Business Words U Should Know
Over 1,000 Essential Words and Phrases! BUSINESS WORDS YOU SHOULD KNOW From Accelerated Depreciation to Zero-based Budgeting—Learn the Lingo for Any Field H. DEAN M C KAY, P H . D. , AND P. T. SHANK Business Words You should knoW From Accelerated Depreciation to Zero-based Budgeting—Learn the Lingo for Any Field h. dean MckaY, Ph. d. , and P. T. shank Avon, Massachusetts I dedicate this book to Susan Shank Mix, my wife, lifelong friend, and trusted advisor. Without her encouragement, creativity, and support, this book would be still in my imagination. —Dr. Dean McKay
I dedicate this book to Al Burgos, an accountant with the heart of an astronomer, because without him, no deadline would have been made. —P. T. Shank Copyright © 2008 by H. Dean McKay, Ph. D. , and P. T. Shank All rights reserved. This book, or parts thereof, may not be reproduced in any form without permission from the publisher; exceptions are made for brief excerpts used in published reviews. Published by Adams Media, an F+W Publications Company 57 Littlefield Street, Avon, MA 02322. U. S. A. www. adamsmedia. com ISBN 10: 1-59869-146-5 ISBN 13: 978-1-59869-146-7 (paperback) ISBN 13: 978-1-44050-101-2 (EPUB)
Printed in the United States of America. JIHGFEDCBA Library of Congress Cataloging-in-Publication Data McKay, H. Dean. Business words you should know / H. Dean McKay, and P. T. Shank. p. cm. ISBN-13: 978-1-59869-146-7 (pbk. ) ISBN-10: 1-59869-146-5 (pbk. ) 1. Business—Dictionaries. I. Shank, P. T. II. Title. HF1001. M26 2007 650. 03—dc22 2007016518 This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice.
If legal advice or other expert assistance is required, the services of a competent professional person should be sought. —From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations Many of the designations used by manufacturers and sellers to distinguish their product are claimed as trademarks. Where those designations appear in this book and Adams Media was aware of a trademark claim, the designations have been printed with initial capital letters. This book is available at quantity discounts for bulk purchases.
For information, please call 1-800-289-0963. Contents Introduction / 1 The Words, A–Z / 2 Appendix: Acronym Index / 247 Acknowledgments T his book is an accumulation of decades of business, education, and management with some remarkable mentors and associates. In particular, I would like to recognize my mentors at the Peter F. Drucker Center for Management, Claremont Graduate School, Professor Joseph A. Maciariello and Professor Peter F. Drucker, along with the other faculty and participants in my decade of association with the university.
I would like also to acknowledge the thousands of associates, peers, and managers in the organizations with whom I have had the pleasure of working these past five decades. To my family, who has been so supportive, I say thank you, Robert, Chris, Melinda, Cameron, Amanda, Dave, Michelle, Marcus, and Meredith. You are my team. P. T. Shank made this book a reality with her voice and creativity as well as hard work. —Dr. Dean McKay M any people helped me make this book happen. Specifically, I would like to thank H. Dean McKay for his business acumen; Ed and
Mitchell, as always; Stephanie Sauls, for laundry, dinners, flowers, and generally being an amazing friend; Billy Taymor for his patience, humor, and being awake long after most people have gone to bed; Shoshanna Grossman, who saw me through the beginning of it; David Willis, who saw me through the end of it; and all my friends—both real and cyber—who understood and still love me. —P. T. Shank Introduction W hen Dean and I first started talking about writing this book, we thought it would be very straightforward. We knew we wanted to take the language of business and translate it into plain English.
He would choose the words, write the definitions, and take the role of business guru, ensuring the information was accurate. I would write the sentences, handle the technical part of writing a book, and take the role of target audience, ensuring the information was understandable. And we would have the next book in the excellent Words You Should Know series. To a certain extent, that is what happened. Over and over throughout the last year, Dean would present me with a definition, and I would say “But what does it mean? ” until he had simplified it enough that even I could understand it.
So it was straightforward. Dean has indeed chosen words and written definitions. I have written sentences. And you are reading this book. But something else happened as well. Once we started writing it, we came to realize it had far more potential than we originally recognized, and that was really exciting. Yes, this book can be used in a very straightforward manner: When you hear a business word you don’t understand, look it up and close the book. Easy. But it can be much more than that as well, depending on your needs. Perhaps you need to know more about a concept than simply its definition and usage.
An Internet search on “management style,” for instance, turns up more than 200 thousand results! This book offers related words for each term. Combine a few of them in your search, and suddenly you are closer to finding the information you actually need. Also, throughout the book, you will find boxes with further explanations of many of the defined words. While the definitions for these words are easy to understand, the concepts sometimes are not. The information found within the boxes will help clarify the concepts and how they apply to the business world.
