 34

articles of incorporation

Back 34

the document filed with a state government to establish the existence of a new corporation

Front 35

corporation

Back 35

a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners

Front 36

general partnership

Back 36

a partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm

Front 37

partnership

Back 37

a voluntary agreement under which two or more people act as co-owners of a business for profit

Front 38

sole proprietorship

Back 38

a form of business ownership with a single owner who usually actively manages the company

Front 39

dynamic delivery

Back 39

vibrant, compelling presentation delivery style that grabs and holds the attention of the audience

Front 40

passive voice

Back 40

sentence construction in which the subject does not do the action expressed by the verb; rather the subject is acted upon

example: the taxes were done by our accountant

less effective for business communication

Front 41

active voice

Back 41

sentence construction in which the subject performs the action expressed by the verb

example: the accountant did the taxes

this works better for the vast majority of business communication

Front 42

bias

Back 42

a preconception about members from a particular group

common forms of bias include:

~ gender bias

~ race bias

~ age bias

~ ethnicity bias

~ nationality bias

Front 43

communication channels

Back 43

the various ways in which a message can be sent, ranging from one-on-one in-person meetings to internet message boards

Front 44

active listening

Back 44

attentive listening that occurs when the listener focuses his or her complete attention on the speaker

Front 45

market niche

Back 45

a small segment of a market with fewer competitors than the market as a whole

market niches tend to be quite attractive to small firms

Front 46

venture capital firms

Back 46

companies that invest in start-up businesses with high growth potential in exchange for a share of ownership

Front 47

angel investors

Back 47

individuals who invest in start-up companies with high growth potential in exchange for a share of ownership

Front 48

external locus of control

Back 48

a deep-seated sense that forces other than the individual are responsible for what happens in his or her life

Front 49

internal locus of control

Back 49

a deep-seated sense that the individual is personally responsible for what happens in his or her life

Front 50

entrepreneurs

Back 50

people who risk their time, money, and other resources to start and manage a business

Front 51

franchise disclosure document (FDD)

Back 51

a detailed description of all aspects of a franchise that the franchisor must provide to the franchisee at least fourteen calendar days before the franchise agreement is signed

Front 52

franchise agreement

Back 52

the contractual arrangement between a franshisor and franchisee that spells out the duties and responsibilities of both parties

Front 53

business format franchisee

Back 53

a broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor

Front 54

distributorship

Back 54

a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it

Front 55

franchisee

Back 55

the party in a franchise relationship that pays for the right to use resources supplied by the franchisor

Front 56

franchisor

Back 56

the business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations

Front 57

franchise

Back 57

a licensing agreement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations

Front 58

conglomerate merger

Back 58

a combination of two firms that are in unrelated industries

Front 59

vertical merger

Back 59

a combination of firms at different stages in the production of a good or service

Front 60

horizontal merger

Back 60

a combination of two firms that are in the same industry

Front 61

divestiture

Back 61

the transfer of total or partial ownership of some of a firm's operations to investors or to another company

Front 62

merger

Back 62

a corporate restructuring that occurs when two formerly independent business entities combine to form a new organization

Front 63

acquisition

Back 63

a corporate restructuring in which one firm buys another

Front 64

nonprofit corporation

Back 64

a corporation that does not seek to earn a profit and differs in several fundamental respects from C coprorations

Front 65

statutory close (or closed) corporation

Back 65

a corporation with a limited number of owners that operates under simpler, less formal rules than a C corporation

Front 66

S corporation

Back 66

a form of corporation that avoids double taxation by having its income taxed as if it were a partnership

Front 67

board of directors

Back 67

the individuals who are elected by stockholders of a corporation to represent their interests

Front 68

institutional investor

Back 68

an organization that pools contributions from investors, clients, or depositors and uses these funds to buy stocks and other securities

Front 69

stockholder

Back 69

an owner of a corporation

Front 70

corporate bylaws

Back 70

the basic rules governing how a corporation is organized and how it conducts its business

