Business Terms

Acquiree

Acquiree is the term used to call the subject matter of sale that is being sold. For example if a company is being traded or sold the subject matter of the sale means all that is part of the sale. It can also be called the ‘target firm’ which is being acquired or purchased.

Acquirer

An acquirer can be a person or a corporation gaining financial control over some other corporation permanently. This acquisition is done by giving cash or stock in exchange, to gain the rights over that corporation. It can also be understood with the example that an acquirer is a financial institution which is approached to approve a credit or debit card purchase. The acquirer will either reject the purchase or accept it by placing money into the sellers account. With the payment that the acquirer gives for the subject matter he then becomes the rightful owner and the ownership in the property is legally transferred to that person or firm.

Act of Bankruptcy

Bankruptcy Act also called as the Insolvency Act is defined as the decree according to which there is a lawful practice of the bankruptcy laws to curb this menace especially in Canada. 

Adam Smith

Adam Smith is the pioneer name in the field of political economy. Basically he was a Scottish philosopher and was a moral dignitary. His main contribution was towards the establishment of the political economy. He has been the main figure who played a very positive and productive role during the times of Scottish Enlightenment.

Adhocracy

The term adhocracy is commonly defined as "a form of organization that operates differently from the normal bureaucratic lines to explore opportunities, resolve the issues, and get better outcomes". 

Arbitrage

In finance, arbitrage refers to the practice of taking advantage of a of the difference between the prices of two or more markets – striking an arrangement of matching deals that capitalize upon the difference, the profit being the difference between the market prices. While being used by the academics, an arbitrage refers to a transaction involving no negative cash flows at any temporal or probabilistic state and a positive cash flow in at least one state. Putting it simple, it is the possibility of a risk free profit at zero cost.

Asset Restructuring

Different companies have established the asset reconstruction and restructuring authorities and organizations in several countries. Various multi national companies in different countries are working in this field and are also establishing the asset restructuring phenomena...

Balance Theory

Balance theories might be of two types, the credit balance theory and the debit balance theory. The credit balance theory indicates the cash balances and the brokerage accounts of the investor that help in forecasting the trends in the market. This theory indicates that those investors who have cash in their accounts usually use that cash for buying marketable securities. When they will go to purchase them, then the demand for the securities will increase in the local markets which will ultimately increase their prices.

Bare Trust

Bare Trust is defined as the basic trust in which the beneficiary has the complete right to the assets within the trust, along with the income generated from these assets. Bare trusts are extensively used by parents and grandparents for handing over the assets to their children or grandchildren. Trust assets are alleged in the name of the trustee, who has the duty to manage the trust assets in a sensible way so as to create maximum profit for the beneficiaries. The trustee does not have any control over these assets and has no say in directing the trust's revenue or capital. It is also known as a simple trust.

Barter

Barter can be describes as an act of trading goods and services between two or more than two parties without involving the use of money. Bartering is beneficial for a companies and countries that see a mutual benefit in exchanging goods and services instead of cash, in addition to enabling those who are short of hard currency to obtain goods and services. The barter system is generally bilateral, but might also be multilateral, and by and large exists parallel to monetary systems in most developed countries, although to a very limited extent.

Benchmark Interest Rate

Various banks in the world have given their own benchmark rates for interest. Benchmark interest rate is defined as the minimum rate of interest which is liable to be accepted by the investors especially when they are willing to invest money in the non treasury security.

Beneficiary

In trust law known as ‘cestui que use’ a beneficiary can be natural person or an entity of legal stature who is entitled to receive money or other assistances from another person known as his ‘Benefactor’. 

Bond

A bond refers to a debt investment wherein an investor lends money to a business company (governmental or corporate) that borrows the funds for a specific time period at a fixed interest rate. 

Bribery

Bribery is the biggest evil for any community and it also impacts the overall economy of that region. Bribery is defined as the gift granted to any individual, community or the organization for which in against the person who granted the gift ask for some favor. The favor usually which are asked by the person who granted the gift are illegal, which is against eh merit system or it can be the short cut method of achieving something for which the rules and other regulations are not been followed. Bribery kills the faith among the person and thus the whole community becomes money hunger.