We sincerely believe this book has become the valuable tool we always knew it could be. Hopefully, you will agree with us, whether you are wellestablished in an industry or just starting out. And who knows, maybe you’ll even come to understand our excitement. We hope you do. 1-to-1 marketing 1 1-to-1 Marketing Customizing the offering to the specific customer needs and desires. This process involves much more than just sales and marketing because the firm must be able to change how its products are configured or its service is delivered based on the individual needs of individual customers.
The technology company was successful because of its ability to offer 1-to-1 marketing to all its clients. See also: Direct Marketing, End User 10Q Report A financial statement filed with the U. S. Securities and Exchange Commission by a company, regarding its financial performance. This form is used for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. A quarterly report on this form must be filed within forty-five days after the end of each of the first three fiscal quarters of each fiscal year.
Investors and brokers are wise to track companies’ 10Q reports before buying large amounts of stock. See also: Financial Statement or Reports, Public Company, Quarterly Report, SEC Filings 10X Change A strategic change from a current state, called X, to a future state in which the change is measured in orders of magnitude. This term refers to those rare moments when something creates a “10X change”—a change ten times greater than your average everyday change. Leadership believes in the exponential growth capacity of each team member.
A 10X change is any change in a business environment that could potentially cause an industry change. Business forecasters were aware that the creation of the personal computer would create a 10X change in the industry. See also: Change, Change Management, Strategic Inflection Points 360-Degree Feedback A means for leadership development; a method and a management tool that provides each employee the opportunity to receive performance feedback from his or her supervisor and four to eight peers, reporting staff members, coworkers, and customers.
Every year, the management staff received 360-degree feedback from their peers and staff in order to ensure a positive working environment for everyone in the department. See also: Communications, Empowerment, Human Resources, Motivate, Performance Review accelerated depreciation 4 Ps of Marketing Product, price, place (distribution), and promotion are the major marketing management decisions; these variables are known as the marketing mix. Even though most customers may not be aware of it, nearly all decisions about buying products are based on the 4 Ps of marketing.
See also: Distribution, Marketing, Price, Product, Promotion A A-Team An elite group or task force that is willing and able to solve difficult problems; a team that works together under uncertain conditions to create innovative solutions; a group having a special mission with a leadership role. The new engineer was assigned to the A-team to tackle the division’s most pressing problem. See also: Leadership, Team Building, Teams Abatement A deduction in the amount of money owed. The start-up received rent abatement to help them get things going in their production facility.
See also: Obligation, Payment in Kind Ability The quality of being able to perform; skill and aptitude that an employee needs in order to perform successfully the various tasks associated with a job; qualities that enable a person to achieve or accomplish something. It is vital to hire someone based on his or her ability to perform the job at hand. See also: Organization, Performance, Skill Abstract A document that summarizes and explains the important aspects of a larger, more detailed document. The database contained many abstracts from articles on small business.
See also: Business Plan, Executive Summary Accelerated Depreciation Depreciation at a greater rate in the early years of an asset’s life; an accounting method. Due to the accelerated depreciation attached to some goods, many people recommend buying slightly used items over brand-new ones. See also: Accounting, Depreciation, Taxes A A access Access A process of inputting or retrieving data from a computer, network, or system. The staff realized the computers were down when none of them could access the database. See also: Computer, Data, Database, Network Access Time
The time interval between a request for information and the start of the delivery process for a computer, network, or system. Faster access time was one of the major selling points of the new computer system. See also: Access, Computer, Float Accessory Goods Products used by business operations to function. Examples include computers, fax machines, office copiers, networks, and so on. The small shop had a full inventory but the bare minimum of accessory goods needed to open for business. See also: Administrative Expenses, Back Office, Operations Accomplishment The result of successfully meeting a goal; an achievement.
The award was given to the sales team for their accomplishment of increasing profits 20 percent over the estimated goal. See also: Ability, Goals, Objectives, Success Account An organization’s record of all the debits and credits chronologically posted to a ledger showing how each transaction affects a particular phase of a business. Entries are usually stated in monetary figures and reflect the current balances, if any. A bookkeeper is often required to manage multiple accounts and track the strengths of all of them. See also: Chart of Accounts, General Ledger, Ledger Accountability
Taking responsibility for actions. An obligation to one’s self—an obligation to lead a meaningful life, both in and out of the workplace, that is consistent with one’s own values. The CEO was impressed by the supervisor’s sense of accountability for everything that happened in his department. See also: Behavior, Governance, Responsibility accounts receivable turnover Accounting The process of identifying, measuring, recording, and communicating financial information about a business or organization. Accounting information can be a helpful managerial and investment aid in the decision-making process.
