Flashcards: Business Terms
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Created by:
magisterkappa on July 8, 2011
Description:
For use in CBS's pre-MBA program.
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Terms | Definitions |
|---|---|
 ARM | Adjustable Rate Mortgage A mortgage loan that allows the interest rate to be charged at specific intervals over the maturity of the loan |
| CSR | Corporate Social Responsibility A concept that corporations have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations |
| DCF | Discounted Cash Flow A technique used to estimate the present value of future expected cash receipts and expenditures; it is a factor analysis of both capital investments and securities investments |
| DIV | Dividend A payment by a corporation to shareholders |
| EBIT | Earnings Before Interest & Taxes Financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses |
| EBITDA | Earnings Before Interest, Taxes, Depreciation & Amortization Pre-tax earnings before interest, depreciation and amortization |
| EBT | Earnings Before Taxes Sales revenue less cost of sales, operating expenses, and interest, before taxes have been paid |
| EPS | Earnings per Share The portion of a company's profit allocated to each outstanding share of common stock |
| FASB | Financial Accounts Standards Board The non-governmental body which sets the accounting rules for US companies |
| FCF | Free Cash Flow The amount of cash a company has after expenses, debt service, capital expenditues and dividends |
| FDIC | Federal Deposit Insurance Corporation A U.S. government corporation that provides deposit insurance, which guarantees the safety of deposits in member banks up to $250,000 per depositor |
| GAAP | Generally Accepted Accounting Practices Rules for accounting standards |
| IMF | International Monetary Fund An international organization that oversees the global financial system by following the macroeconomic policies of member countries, in particular those with an impact on exchange rates and the balance of payments; it also offers financial and technical assistance to its members, making it an international lender of last resort |
| LBO | Leveraged Buyout The takeover of a company, using borrowed funds |
| LIBOR | London Inter-Bank Offer Rate The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once per day by a small group of large London banks, but the rate changes throughout the day. |
| NFA | Net Fixed Assets Also known as the book value of an asset, this is calculated as the purchase price of the asset (gross fixed asset) less the accumulated depreciation (the sum of the annual amounts charged for the "wearing out" of the asset). |
| NOPAT | Net Operating Profit After Tax In corporate finance, a company's after-tax operating profit for all investors, including shareholders and debt holders. NOPAT is an operating performance measure after taking account of taxation but before financing cost (i.e., interest is excluded). |
| PPE (Net) | Property, Plant & Equipment less Accumulated Depreciation |
| R&D | Research & Development The scientific and marketing evolution of a new product or service |
| ROA | Return on Assets Indicator of profitability determined by dividing net income for the past 12 months by total average assets |
| ROE | Return on Equity Indicator of profitability determined by dividing net income for the past 12 months by common shareholder equity |
| ROI | Return on Investment Book income as a proportion of net book value |
| SEC | Securities & Exchange Commission A federal agency that regulates the U.S. financial markets |
| SG&A | Selling, General and Administrative Expenses |
| SWOT | Strengths, Weaknesses, Opportunities, Threats Components of a situation analysis in marketing and business strategy |
| TARP | Troubled Assets Relief Program A U.S. government program to purchase assets and equity from financial institutions in order to strengthen the financial sector |
| TVM | Terminal Value The remaining or expected remaining value of a property at the end of a certain period |
| WC | Working Capital Current assets minus current liabilities |
| Alpha | A financial measure giving the difference between a fund's actual return and its expected level of performance |
| Amortization | Paying off debt over time |
| Annuity | Any terminating stream of fixed payments over a specified period of time |
| Balance Sheet | A financial statement that gives an accounting picture of a business at a particular date |
| Beta | The measure of a stock's volatility relative to the market |
| Bond | A form of interest-bearing security issued by governments, companies, banks and other institutions |
| Breakeven Analysis | A financial analysis that identifies the point at which expenses equal gross revenue for a zero net difference |
| Budget Deficit | Excess of spending over income for a government, corporation or individual over a particular period of time |
| Business Cycle | Recurrent periods during which the nation's economy moves in and out of recession and recovery phases |
| Call | Right to buy a specific number of shares at a specified price by a fixed date |
| Capital | Money and other property of a corporation or other enterprise used in transacting business |
| Central Bank | The governmental institution that issues currency, administers financial policy and holds deposits representing the reserves of other banks |
| Collateralized Debt Obligation (CDO) | A security backed by a pool of bonds, loans, and other assets |
| Common Stock | Securities that represent an equity ownership interest in a company |
| Core Competency | Distinctive employee, product, or capacity leading to a long-term advantage |
| Corporate Governance | The monitoring systems of a corporation consisting of incentives, safeguards, and dispute resolution processes |
| Corporate Social Responsibility (CSR) | A concept that corporations have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations |
| Coupon | The interest payment thata must be made on a note or bond until it matures |
| Credit Default Swap (CDS) | A contract between the buyer, who receives protection, and the seller, who provides protection, under which the seller agrees to make specified payment to the buyer in the event of a negative credit event (e.g., a default) on the underlying fixed income product(s) specified in the contract |
| Current Assets | Assets that could be converted to cash, sold, exchanged, or expensed in the normal course of business, usually within one year |
| Current Liabilities | Debt incurred as part of normal operations that is due within one year |
| Debt | An obligation to pay |
| Demand | Economic expression of desire, and ability to pay, for goods and services |
| Depreciation | The reduction in value of an asset through wear and tear, obsolescence or other factors |
| Derivative | A generic term for futures, options, and swaps, i.e. instruments derived from conventional direct dealings in securities, currencies, and commodities |
| Enterprise Value | A measure of what the market believes a company's ongoing operations are worth |