Bridge Loan

Basically the bridge loan is the interim financing strategy based loan and it offers the financing of an individual or a business. This is done so that the next stage of financing until the next stage of the financing is obtained.

Budget Constraint

A budget constraint refers to all the combination of goods and services that can be purchased by a consumer with his or her income at their given prices. The concepts of a preference map and a budget constraint is used by the consumer theory for analyzing consumer choices.

Budgetary Slack

Budgetary slack is an allowance set for any extra expenditure that the entity is going to incur in the fore coming period. This is a practice where an ample amount of intentional allowance is introduced in the budget for any other or miscellaneous expenditure the business is going to sustain.

Bureaucracy

Burn Rate

Burn rate is the term which is used in synonym for the cash flow in negative or opposite direction. Basically it is the measure of the speed of a company to use or consume the capital of a share holder.

Business Plan

A business plan is a decision making tool which can be delineated as a formal statement of a set of business goals, the reasons for they being achievable, and the plans for achieving these goals. Moreover, a business plan may also consist of background information about the organization attempting to achieve the goals.

Business Process Reengineering

The process of assessing and then redesigning the flow of work within the business or between businesses is known to be the business process reengineering. In the fast changing global market the strategies and goals of businesses keep changing to keep up with the modern globalised market structure. To keep in sync with the goals of business there is a need to keep the business ‘lean and fit’ thus cut off all the excess joints in the workflow which are unprofitable for the business and reduce the overall efficiency in order for the business to become a strong force in the highly competitive market now days.

Capital Account

The term capital account is used most frequently in the field of macroeconomics and international finance and monetary matters. It is also known as the financial account. Therefore both the terms can be used for this thing.

Capital Accumulation

Capital accumulation means collecting or gathering of objects that have value, increasing wealth by concentrating it or creating of wealth. Capital refers to money or any financial asset that is utilized for generating money. The generated money can be received in the form of interest, profit, rent, capital gain, royalties or any other type of return. This activity is the foundation of the economic system of capitalism in which all the economic activities are planned and prepared around accumulating the capital. That is to say, all investments are made for realizing financial profit.

Cash Generating Account

Various banks and financial institutions have come up with the establishment of the cash generating units and accounts. Basically these units and accounts are subjected to the testing of annual impairment if there exists any in the banking systems and the accounts.

Cash Limit

There is a cash limit of every card whether it is the credit card of the ATM card which one can withdraw at the specific time or within 24 hours time period. This is called as the cash limit of the card or account.

Cash Transaction

A cash transaction has two essential features. A transaction that takes place and cash is given immediately. Cash needs to be paid upfront and even the delivery shall take place at the same time. If delivery takes place now and payment is to be settled at a later date agreed by both parties involved in the transaction then it is no longer a cash transaction. The simplest example of a cash transaction can be if you walk into a garment shop, pick out a jacket, pay for it in cash and walk out with the jacket. In the above transaction both elements are then fully satisfied as cash payment and delivery both take place at the same time.

Certificate of Deposit

It is a timely deposit. A cost-effective product commonly accessible to the clients in the US by thrifts institutions, credit unions and banks. The trademark for the customary certificate of deposit is safety that is vended by credit unification or a bank. Financiers looking for a low jeopardy investment suppose that once it’s held to development numerous CDs would yield the full quantity of the innovative speculation even if the organization delivering the certificate of deposit breakdowns.

Claw Back

Claw back is the specific kind of a clause which is added at the time of signing a contract. This is a typical one and is added frequently in the major employment contracts of firms and companies.

Co-financing

Other than financing techniques, there is another term known as co-financing. Basically on official terms, the co-financing is concerned with designing of certain arrangements according to which more than one parties collaborate and contribute towards funding. This procedure and agreement is carried on and followed on international levels.

Collateral

Collateral refers to assets or properties which are presented to secure a loan or other credit.

Collateralized Mortgage Obligation

Collateralized mortgage obligation is basically a kind of security that has mortgage backing and establishes separated pools of pass-through rates for multiple bondholder classes with a variety of maturities known as tranches. Any repayment from the pool of securities is utilized for retiring of bonds in an order that is laid down in the prospectus of the bonds.

Collection Agency

A collection agency is the business oriented agency which is concerned with collection of money of debt from the lenders ad companies.