The accounting firm was known and respected for the efficiency and uncompromising sense of integrity. See also: Accounting Noise, Public Accounting, Purchasing Accounting Accounting Noise Complex rules that may affect the way a company’s performance is related to the public. These rules do not affect the company’s true performance, simply the way that performance is reported. After a company has gone through a major change, it may be difficult for potential investors to cut through the accounting noise to discover how well the business is actually expected to perform. See also: Accounting, Financial Statement or Report
Accounts Payable Money or liabilities owed by a firm to vendor, suppliers, or service providers. The secretary juggled the accounts payable so that the small firm’s bills were paid every month within days of receiving the fees from their clients. See also: Balance Sheet, Liability, Supplier, Vendor Accounts Receivable Money or liabilities due to a firm from customers for the purchase of inventory, goods, or services. Carried in the current-assets section of the firm’s balance sheet. The billing department sent out invoices on all accounts receivable that were not paid in full at the time of service.
See also: Assets, Balance Sheet, Customer, Inventories Accounts Receivable Turnover A measurement of how quickly customers pay their bills. The ratio of net credit sales to average accounts receivable. Their bank asked for the accounts receivable turnover report to measure how quickly their customers paid their bills. See also: Accounts Receivable, Credit, Financial Ratios, Turnover A A accrual-based accounting Accrual-Based Accounting An accounting method in which income is reported when earned and expenses are reported when an obligation is made rather than when money is received or paid.
Retail stores and other businesses that sell products and stock inventory use accrual-based accounting. See also: Accounting, Bookkeeping, Expenses, Income Accrue Accumulate or increase over a period of time. She chose to put her money into a CD rather than just into a savings account because interest would accrue at a faster rate. See also: Depreciation, Expenses, Taxes Accrued Expenses Expenses yet to be paid; accumulated expenses in a given period that will be paid in the future. It was agreed that the accrued expenses owed to the law firm would be paid at the end of the trial.
See also: Accrue, Expenses, Period Accrued Interest Interest yet to be paid; accumulated interest in a given period that will be paid in the future. She opted to receive all accrued interest from her investments in one check at the end of the year. See also: Accrue, Interest, Period Accrued Taxes Taxes yet to be paid; accumulated taxes that will be paid in the future. The accountant tracked the accrued taxes in order to ensure there was enough cash to pay them when they came due. See also: Accrue, Taxes Accurate Correct and exact; produces flawless work, generally as the result of painstaking care.
The accountant was known for being detail oriented and accurate in every aspect of his job. See also: Consistent, Quality action learning Acid Test Ratio A ratio of current assets minus inventories, accruals, and prepaid items to current liabilities that is used to determine a firm’s ability to meet current debt obligations. According to the acid test ratio, the firm was actually in very good financial shape in spite of the unexpected quarterly losses. See also: Assets, Liquid, Short-Term Debt Acquisition Acquiring control of a business or corporation.
The parent company’s primary goal was to staff its new acquisition quickly and well before it began losing money. See also: Due Diligence, Integration, Merger, Purchasing Accounting, Strategy Acquisition Cost The cost of purchasing equipment before sales tax. The start-up bought much of its equipment slightly used in order to keep acquisition costs low. See also: Capital Expenses (CapEx), Hard Assets Acquittance A receipt indicating payment in full, freedom from a financial obligation. Every acquittance was kept on file in case questions arose later about the payment of the bills.
See also: Debt, Payments Across the Board Affecting all in an equal manner; comes from the New York Stock Exchange (NYSE) big board, a large board on which stock prices were once written, so when the majority of prices were up or down, the movement was shown “across the board. ” Concern about the economy and rising prices cut consumer spending across the board, not just in the travel industry, over the summer. See also: New York Stock Exchange (NYSE), Stock Action Learning A process in which a group of people come together more or less regularly to help each other to learn from their experience.
The company offered action learning programs as a way for senior management to lean on each other and junior management to receive mentoring. See also: Action Plan, Group Processes, Teambuilding A action plan A Action Plan A list of tasks that needs to be carried out in order to achieve a larger objective; may include other plans, activities, resources, and/or commitments. The action plan was clear and concise so that everyone on the project knew what steps needed to be taken in order to achieve success. See also: Goals, Obstacles, Task
Actionable An act, event, or occurrence that carries legal grounds for basing a lawsuit. As offensive as the supervisor’s statements and behaviors had been, her attorney told her they were, unfortunately, not actionable. See also: Arbitration, Audit Activity List A list of the defined activities that need to be completed for a project or task within an action plan. The team was pleased that they had completed their activity list well enough in advance that the whole project moved forward sooner than expected. See also: Planning, Project, Task
Activity Sequencing Identifying how activities affect each other and determining the best order to perform them in order to complete the project. Although the committee’s suggested activity sequencing seemed reasonable on paper, it didn’t take into account ordinary delays expected by the technicians. See also: Program Evaluation and Review Techniques (PERT), Project, Time Management Ad Hoc A team, project, task force, or committee formed to address a specific issue or concern; singular-in-purpose effort; dealing with a particular organizational problem.