Front 71

C corporation

Back 71

the most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders

Front 72

limited liability partnership (LLP)

Back 72

a form of partnership in which all partners have the right to participate in management and have limited liability for company debts

Front 73

limited partnership

Back 73

a partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability

Front 74

limited liability company (LLC)

Back 74

a form of business ownership that offers both limited liability to its owners and flexible tax treatment

Front 75

pure competition

Back 75

a market structure with many competitors selling virtually identical products

barriers to entry are quite low

Front 76

exporting

Back 76

selling products in foreign nations that have been produced or grown domestically

Front 77

capitalism

Back 77

an economic system - also known as the private enterprise or free market system - based on private ownership, economic freedom, and fair competition

Front 78

economic system

Back 78

a structure for allocating limited resources

Front 79

reserve requirement

Back 79

a rule set by the Fed, which specifies the minimum amount of reserves (or funds) a bank must hold, expressed as a percentage of the bank's deposits

Front 80

federal deposit insurance corporation (FDIC)

Back 80

a federal agency that insures deposits in banks and thrift institutions for up to $250,000 per customer per bank

Front 81

discount rate

Back 81

the rate of interest that the federal reserve charges when it loans funds to banks

Front 82

open market operations

Back 82

the federal reserve function of buying and selling government securities, which include treasury bonds, notes, and bills

Front 83

M2 money supply

Back 83

includes all of M1 money supply (all currency plus checking accounts and travelers checks) plus:

~most savings accounts

~money market accounts

~certificates of deposit

Front 84

M1 money supply

Back 84

all currency plus:

~checking accounts

~travelers checks

Front 85

money

Back 85

anything generally accepted as a medium of exchange, a measure of value, or means of payment

Front 86

money supply

Back 86

the total amount of money within the overall economy

Front 87

commercial banks

Back 87

privately owned financial institutions that accept demand deposits and make loans and provide other services for the public

Front 88

importing

Back 88

buying products domestically that have been produced or grown domestically

Front 89

foreign outsourcing

Back 89

contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production

also called contract manufacturing

Front 90

monetary policy

Back 90

actions that shape the economy by influencing interest rates and the supply of money

Front 91

federal debt

Back 91

the sum of all the money borrowed by the government over the years and has not yet been repaid

Front 92

budget deficit

Back 92

shortfall that occurs when expenses are higher than revenue over a given period of time

Front 93

budget surplus

Back 93

overage that occurs when revenue is higher than expenses over a given time

Front 94

fiscal policy

Back 94

government efforts to influence the economy through taxation and spending decisions that are designed to encourage growth, boost employment, and curb inflation

Front 95

statement of cash flow

Back 95

the financial statement that identifies a firm's sources and uses of cash in a given accounting period

Front 96

net income

Back 96

the difference between the revenue a firm earns and the expenses it incurs in a given time period

Front 97

expenses

Back 97

resources that are used up as the result of business operations

Front 98

accrual-basis accounting

Back 98

the method of accounting that recognizes revenue when it is earned and matches expenses to the revenues they helped produce

Front 99

revenue

Back 99

increases in a firm's assets that result from the sale of goods, provisions of services, or other activities intended to earn income

Front 100

income statement

Back 100

the financial statement that reports the revenues, expenses, and net income that resulted from a firm's operations over an accounting period

Front 101

owners' equity

Back 101

the claims a firm's owners have against their company's assets

often called "stockholders' equity" on balance sheets of corporation

Front 102

liabilities

Back 102

claims that outsiders have against a firm's assets

Front 103

assets

Back 103

resources owned by a firm

Front 104

accounting equation

Back 104

Assets = Liabilities + Owners Equity

Front 105

balance sheet

Back 105

a financial statement that reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owners' equity

Front 106

financial accounting standards boards (FASB)

Back 106

the private board that establishes the generally accepted accounting principles (GAAP) used in the practice of financial accounting