Commitment Letter

A commitment letter is the formal letter which is issued by the lending authorities in order to inform the loan applicant about the terms and conditions about getting the loan credit. The status of the commitment letter is made equal by the authorities as being the legal and formal documents.

Commodity Paper

Commodity paper is defined as the loan or advance of issued by the borrower to the lender on part of which the raw materials owned by the borrower serve as the collateral body for both the people.

Commodity Product Spread

There are several aspects and attributes of the commodity product spread. The involvement of a commodity product spread in the purchase of a given tangible or intangible commodity is result of the purchase or subsequent sale of the products because of the commodity product spread.

Conversation Costs

Conversion cost is defined as the sum of all the costs which have been incurred in carrying out the conversion of an article into the intended output.

Conversion Premium

The surplus at which an adaptable security may be sold beyond its transfiguration value is known as premium. If the market price of an alterable security rises, its conversion premium declines. A bond valuing $1500, which is convertible into 50 common stock shares of $25 each will sell on aconversion premium of $250 {$1500 – (50 x $25)}.

Corporate Finance

Corporate finance can be delineated as a monetary or financial activity dealing with a company and its money. As per Investopedia, this can consist of anything from IPOs to acquisitions. A corporate finance specialist assists a firm in evaluation of operating data and industry indicators in addition to providing advice about management on budget adjustment and decisions regarding general investment. 

Cost Benefit Analysis (CBA)

Cost benefit analysis (CBA) refers to a systematic process that is used to calculate and compare costs and benefits of projects, decisions and government policies. Cost benefit analysis is also sometimes known as benefit cost analysis (BCA).

Cost-effectiveness Analysis (CEA)

Cost effectiveness analysis (CEA) refers to a systematic process that helps in comparing two or more courses of action by considering their relative costs and outcomes or effects. Cost effectiveness analysis is related to cost benefit analysis but there is a slight difference between them. Unlike cost benefit analysis (CBA), cost effectiveness analysis does not assign any monetary value for measuring the effects.

Covenant

Covenant generally refers to a promise in an agreement, or any other formal debt indenture, that certain activities will or will not be conducted. Putting it simple, it is a clause in a contract that asks one party to carry out, or refrain from carrying out, certain things.

Credit Cooperative

There is a People’s Bank in China which has initiated the credit cooperative scheme. This is the sanctioned cooperative union which enables the citizens to get credit. This is provided on tenure system.

Credit Crunch

Credit crunch is defined as the reduction in the general availability of loans or credit. It may also be defined as the sudden restrictions and tightening of the terms and conditions which are required for obtaining the loans from banks.

Credit Limit

Credit limit is defined as the maximum amount credit that can be withdrawn as the debt from any financial institution or a bank. Basically it is decided by the financial institution to set its own credit limits and range to which the credit can be provided to a borrower in a specific time period.

Credit Line

The credit line is defined as the credit source which is extended to any business, government, bank, individuals or any other financial institution. There are several forms in credit line can be interpreted and explained. The most common forms of credit line expansion or restriction include the loan demand, protection of overdraft, any other specific purpose, export packing of the credit, and many other attributes.

Credit Rating Agency

Credit rating agency is the rating service company which is destined to assign ratings. There are different kinds of rating included in this regard. These can be expressed as follows.

Cumulative Preferred Stock

If the past dividends have been omitted for some reasons, they must be paid to the preferred stockholders rather than the common shareholders. This is known as cumulative preferred stock.

Debenture

Debenture is an instrument that is only backed up by the credibility of the issuer in the market and not with any physical asset as such. It is a type of debt instrument which is in an indenture just like other bonds. Debentures are introduced in the market by corporations and government to pool in capital.

Deflation

Deflation is the opposite of inflation which means a decline in the money supply or credit. Deflation may also be caused by decrease in spending which includes government or private sector spending. Central banks tend to decrease severe deflation in order to keep the price fluctuation to minimum level because deflation creates uncertainty in the country with decreased demand.