The CEO created an ad hoc committee to investigate the charges of harassment. See also: Organization, Project, Teams Adaptation to Change Methods and mechanisms that organizations use to react to internal and external environmental changes. Businesses tend to survive longer when their adaptations to change are flexible, open-minded, and already in place prior to major market fluctuations. See also: Adapting, Change, Change Management, Organizations adjustment Adapting Capable of change from today’s reality to a future state, such as change in response to new markets, globalization, and management changes.
Many nonprofit organizations had a hard time adapting to computerization in the 1980s and 1990s. See also: Change, Flexible, Growth Addendum A supplement to a written document. The actor requested that an addendum spelling out the specific needs of his staff be added to the contract. See also: Appendix, Communication Adhesion Contract A contract that generally contains nonnegotiable terms that usually favor the party presenting it. The band was known for the outrageous clauses in the adhesion contract they required each venue to sign before they agreed to perform. See also: Contract, Letter of Intent (LOI), Terms
Adhocracy A form of organization, usually with little or no structure, that allows for greater creativity and innovation around capturing opportunities, solving problems, and getting results. Once the company moved from a bureaucracy to an adhocracy, several of the program directors had a hard time changing from a very controlling management style to one where staff was allowed more input and flexibility. See also: Bureaucracy, Cross-Functional Team, Management, Organization, Teams Adjustment A debit or credit to a cardholder or seller’s account to correct a transaction error.
When the woman’s coat didn’t arrive in the promised amount of time, the store made an adjustment on her credit card to reflect the removal of shipping charges. See also: Accounting, Credit, Credit Card, Debt A administrative expenses 10 A Administrative Expenses The expenses incurred in carrying out the activities listed in the management and organization section of the business plan. The assistant secretary had to be laid off in order to cut back on administrative expenses. See also: Accounting, Business Plan, Expenses, Income Statement Administrivia
The day-to-day workings of an office environment required by administrators; Tasks that staff perform to maintain value in an organization that are needed to keep things going forward or to fulfill management needs. The old secretary was invaluable to her boss because of her skill at dealing with administrivia. See also: Administrative Expenses, Task Advertising A tool or management resource for increasing product differentiation and encouraging brand loyalty by communicating the features and benefits of a product/service through the use of radio, television, print, Internet, and other media.
Advertising is a large part of any company or product’s success. See also: Benefits, Brand, Communication, Marketing Advertising-Based Model A business model in which a firm generates revenue by charging advertisers for space (for example, in a magazine or on a Web site) or time (as in radio or TV). The weekly neighborhood newspaper was able to stay in business once it switched over to an advertising-based model. See also: Advertising, Business-to-consumer (B to C or B2C), Business Model, Revenue, Web Page Advisory Board
A group of outside experts, typically three to six people, usually recruited by entrepreneurs to provide regular input and suggestions to management. The entrepreneurs brought in an advisory board early in the planning stages of getting the new company up and running. See also: Entrepreneur, Goals, Planning, Vision agenda 11 Affiliate An organization, firm, or other entity with a relationship with another company, peer, or larger entity. Few people realized the community clinic was actually an affiliate of the nationally recognized hospital and was staffed by many of the same doctors.
See also: Control, Network, Relationships Affinity Group An organization made up of businesses (or representatives thereof) with common interests, such as an industry trade association or another group of entrepreneurs. It is important for young professionals to find and join an affinity group that will assist them in becoming comfortable and growing in their chosen field. See also: Trade Association After-Hours Trading Refers to stock trading that takes place outside the traditional trading hours of the major exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ Stock Market.
As more people use the Internet for investment purposes, after-hours trading is becoming more and more common. See also: Stock, New York Stock Exchange (NYSE), Transactions Aftermarket The trading activity in a security immediately after its initial offering to the public; used to define the volatile time before prices stabilize or the secondary market for upgrades, such as the automotive non-factory parts. Casual investors often wait until the aftermarket has settled down before deciding whether to invest in a specific stock. or
Computer companies can make large sales based solely on the aftermarket when new technology that is desirable but not necessary becomes available. See also: Capital Market, Initial Public Offering (IPO), Investor, Marketing, Security Agenda A list of items, issues, things to be considered; points to be discussed; outline of topics to be discussed in a meeting. The agenda was so full, he wasn’t sure if they would cover everything in the course of the hour-long meeting. See also: Briefing, Kickoff Meeting, Meetings, Schedule A 1 A aging of receivables
Aging of Receivables An accounting method that provides management with information regarding a debt’s age; or a method of estimating bad-debt losses by aging the accounts and then assigning a probability of collection to each classification. The accountant urged the billing department to track outstanding fees because the aging of receivables indicated any accounts more than six months delinquent would be worthless. See also: Accounts Receivable, Debt Agreement An understanding between two or more parties. May be formal or informal, legal or a “gentlemen’s” agreement.