Front 107

generally accepted accounting principles (GAAP)

Back 107

a set of accounting standards that is used in the preparation of financial statements

Front 108

financial accounting

Back 108

the branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders

Front 109

accounting

Back 109

a system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization

Front 110

business plan

Back 110

a formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives

Front 111

countertrade

Back 111

international trade that involves the barter of products for products rather than currency

Front 112

exchange rate

Back 112

a measurement of the value of one nation's currency relative to the currency of other nations

Front 113

balance of payments deficit

Back 113

shortfall that occurs when more money flows out of a nation than than into that nation

Front 114

balance of payments surplus

Back 114

overage that occurs when more money flows into a nation than out of that nation

Front 115

balance of payments

Back 115

a measure of the total flow of money into or out of a country

Front 116

trade deficit

Back 116

shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports

Front 117

trade surplus

Back 117

overage that occurs when the total value of a nation's exports is higher than the total value of its imports

Front 118

balance of trade

Back 118

a basic measure of the difference in value between a nation's exports and imports including both goods and services

Front 119

comparative advantage

Back 119

the benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries

Front 120

absolute advantage

Back 120

the benefit a country has in a given industry when it can produce more of a product than other nations using the same amount of resources

Front 121

intercultural communication

Back 121

communication among people with differing cultural backgrounds

Front 122

communication barriers

Back 122

obstacles to effective communication, typically defined in terms of physical language, body language, cultural, perceptual, and organizational barriers

Front 123

noise

Back 123

any interference that causes the message you send to be different from the message your audience understands

Front 124

communication

Back 124

the transmission of information between a sender and a recipient

Front 125

social audit

Back 125

a systematic evaluation of how well a firm is meeting its ethics and social responsibility goals

Front 126

green marketing

Back 126

developing and promoting environmentally sound products and practices to gain a competitive advantage

Front 127

carbon footprint

Back 127

refers to the amount of harmful greenhouse gases that a firm emits throughout its operations both directly and indirectly

Front 128

monopolistic competition

Back 128

a market structure with many different competitors selling differentiated products

barriers to entry are low

Front 129

direct investment

Back 129

when firms either acquire foreign firms or develop new facilities from the ground up in foreign countries

also called foreign direct investment

Front 130

foreign franchising

Back 130

a specialized type of foreign licensing in which a firm expands by offering businesses in other countries the right to produce and market its products according to specific operating requirements

Front 131

partnership

Back 131

a voluntary agreement under which two or more people act as co-owners of a business for profit

Front 132

joint ventures

Back 132

when two or more companies join forces - sharing resources, risks, and profits, but not actually merging companies - to pursue specific opportunities

Front 133

strategic allience

Back 133

an agreement between two or more firms to jointly pursue a specific opportunity without actually merging their businesses

involve less formal & less encompassing agreements than partnerships

Front 134

sociocultural differences

Back 134

differences among cultures in language, attitudes, and values

Front 135

deflation

Back 135

a period of falling average prices across the econoy

Front 136

disinflation

Back 136

a period of slowing average prices across the economy

Front 137

hyperinflation

Back 137

an average monthly inflation rate of more than 50%

Front 138

inflation

Back 138

a period of rising average prices across the economy

Front 139

expansion

Back 139

a period of robust economic growth and high employment

Front 140

recovery

Back 140

a period of rising economic growth and employment

Front 141

depression

Back 141

an especially deep and long-lasting recession

Front 142

recession

Back 142

an economic downturn marked by a decrease in the GDP for two consecutive quarters

Front 143

opportunity cost

Back 143

the opportunity of giving up the second-best choice when making a decision

Front 144

contraction

Back 144

a period of economic downturn, marked by rising unemployment and falling business production

Front 145

business cycle

Back 145

the periodic contraction and expansion that occur over time in virtually every economy

Front 146

unemployment rate

Back 146

the percentage of people in the labor force over age 16 who do not have jobs and are actively seeking employment