| Equilibrium (economic) | A situation in which market forces do not set in motion a change in the quantities demanded or the current prevailing price |
| Equity | The residual value of a company's assets after all liabilities have been allowed for |
| Exponential Equation | An equation in which a term is raised to a power |
| Fixed Pie | A situation in which resources to be divided are fixed |
| Free Cash Flows | The amount of cash that a company has left over after it has paid all of its expenses, including capital expenditures, debt service, and dividends |
| Fund of Funds | A mutual fund that invests in other mutual funds |
| Gain | Increase in value |
| Gross Domestic Product | The total market value of all final goods and services provided in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports |
| Gross Income | The total income from all sources |
| Gross National Product | The total value of all goods and servies produced within a nation in a particular year, plus income earned by its citizens located abroad minus income in non-residents located in that country |
| Groupthink | The condition where desire for consensus within a group overrides the realistic appraisal of alternative courses of action and downplays risks |
| Habituation | The process through which people adjust to a change in circumstances, coming to accept something new as standard |
| Hedge Fund | Private investment partnership which takes both long and short positions, uses leverage and derivatives and invests in many markets |
| Illiquid Securities | An asset that cannot easily be sold without a substantial loss in value because of a lack of buyers |
| Income Statement | A financial statement giving operating results, such as net income and loss, for a specific period |
| Inflation | A rise in the price of goods and services |
| Interest Rate | The rate of return over a period of time promised by a borrower to a lender |
| Just-in-Time Inventory | A method of coordination with suppliers maximizing the relationship between production and sales with inventory to minimize the carrying cost of supplies |
| Leveraged Buyout (LBO) | The takeover of a company, using borrowed funds |
| Linear Equation | An equation in which all terms are of the power 1 |
| Loss | Expenses exceeding sales or revenue |
| Macroeconomics | The study of which economic systems |
| Managing Upwards | Efforts to influence one's manager or superior, over whom one does not have organizational authority |
| Management Fee | The charge against assets for managing the portfolio of a mutual fund or other investment entity, as well as for such services as shareholder relations or administration |
| Margin (finance) | The difference between the price at which something is bought and the price at which it is sold |
| Mark-to-Market | An accounting rule of assigning a value to a financial instrument based on the current market price for the instrument or similar instruments |
| Market Segmentation | The process of dividing the market according to similarities that exist among the various subgroups within the market |
| Microeconomics | The study of economics at the level of individual consumers, groups of consumers or firms |
| Monetary Policy | Policies determining the level and rate of growth of the nation's money supply, which are under the control of a government institution |
| Mortgage-Backed Security (MBS) | A security that is secured by a collection of mortgages |
| Multiples | In stock-index futures, the number multiplied by the futures price to determine the value of the contract |
| Mutual Fund | An investment company that pools the money raised from shareholders for investment |
| Net Income | The company's total earnings, reflecting revenues, adjusted for expenses |
| Net Worth | The amount by which the fair market value of all assets exceeds liabilities |
| Options | Contracts giving the right to buy or sell a financial instrument or commodity at a specified price within a specified period, with no obligation to do so |
| Preferred Stock | A stock which precedes the remaining stock in the payment of dividends and the return of capital if the issuing company is liquidated |
| Price to Earnings Ratio (P/E Ratio) | A measure of the price paid for a share relative to the annual net income or profit earned by the firm per share |
| Profit | The difference between the price at which products are sold and the cost of producing them |
| Private Equity | Institutional investment in unlisted companies |
| Put | An option granting the right to sell a specified number of shares at certain price by a specified date |
| Quadratic Equation | An equation in which the highest power of an unknown quantity is a square |
| r^2 | A statistic that shows the amount of variability in a dependent variable explained by the regression model's independent variable(s) |
| Revenue | Amount earned, generally denoting a gross figure |
| Risk Free Rate | The theoretical rate of return of an investment with zero risk |
| Securitization | Distribution of risk by aggregating debt instruments in a pool, then issuing new securities backed by the pool |
| Security | Signifying an ownership position, i.e. bonds or shares, as distinct from money market assets |
| Seignorage | The financing of government deficits by printing money instead of borrowing from the public |
| Short Selling ("Shorting") | The selling of a security that the seller does not own at the time of sale with the intention of later purchasing the security at a lower price and returning it to the security's lender, thereby generating a profit if the security has declined in value. (This reverses the adage of "buy low, sell high" to "sell high, buy low.") |
| Social Intelligence | A set of skills and abilities revolving around one's abiltiy to understand and manage oneself and relationships with others |
| Stagflation | An economic environment in which unemployment and inflation coexist |
| Stock | Ownership of a corporation which is represented by shares which represent a piece of the corporation's equity |
| Stock Exchange | An organized marketplace in which stocks and bonds are traded by members of the exchange, acting both as agents and as principals |
| Supply | The quantity of a good or service available for sale at any specified price |
| Swap | To exchange one investment for another |
| Time Value of Money | A concept that money available now is worth more than the same amount in the future because of its potential earning capacity |
| Unemployment | The number of people who are available for work and actively seeking work, but cannot find jobs |
| Value Investment | The practice of purchasing stock that is perceived to be under priced |
| Venture Capital | An investment in a start-up business |
| Yield Curve | The relation between the interest rate and the time of maturity of the debt for a given borrower in a given currency |
| Zero Sum Game | A game in which the sum of the amounts won and lost by all parties is always zero, i.e. gain is always achieved at the expense of other participants |
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