In many parts of the country, a handshake still creates as binding an agreement as a signed contract. See also: Collective Bargaining, Confidentiality Agreement, Contract Alert Managers, executives, and employees who are observant and on the lookout. Aware, quick to understand the real importance and consequences of a situation or an occurrence. The staff of the advertising department had to be alert to the changing values and morals of society in order to create effective campaigns. See also: Human Resource, Observant Allegiance A commitment to a leader or organization that binds a party (intellectually or emotionally) to a course of action.
The business made it clear that its allegiance was to its customers and employees, even before that of the stakeholders. See also: Commitment, Leadership, Loyalty, Stakeholders Alliance Any formal, inter-organizational, collaborative relationship with competitors or suppliers of complementary products and services aimed at avoiding crippling capital investments and gaining market entry or core competencies. The owners of the start-up companies were excited about forming an alliance, secure in the knowledge that they could help each other grow.
See also: Collaborate, Relationship analysis 1 Alpha Version Development-stage terminology that expresses that the development of a piece of software is in its early stages and may require much further development. An alpha version of a program is also known as a “pilot” version, which can be tested for overall usability and training effectiveness. Although the alpha version hadn’t worked the way the designers had expected it to, the lessons learned from its failures were valuable in correcting the design flaws. See also: Feasibility Study, Product Development Ambitious
Intent on advancing, enterprising, having great desire and determination to achieve a certain goal. An advancement in position, authority, earnings, or reputation is usually the objective. The plan to expand the company throughout the Northeast was ambitious, but management thought it could be done based on projected sales and growth. See also: Energetic, Motivated Ambivalence Conflicting emotions or feelings about an individual, team, or organization; mixed feelings leading to uncertainty or indecisiveness. The manager was ambivalent about his team’s performance on the marketing campaign.
See also: Conflict, Indecisiveness, Leadership, Management, Uncertainty Amortization The allocation of a lump sum amount to different time periods. Either the paying off of debt in regular installments over a period of time or the deduction of capital expenses over a specific period of time. Loan companies set up an amortization schedule that allows businesses to pay off their debts slowly so they don’t go under but, at the same time, ensure the lender does indeed get its money back in a timely manner. See also: Capital Investments, Debt, Installment Analysis
The action of taking something apart in order to study it, such as financial analysis, competitive analysis, or strategic analysis. The analysis of the competing firm’s client list proved they were signing the clients everyone in town was hoping to bring on board. See also: Competitive Analysis, PEST Analysis, Problem Solving, SWOT Analysis, Variance Analysis A 1 A anchor store or client Anchor Store or Client A branded store or client that provides an attraction to draw new customers. The presence of such an anchor increases the market potential for other businesses and makes adjacent locations more desirable for entrepreneurs.
The mall closed within months after the two anchor stores moved out. See also: Brand, Marketing Angel Capital Start-up money provided to entrepreneurs by friends, family, or wealthy individuals (often referred to as the 3 Fs: friends, family, and fools) whose motives may be non-monetary as well as financial. The company’s first round of financing was angel capital. See also: Entrepreneur, Financing, Seed Capital, Venture Capital Angels Private investors, generally wealthy individuals who are former entrepreneurs or executives who invest in entrepreneurial companies.
The young businessmen wanted angels for the company, not just for the monetary assistance but for the advice and experience they would bring to the table. See also: Advisory Board, Angel Capital, Incubator, Investor, Venture Capital Animation Effects used in presentations to improve the audience’s experience; rapid sequential presentation of different graphics to create the illusion of motion. Even the most engaging speakers can be more effective with the use of animation in their presentations. See also: Presentation Slides, Visual Aid Annual Percentage Rate (APR)
An interest rate that states the true cost of obtaining credit for the duration of the loan. Even an APR that is only half a point lower than others can save a consumer a lot of money over the course of a loan. See also: Credit, Interest, Loan applicant 1 Annual Report A document issued annually by public companies to their shareholders per Securities and Exchange Commission (SEC) regulations; includes information about a company’s performance during the previous year, as well as management’s view of the company’s strategy for the future. Serious investors will pay very close attention to a company’s annual report before investing.
See also: 10K, Communication, Financial Statement or Report, Investors Annual Sales Sales or revenue received during the period of a year, before any expenses are deducted, for providing the firm’s products and services. In a weak economy, simply maintaining annual sales is often considered as much a success as increasing them would be in a strong economy. See also: Income Statement, Revenue, Sales Antitrust Laws that prohibit agreements in restraint of trade, monopolization and attempted monopolization, anticompetitive mergers and tie-in schemes, and, in some circumstances, price discrimination in the sale of commodities.
The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. Antitrust laws were established to help ensure every company has the opportunity to succeed or fail on its own merits, without being held back by larger, already established businesses. See also: Entry Barriers, Monopoly, Predatory Pricing Appendix An addition to the end of a document. In a business or feasibility plan, it may include copies of product/service information, legal agreements, resumes of principal owners, and so on.