Front 147

gross domestic product (GDP)

Back 147

the total value of all final goods and services produced within a nation's physical boundaries over a given period of time

Front 148

privatization

Back 148

the process of converting government-owned business to private ownership

Front 149

cause-related marketing

Back 149

marketing partnerships between businesses and nonprofit organizations designed to spike sales for the company and raise money for the nonprofit

Front 150

corporate philanthropy

Back 150

all business donations to nonprofit groups, including money, products, and employee time

Front 151

Sarbanes-Oxley Act

Back 151

federal legislation passed in 2002 that sets higher ethical standards for public corporations and accounting firms

key provisions limit conflict-of-interest issues & require financial officers & CEOs to certify validity of statements

Front 152

planned obsolescence

Back 152

the strategy of deliberately designing products to fail in order to shorted the tie between purchases

Front 153

consumerism

Back 153

a social movement that focuses on four key consumer rights:

1. the right to be safe

2. the right to be informed

3. the right to choose

4. the right to be heart

Front 154

stakeholders

Back 154

any groups that have a stake - or a personal investment - in the performance and actions of an organization

Front 155

social responsibility

Back 155

the obligation of a business to contribute to society

Front 156

whistle-blowers

Back 156

employees who report their employers illegal or unethical behavior to either the authorities or the media

Front 157

code of ethics

Back 157

a formal, written document that defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations

Front 158

ethical dilemma

Back 158

a decision that involves a conflict of values; every potential course of action has some significant negative consequences

Front 159

business ethics

Back 159

the application of right and wrong, good and bad, in a business setting

Front 160

universal ethical standards

Back 160

ethical norms that apply to all people across a broad spectrum of situations

Front 161

ethics

Back 161

a set of beliefs about right and wrong, good and bad

Front 162

European Union (EU)

Back 162

the world's largest common market, composed of 28 European nations

Front 163

North American free trade agreement (NAFTA)

Back 163

the treaty among the United States, Mexico, and Canada that eliminated trade barriers and investment restrictions over a fifteen-year period starting in 1994

Front 164

common market

Back 164

a group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations

Front 165

trading bloc

Back 165

a group of countries that have reduced or even eliminated tariffs, allowing for the free flow of goods among the member nations

Front 166

international monetary fund (IMF)

Back 166

an international organization of 187 member nations that promotes international economic cooperation and stable growth

Front 167

world bank

Back 167

an international cooperative of 187 member countries, working together to reduce poverty in the developing world

Front 168

world trade organization (WTO)

Back 168

a permanent global institution to promote international trade disputes

Front 169

general agreement on tariffs and trade (GATT)

Back 169

an international trade treaty designed to encourage worldwide trade among its members

Front 170

free trade

Back 170

the unrestricted movement of goods and services across international borders

Front 171

embargo

Back 171

a complete ban on international trade of a certain item, or a total halt in trade with a particular nation

Front 172

voluntary export restraints (VERs)

Back 172

limitations on the amount of specific products that one nation will export to another nation

Front 173

quotas

Back 173

limitations on the amount of specific products that may be imported from certain countries during a given time period

Front 174

tariffs

Back 174

taxes levied against imports

Front 175

protectionism

Back 175

National policies designed to restrict international trade, usually with the goal of protecting domestic businesses

Front 176

infrastructure

Back 176

a country's physical facilities that support economic activity

Front 177

small business development centers (SBDCs)

Back 177

local offices affiliated with the small business administration that provides free, comprehensive business counseling for small business owners from qualified volunteers

Front 178

small business administration (SBA)

Back 178

an agency of the federal government designed to maintain and strengthen the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses

Front 179

horizontal analysis

Back 179

analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends

Front 180

budgeting

Back 180

a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period

Front 181

operating budgets

Back 181

budgets that communicate an organization's sales and production goals and the resources needed to achieve these goals