Derivative

Derivative is a financial instrument or other contract with all three of the following characteristics:

Discretionary Trust

Discretionary trust provides a trustee with the power to decide and come to a conclusion with regard to the beneficiary who would receive the funds and the amount of funds that he/she would get. The trust’s settler may look at guiding the trustee using a memorandum that is informal or through a letter comprising wishes. However, any of the settlor’s attempts to put restrictions on the discretion of trustees renders the trust invalid. Given that none of the assets can be clearly identified with any one particular beneficiary, the creditors are not allowed to attach the assets of the trust towards paying a liability or loan.

Divestment

Divestment basically refers to the process of selling an asset. This process is also referred as divesture. The process is carried out either for social or financial goals. Divestment is the converse of investment.

Dutch Auction

Dutch auction is primarily a kind of auction wherein the price on a particular item is lowered till the time it attracts a bid. The bid that is made first is considered to be the winning bid and transforms into a sale, on the assumption that the bidding price is more than the reserve price. In this sort of an auction, the investors bid for an amount that they are willing to pay for buying, both in terms of price and quantity.

Escrow

An escrow is basically a type of arrangement, which is made as per the provisions laid down in a contract between parties that are transacting with each other, wherein an independent 3^rd party gets and disburses funds or/and documents on behalf of the parties that are transacting, with disbursement timing by the 3^rd party depending on fulfilling of all the conditions listed in the contract by the parties that are transacting with each other.

Exploration Expenditures

Exploration expenditure comprises of the expenditure other than the excluded expenditure which is incurred by a taxpayer in exploration for petroleum in the eligible recovery or the exploration area in relation to the petroleum project.

Factoring

Factoring can be explained as a financial transaction that involves a business job sells out its accounts receivable (called invoices) to a third party (referred as a factor) at a discount. “Advance” factoring involves the factor to provide finance to the account seller in the form of a cash advance, usually 70-85% of the purchase price of the accounts. The balance of the purchase price, along with the net of the factor’s discount fee, and other charges is paid upon collection.

Finance

Finance is generally defined as “funds management” or the management of money. However, modern finance is a family of business activity which involves the marketing, organization, and management of cash. Moreover, money surrogates through the way of instruments, capital accounts, and markets created for transacting and trading assets, liabilities, and risks.

Financial Management

Financial management can be referred to as a branch of finance dealing with the managerial significance of the finance techniques. It involves planning, organizing, directing, and controlling the financial activities of a business firm, like procurement and utilization of the funds of the business firm. 

Franchise

By definition, a franchise is a form of business organization in which a firm is already successful because of a good product or service called the franchisor, who gets into a contract based relationship with another business called a franchisee, who operates under the name of the franchisor for a fee.

Franchisee

A franchise is an agreement in which a party (franchisor) shares business knowledge, trademarks, techniques and other unique selling points with another party (franchisee). The franchisee then may operate under the franchisor’s name and carry on a separate business but within the perimeters set by the franchisor.

Franchisor

A franchise is an agreement in which a party (franchisor) shares business knowledge, trademarks, techniques and other unique selling points with another party (franchisee). The franchisee then may operate under the franchisor’s name and carry on a separate business but within the perimeters set by the franchisor.

Fraud

Fraud is considered to be the economic evil. It’s actually a tricky or unlawful way to obtain something. Fraud vanishes the trust of the person who had been victimized from it. Fraud got motivation from the will or desire to deceive someone or unlawfully capturing the money or the property from the person who previously trusted the person who had done fraud with him. This evil has wreaked up the faith among the persons and makes the community to be less depended to the term ‘trust’.

Free Price System

The term free price system refers to an economic system where prices are decided by exchange of demand and supply and the prices resulting from it is taken as a signal which is communicated between consumers and producers and which helps in guiding production and distribution of the resources. Free price system is also known as free price mechanism and sometimes informally they are called the price mechanism or the price system.

Garnishment

Garnishment is a process that is extremely associated with the payroll accounting. In this process, the employer holds the wages of the employee by the order of a court. Then the employer remits this money to the person or agency, which the court specifies explicitly. This process of withholding and remittance by the order of a court is known as wage garnishment.