Although people tend to ignore the appendix of a document, it often contains important, albeit secondary, information. See also: Communication, Contract Applicant One who is seeking employment. Employers appreciate having a large applicant pool because it tends to increase the chances of finding the right person for the position. See also: Employ, Employee A application 1 A Application A form to be filled out by a job candidate when seeking employment, or the use of computer-based programs to process data for specific purposes.
Many companies have applications online, which allows people to apply for positions with ease. or Since the business world has become computerized, having a working knowledge of several different applications is beneficial to job applicants. See also: Applicant, Applications Software, Data Processing Application Service Provider (ASP) Party that offers an outsourcing mechanism whereby it develops, supplies, and manages application software and hardware for its customers, thus freeing up customers’ internal IT resources.
The application software resides on the vendor’s system and is accessed by users through a Web browser using HTML or by special-purpose client software provided by the vendor. Using an ASP can be risky because if the vendor goes under or closes, information can be lost with very little, if any, warning to the customers. See also: Client, Information Technology (IT), Server Application Software Software applications that are intended for end-users, such as database programs, word processors, and spreadsheets. Application software runs on top of system software.
Application software can often be purchased to upgrade a computer’s capabilities. See also: Application, Data Processing, Information Technology (IT) Appraisal A written document by a professional appraiser estimating the value or quality of an asset as of a given date or a performance evaluation of an employee. It is important to get a fair appraisal prior to purchasing a big ticket item. The company required yearly performance appraisals of all the employees. See also: Employee, Promotion Appraise Estimating the value or determine the cost of an item or enterprise.
When the situation was appraised objectively, moving the company out of the city really was the best course of action in the long run. See also: Appraisal, Valuation arbitration 1 Appreciation An increase in the value of an asset. The appreciation in property values expected in the neighborhood made buying even a small house an excellent investment. See also: Assets, Capital Appreciation, Valuation Appropriation The application of the payment of a sum of money, made by a debtor to his creditor, to one of several debts as money that has been set aside by formal action to pay some known or anticipated costs.
The bookkeeper insisted on an accounting of the funds appropriated for each step of the loan repayment process because she feared the company was overreaching its financial abilities to pay back new loans. See also: Creditor, Debt Arbitrage The opportunity to profit from a simultaneous purchase and sale of an asset; a rare and short-lived situation because market forces will close the gap between the purchase and sale prices, thus ending the opportunity. The speculator realized she needed to take advantage of the arbitrage before the window of opportunity closed and the market prices equalized.
See also: Risk, Security A rbitrage is the opportunity to obtain a risk-free profit from the simultaneous purchase and sale of an asset, thus capturing the price differentials in similar or different markets. Such arbitrage opportunities are rare and short-lived as market forces will drive toward price convergence and eliminate such arbitrage opportunities. Arbitration A form of alternate dispute resolution in which a neutral third party hears the respective positions and renders a decision. The contract disputes were eventually resolved when the company and the union were ordered into arbitration.
See also: Conflict Resolution, Mediation A articles of incorporation 1 A Articles of Incorporation A document filed with the secretary of state of the state of incorporation detailing things such as a company’s purpose, powers under state law, classes of securities to be issued, and the rights and liabilities of directors and shareholders. One of the first steps taken by a new business needs to be filing its articles of incorporation so that every step thereafter is legal. See also: Board of Directors, Incorporate Articulate The ability to express oneself distinctly; able to speak effectively.
The CEO was disappointed to learn that as articulate as she had been during interviews, the new employee didn’t have the skills or knowledge base to get the job done. See also: Persuasive, Understanding Artificial Intelligence (AI) Using the power of a computer or network to improve the quality of management decisions, particularly complex strategic choices. Many spam blockers use AI to filter out e-mail that is unsolicited, which in turn improves efficiency. See also: Computers, Data Mining, Expert System, Fuzzy Logic, Strategic Choices Asking Price The price an owner places on an asset he is willing to sell.
The asking price is also viewed as a benchmark price where the buyer and seller can begin negotiations since an agreed-upon price has yet to be reached. During a housing boom, it is not uncommon for sellers to get above the asking price on a property. See also: Benchmark, Bid Price Aspirin Count Theory A market theory that suggests that aspirin production and stock prices are inversely related, therefore when stock prices drop, aspirin production increases. The aspirin count theory may be based on an old wives’ tale but it certainly makes sense as well. See also: Stock, Economics sset-based financing 1 Assertive The ability and willingness to speak up without hesitation, make a position known; characterized by decided, often emphatic, statements and actions. A good supervisor is able to juggle being assertive with diplomacy skills. See also: Attitude, Positive Assessment An official estimate of the value of something for the purpose of computing property tax. Based on the assessment, the house was worth far more than the young couple could afford to pay for it. See also: Taxes, Valuation Asset Lending The loaning of money on the value of assets offered as security.