Front 182

financial budgets

Back 182

budgets that focus on the firm's financial goals and identify the resources needed to achieve those goals

Front 183

master budget

Back 183

a presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period

Front 184

managerial (or management) accounting

Back 184

the branch of accounting that provides reports and analysis to managers to help them make informed business decisions

Front 185

cost

Back 185

the value of what is given up in exchange for something

Front 186

out-of-pocket cost

Back 186

a cost that involves the payment of money or other resources

Front 187

implicit cost

Back 187

the opportunity cost that arises when a firm uses owner-supplied resources

Front 188

fixed costs

Back 188

costs that remain the same when the level of production changes within some relevant range

Front 189

variable costs

Back 189

costs that vary directly with the level of production

Front 190

direct cost

Back 190

costs that are incurred directly as the result of some specific cost object

Front 191

indirect cost

Back 191

costs that are the result of a firm's general operations and are not directly tied to any specific cost object

Front 192

activity-based costing (ABC)

Back 192

a technique to assign product costs based on links between activities that drive costs and the production of specific products

Front 193

financial capital

Back 193

the funds a firm uses to acquire its assets and finance its operations

Front 194

finance

Back 194

the functional area of business that is concerned with finding the best sources and uses of financial capital

Front 195

risk

Back 195

the degree of uncertainty regarding the outcome of a decision

Front 196

risk-return tradeoff

Back 196

the observation that financial opportunities that offer high rates of return are generally riskier than opportunities that offer lower rates of return

Front 197

financial ratio analysis

Back 197

computing rations that compare values of key accounts listed on a firm's financial statements

Front 198

liquid asset

Back 198

an asset that can quickly be converted into cash with little risk of loss

Front 199

liquidity ratios

Back 199

financial ratios that measure the ability of a firm to obtain the cash it needs to pay its short-term debt obligations as they come due

Front 200

assets management ratios

Back 200

financial ratios that measure how effectively a firm is using its assets to generate revenues or cash

Front 201

financial leverage

Back 201

the use of debt in a firm's capital structure

Front 202

leverage ratios

Back 202

ratios that measure the extent to which a firm relies on debt financing in its capital structure

Front 203

profitability ratios

Back 203

ratios that measure the rate of return a firm is earning on various measures o investment

Front 204

budgeted income statement

Back 204

a projection showing how a firm's budgeted sales and costs will affect expected net income

also called a pro forma income statement

Front 205

budgeted balance sheet

Back 205

a projected financial statement that forecasts the types and amounts of assets a firm will need to implement its future plans and how the firm will finance those assets

also called a pro forma balance sheet

Front 206

cash budget

Back 206

a detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash

Front 207

trade credit

Back 207

spontaneous financing granted by sellers when they deliver goods and services to customers without requiring immediate payment

Front 208

spontaneous financing

Back 208

financing that arises during the natural course of business without the need for special arrangements

Front 209

factor (noun)

Back 209

a company that provides short term financing to firms by purchasing their accounts receivables at a discount

Front 210

line of credit

Back 210

a financial arrangement between a firm and a bank in which the bank pre-approves credit up to a specified limit, provided that the firm maintains an acceptable credit rating

Front 211

revolving credit agreement

Back 211

a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement

Front 212

commercial paper

Back 212

short-term (and usually unsecured) promissory notes issued by large corporations

Front 213

retained earnings

Back 213

the part of a firm's net income it reinvests

Front 214

covenant

Back 214

a restriction lenders impose on borrowers as a condition of providing long-term debt financing

Front 215

equity financing

Back 215

funds provided by the owners of a company

Front 216

debt financing

Back 216

funds provided by lenders (creditors)

Front 217

capital structure

Back 217

the mix of equity and debt financing a fir uses to meet its permanent financing needs

Front 218

Dodd-Frank Act

Back 218

a law enacted in the aftermath of the financial crisis of 2008-2009 that strengthened government oversight of financial markets and placed limitation on risky financial strategies such as heavy reliance on leverage