GE/McKinsey Matrix

The GE/McKinsey matrix is a form of analysis using a portfolio, it outlays the strategic units of the business and the position of SBU (it is a combination of product market which needs a separate business plan) in the industry. It locates the industry attractiveness on the vertical axis and the business unit strength on the horizontal axis, both in categories of high, medium and low. It was originally developed by McKinsey for the general electric company. It is indicated on the axes weigh the business options under two criteria the first is the attractiveness of the potential industry and the second is the business strength.

Golden Parachute

An agreement between a company and an employee which states that the employee will be entertained with certain benefits if his employment is terminated is known as a golden parachute. Golden parachute is provided mostly to executive employee and benefits are significant and noteworthy. In some cases, this termination of an employee is due to a merger of companies or takeover of a company while in other cases golden parachute may depict packages for executive officers like CEO as a result of separation or termination of partnership and is not related to changes in the ownership.

Grace Period

A grace period is the time period during which the late penalty on the obligation due is not charged. In this period of time, the late payments regarding your due obligations are not charged with the default surcharges. In other words, Grace period is an extension period that is provided to you from your borrower out of good will.

Grey Market

A grey market or gray market is an unauthorized and unofficial market where products are bought and sold at lower prices than the official price of that product. While grey market is legal, it is an unofficial market where goods are traded through distribution channels which are unauthorized by the manufacturer of that product. Grey market is similar to the term black market. However grey economy, sometimes known as ‘hidden economy’ or underground economy means paying the workers under the table where no income tax is paid or no contribution is made to Medicare, Social Security and such other public services.

Gross Domestic Product (GDP)

The actual definition for Gross Domestic Product (GDP) can be given as the financial value of all finished goods and services generated within a nation’s borders in a certain time period, though GDP is generally evaluated on a yearly basis. This counts all of public and private consumption investments, government outlays, and exports less imports occurring within a specific territory.

Gross National Product (GNP)

Gross National Product (GNP) can be defined as an economic statistic which includes Gross Domestic Product, plus any income earned by the residents from investments made overseas. Also, the income earned within the domestic economy by overseas residents. As explained by Investopedia, Gross National Product (GNP) refers to a quantification of economic performance of a country.

Hedge

A hedge is, generally, an investment position projected to make up for potential losses which might be incurred by a cohort investment. In theoretical terms, a hedge refers to an investment made to reduce the risk of unfavorable price movements in an asset.

HIBOR

HIBOR is actually the rate through which the banks in Hong Kong deal with each other in the inter bank market. The lending and borrowing in Hong Kong dollars between their banks is done with the help of a rate that is known as HIBOR.

Highly Leveraged Transaction (HLT)

A bank loan given to a company which is already in huge debt is high leveraged transaction. It results in doubling the liabilities of the borrower because the acquisition or recapitalization transaction is made. The high leveraged company means that already huge loans has been taken the interest rate might also be high too.

Holding Company

Holding company can be explained as a parent corporation which owns sufficient voting stock in another corporation to control its board of directors (and, thus, controlling its policies and management). As explained by Investopedia, it is essential for a holding company to own a minimum of 80% of voting stock to obtain tax consolidation benefits, like tax-free dividends.

Horizontal Integration

When the same level of value chain acquires additional business activities, then it is referred to as horizontal integration. This can be said that horizontal integration refers to control and ownership.

Hostile Takeover

A hostile takeover takes place when the company is taken over without the choice of management especially the directors. It is either done with the purchase of shares or with the help of a demand to request the change in the management.

Human Resource Management

Human Resource Management is important for every company, as it helps in organizing the recruitment process within a company. Human resource management is not limited just to the recruitment process alone, but also helps in managing the employees and also help in providing the necessary guidance that is required by the people employed with a given organization.

Human Resources

Human resources are the collection of individuals who work in an organization and form its workforce. Human resources are also sometimes known as human capital, but the term human capital has a narrow view where individuals working in the organization are seen only from the viewpoint of the knowledge that they have and how that can be useful to the organization. There are also many other terms that are commonly used for human resources and they are ‘manpower’, ‘labor’, ‘people’ or ‘talent’.

Hyperinflation

Hyperinflation is actually the process when the prices become out of control and they increase rapidly. Hyperinflation in the economy results in the decrease in the value of money as the demand supply formula loses its original shape.

Incorporation

Incorporation is a procedure that declares that a corporate company is separate from its owners. There are many benefits of incorporation both for the owners and business, such as...