The lender is protected from loss by the liquidation value of the assets. Although she generally didn’t like asset lending, the antiques presented as security were worth the risk she incurred by offering the couple the loan. See also: Assets, Loan Asset Redeployment The strategic relocation of enterprise assets in order to increase profitability through improved competitive advantage. The small company decided to try asset redeployment to help bring in more money so layoffs wouldn’t be required. See also: Assets, Competitive Advantage, Strategy Asset Turnover A company’s total sales divided by its total assets.
This ratio measures the overall efficiency with which a company uses its assets to produce sales. The higher the measure, the more efficient the business model. The investors were pleased to see the asset turnover on the rise after three straight quarters of watching the ratio fall. See also: Assets, Financial Ratios, Profit Margin, Revenue, Turnover Asset-Based Financing Financing an enterprise by using its hard assets for collateral to acquire a loan of sufficient size with which to finance operations. Asset-based financing can be a safe or a risky choice depending on the strength of the company being taken over.
See also: Assets, Financing, Leveraged Buyout (LBO), Loan A assets 0 A Assets Anything on a company’s books considered as having a positive monetary value. Assets are reported on a firm’s balance sheet. Although the firm seemed financially secure, the accountants were beginning to become concerned about its dwindling assets. See also: Balance Sheet, Return on Assets (ROA) Assign To transfer a right or interest to another person. On his twenty-fifth birthday, the young man was assigned his half of his father’s share in the business. See also: Project, Resource Assumptions
Factors that are believed to be true and affect business planning. Assumptions may impact risk and should always be documented and validated. Organizations make assumptions about many internal and external factors, including customers, competitors, industry evolution, regulation, technology, and the organization’s resources, competencies, and cash flows. Inaccurate assumptions about the dot-com industry led to the bubble bursting in the 1990s. See also: Business Plan, Organizations, Resource At-Will Employment An employment policy that allows employees and employers to terminate the working relationship at any time.
Many seasonal and part-time employees are hired with an at-will employment understanding. See also: Employee, Termination Attrition A reduction in the number of employees through retirement, resignation, or death. Some downsizing may occur through attrition, while others take place more aggressively through layoffs and terminations. See also: Downsizing, Employee, Retirement, Rightsizing average selling price 1 Audit To examine an individual’s or organization’s records in an attempt to verify accuracy and legal compliance. Insurance companies may audit clinic records at least once a year, provided they offer reasonable notice.
See also: Accounting, Adjustment, Due Diligence Authentication The process of confirming a user’s identity; commonly done through the use of passwords or digital certificates. Most credit card companies use security questions to ensure authentication of the caller. See also: Authorization, Information Technology (IT), Password Authority Permission or approval to make decisions for team, organization, or firm; the power to command actions be taken; legitimacy to lead. In order to be effective, managers need to have the authority to make decisions without double-checking with the CEO or president.
See also: Adhocracy, Delegation, Organizations Authorization Validating the authenticity of something or someone; approval of a bank card transaction by the card-issuing bank for a specified dollar amount. Authorization is a critical step in processing credit cards for purchase of merchandise online. See also: Authentication, Bank Card, Charge-Back, Credit, E-Commerce, Gateway, Power of Attorney, Sales Transaction Average Annual Growth Rate A measure of the rate of change in a firm’s annual sales. The average annual growth rate can indicate the overall health or weakness of a company.