Front 219

cash equivalents

Back 219

safe and highly liquid assets that many firms list with their cash holdings on their balance sheet

Front 220

U.S. Treasury bills (T-bills)

Back 220

short-term marketable IOUs issued by the U.S. federal government

Front 221

money market mutual funds

Back 221

a mutual fund that pools funds from many investors and uses these funds to purchase very safe, highly liquid securities

Front 222

capital budgeting

Back 222

the process a firm uses to evaluate long-term investment proposals

Front 223

time value of money

Back 223

the principle that a dollar received today is worth more than a dollar received in the future

Front 224

certificate of deposit (CD)

Back 224

an interest-earning deposit that requires the funds to remain deposited for a fixed term

withdrawl of the funds before the term expires results in a financial penalty

Front 225

present value

Back 225

the amount of money that, if invested today at a given rate of interest (called the discount rate), would grow to become some future amount in a specified number of time periods

Front 226

net present value (NPV)

Back 226

the sum of the present values of expected future cash flows from an investment, minus the cost of that investment

Front 227

Standard & Poor's 500

Back 227

a stock index based on prices of 500 major U.S. corporations in a variety of industries and market sectors

Front 228

Dow Jones industrial average

Back 228

an index that tracks stock prices of thirty large, well-known U.S. corporations

Front 229

stock index

Back 229

a statistic that tracks how the prices of a specific set of stocks have changed

Front 230

limit order

Back 230

an order to a broker to buy a specific stock only if its price is below a certain level, or to sell a specific stock only if its price is above a certain level

Front 231

market order

Back 231

an order telling a broker to buy or sell a specific security at the best currently available price

Front 232

electronic communications network (ECN)

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an automated, computerized securities trading system that automatically matches buyers and sellers, executing trades quickly and allowing trading when securities exchanges are closed

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over-the-counter (OTC) market

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the market where securities that are not listed on exchanges are traded

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market makers

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securities dealers that make a commitment to continuously offer to buy and sell the stock of a specific corporation listed on the NASDAQ exchange or traded in the OTC market

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stock (or securities) exchange

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an organized venue for trading stocks and other securities that meet its listing requirements

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accredited investor

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an organization or individual investor who meets certain criteria established by the SEC and so qualifies to invest in unregistered securities

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registration statement

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a long, complex document that firms must file with the SEC when they sell securities through a public offering

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underwriting

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an arrangement under which an investment banker agrees to purchase all shares of a public offering at an agreed-upon price

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initial public offering (IPO)

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the first time a company issues stock that may be bought by the general public

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private placement

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a primary market issue that is negotiated between the issuing corporation and a small group of accredited investors

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public offering

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a primary market issue in which new securities are offered to any investors who are willing and able to purchase them

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secondary securities market

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the market where previously issued securities are traded

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primary securities market

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the market where newly issued securities are traded

the primary market is where the firms that issue securities raise additional financial capital

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exchange traded fund (ETF)

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shares traded in securities markets that represent the legal right of ownership over part of a basket of individual stock certificates or other securities

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net asset value per share

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the value of a mutual fund's securities and cash holdings minus any liabilities, divided by the number of shares of the fund outstanding

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mutual fund

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an institutional investor that raises funds by selling shares to investors and uses the accumulated funds to buy a portfolio of many different securities

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financial diversification

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a strategy of investing in a wide variety of securities in order to reduce risk

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convertible security

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a bond or share of preffered stock that gives its holder the right to exchange it for a stated number of shares of common stock

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current yield

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the amount of interest earned on a bond, expressed as a percentage of the bond's current market price

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coupon rate

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the interest paid on a bond, expressed as a percentage of the bond's par value

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par value (of a bond)

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the value of a bond at its maturity; what the issuer promises to pay the bondholder when the bond matures

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maturity date

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the date when a bond will come due

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bond

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a formal debt instrument issued by a corporation or government entity