Incoterms

Incoterms is the term (short for International commerce terms) that is used in the international contracts and published by the International Chamber Of Commerce. This term was developed to bridge the gap between the members of the industry so that they can use a uniform language.

Inflation Rate

Inflation is the rise in the price of products for general consumers which in turn affect the cost of living of a normal consumer.

Initial Public Offering (IPO)

Initial Public Offering (IPO) is the first stock sold by a private entity to the public. Initial Public Offerings are generally used by younger and small entities that are looking to raise or expand their capital. However, IPOs can also be offered by large private companies that wish to trade publicly.

Inside Information

Inside information is the material information regarding an entity, which only the board of directors, management, or/and employees and not the public is aware of.

International Monetary Fund

IMF which is the abbreviation of International Monetary Fund is the largest financial and economic organization of the world.

Job Analysis

Job Analysis is a process, which is used to collect information relating to the responsibilities, duties, skill sets, conclusion and work environment of any given job. The information needed to analyse the job could require a person collecting endless data. This analysis helps in figuring out the result of a given job. The result can be in the form of performance development, recruitment planning and more.

Joint Stock Company

A Joint Stock Company may be defined as a company that issues stock and allows derived promotion trading making the stockholders legally responsible for the debts caused to the company. A Joint Stock Company is a combination of a partnership and a corporation. A joint stock company has right to use the liquidity and fiscal funds of stock markets but also is restricted like a partnership.

Kickback

Kickback is considered to be a part of the bribe. Kickback is actually a job which is performed by the person or the organization which is considered to be bribed. In other words, the favor which is done by the passive bribe partner against the money or the granting of the gift. This process is totally unlawful and against the moral values and ethics. Kickbacks and bribery both harms the public especially to the poor class whose prosperity and progress only lies on the merit system. Moreover, the kickbacks and the bribery impact the welfare system and have the impact on the overall economy too.

Labor Theories of Value

The labor theories of value (LTV) are different from the accepted theories of value and states that the value of a commodity only has relation with the labor required for obtaining or producing that commodity and is not related to any other factors of production. The concept of labor theories of value is often linked with Marxian economics in present times. It is also related to earlier classical economic theories like the theories of David Ricardo and Adam Smith. The term ‘labor theory of value’ was never used by Karl Marx for describing the theory of value; instead he referred to a law of value which has no association with the concept of’ labor theory of price’ which is a classical economics concep

Lessee

A person lending a property after making an agreement in black in white is a lessee. It can be also be defined as the tenant who take a property on rent and performs his part of obligations as mentioned in the agreement. As this is a legal document if the lessee fails to perform the obligations he can be evicted.

Lessor

Lessor can be defined as the owner of the property that has been the subject matter of the leased agreement. It can also be known as the person who gives his property to the lessee for a particular duration.

Letter of Credit

A letter of credit, generally, refers to a letter supplied by the buyer’s bank to the seller after the accomplishment of a contract between a buyer and a seller. This letter of credit from the bank guarantees that the buyer’s payment will be made to the seller on time and for the right amount. If, in any case, the buyer is unable to make payment at the time of purchase, it is required by the bank to cover the full or pending amount of payment.

Life Annuity

It is a sort if a life insurance that a person wishes to take making his/her retirement safe. Life annuity is based on a pre-determined amount that the annuitant wishes to pay periodically till the retirement day. The payments made to him until he ceases to live anymore that is till that person dies.

Limited Liability Company (LLC)

According to definition a Limited Liability Company (LLC) is a corporate structure in which the shareholders of the company have limited liability to the company’s actions. A Limited Liability Company provides the shareholders the required personal liability protection for any action of the business. The compensation of the business is not recovered with the assets of the owners.

Limited Liability Partnership (LLP)

A Limited Liability Partnership (LLP) is basically a new kind of corporate framework, which combines the flexibility involved in a partnership and the benefits of limited liability of an entity at a compliance price that is very low. Thus, it offers the advantages of limited liability of an entity and also permits its members to organize their internal management based on a mutual agreement, like in the case of a partnership entity.

Management Discussion and Analysis

Management Discussion and Analysis is basically business related information that has been mand