See also: Net Worth, Revenue, Sales Average Selling Price (ASP) The average price for all items sold during a particular time frame, usually calculated for a specific category or a single seller’s sales. Online auctions benefit customers because products can be bought well below the ASP. See also: Distribution, Price, Retailer A award A Award A final decision that is rendered in favor of one party or something that is given on the basis of merit or need. Many people believe there should be no upper limit to what juries may award victims in malpractice suits. or
The team was thrilled to win the award, especially in light of the strength of the national competition. See also: Grant, Honor B Baby Boomers Consumers born from 1943 to 1960, characterized as experimental, individualistic, free spirited, social cause–oriented, distrustful of government, and generally cynical. As the largest generation cohort in America, they have dominated the market’s attention and driven product development. Many ad campaigns are directed toward baby boomers’ reluctance to admit that they are aging. See also: Cohort, Market Research, Marketing Back Office
Administrative functions that support the processing of online transactions such as e-mail confirmations, shipping and tax calculations, packing slip creation, and report generation. For every online store, there is someone in front of a computer handling back office issues. See also: Administrivia, General and Administrative (G&A) Expenses, Overhead Back Order Part of an order that was not filled when the initial shipment was made. Back orders are usually shipped when the items become available, without requiring the customer to place a reorder. See also: Backlog, Customer
Back Pay Wages that an employee is entitled to when the employer is found to be in violation of standard employment practices. He received his back pay after going for an extended period of time without a paycheck. See also: Employee, Wage bailout clause Backdating Placing a date on a document that is prior to the date the document is actually drawn up; a process that makes a document effective from an earlier date. Both parties agreed to backdate the contracts to the day they had first discussed the arrangement. See also: Agreement, Contract, Stock Option Backlog
Customer orders on products that are planned for shipment or delivery in the future. The clerk was able to check the backlog and tell the customer when his equipment would be delivered. See also: Back Order, Sales Backup A copy of a file or application that is kept separate from the original as a precaution against data loss in the event the original is lost or destroyed; or (two words) to make a copy of original work. It is vital to keep a backup of all documentation stored on a hard drive. or He didn’t back up the data, so we lost last week’s work. See also: Computer, Data, Data Recovery, Software
Bad Credit The result of a company or individual being late or defaulting on bill payment. He was concerned about qualifying for the loan because of the bad credit he had accrued while he was in college. See also: Credit, Default Bad Debt Money that is still owed on an account and is past due; a debt that cannot be recovered. Once the firm declared bankruptcy, its lenders had to write off their accounts as bad debt. See also: Debt, Insolvency, Risk Bailout Clause A clause in a contract that allows a party to get out of the contract. They decided to accept the bailout clause despite some reservations.
See also: Cancellation, Contract, Negotiation, Termination B balance sheet B Balance Sheet A statement of the book value of a business, corporation, or individual at a particular date. The balance sheet provides a snapshot of the organization’s assets, liabilities, and net worth or shareholder equity. Her business acumen allowed her to interpret a company’s balance sheet more accurately than most, so she knew what was a good investment even when others missed the opportunity. See also: Assets, Financial Statement or Reports, Fiscal Year, Income Statement, Liability, Net Worth, Profit and Loss (P&L) Statement Balanced Scorecard
A process that enables organizations to translate a company’s vision and strategy into implementation by working from four perspectives: financial, customer, business process, and learning and growth. This not only allows the monitoring of present performance, the method also tries to capture information about how well the organization is positioned to perform in the future. The balanced scorecard enabled the consultants to understand where the company wanted to go in the future and help its staff understand how to get there. See also: Critical Success Factors (CSFs), Metrics, Organizations, Strategy, Teams, Vision Bank
A financial institution; a commercial institution licensed as a receiver of deposits; a business for keeping, lending, exchanging and issuing money. A bank-issued card that authorizes the holder to receive bank services and that often functions as a debit card is an important tool for any business. See also: Bank Statement Bank Card A form of payment using either credit or debit from a bank account; any valid card issued by a card association or other card-issuing organization that is presented in payment for goods and services or to obtain cash advances. Many people appreciate being able to use a bank card instead of having to carry cash.
See also: Bank, Credit Card Bank Statement A record of a firm’s account that is regularly provided by the bank, either in print or online. Our accountant reconciles the firm’s bank statement each month. See also: Bank, Cash Basis Accounting, Deposit Transactions barrier Bankruptcy A state in which an entity is unable to meet its obligations and seeks court protection from its debtors. If the bankrupt entity is a firm, the ownership of the firm’s assets is transferred from the stockholders to the bondholders. Shareholders are the last people to get paid if a company goes bankrupt.
Secure creditors always get first grabs at the proceeds from liquidation. Also called Chapter 11. The company decided to file for bankruptcy rather than to accumulate more debt and destroy its reputation even further. See also: Assets, Creditor, Debt, Stockholder or Shareholder Banner Ad Internet advertising using graphics on a Web page to direct a viewer’s attention to a product or service. Banners link to further information and Web pages. The online store charged other businesses a small fee to have banner ads on its Web site. See also: Advertising, Hyperlink, Internet, Web Page, World Wide Web (WWW) Bar Chart
A schedule that shows project activities with associated start and completion dates. The bar chart was posted where everyone involved with the project could see it and be sure to stay on target. See also: Activity Sequencing, Business Plan, Critical Path Method (CPM), Gantt Chart, Milestone, Projects Bar Code An identifying mark made from a pattern of bars and spaces. A bar code is generated for individual items based on the item name/number or stockkeeping unit (SKU) on the item record. If a bar code is ripped or missing, it can be difficult for clerks to find the price of an item. See also: Inventories, Inventory Control, Retailer
Barrier Conditions that create difficulty for an organization to meet a goal or objective; something that prevents progress or success toward an end. There is a long-standing debate about how much of a barrier race and gender are in the corporate world. See also: Entry Barriers, Obstacles B barter B Barter The exchange of one commodity for another without the exchange of money. Although the project had very limited assets, the team met its goals through a barter arrangement. See also: Commodity, Microeconomics Baseline The agreed-upon plan to which all subsequent plans will be compared for cost, schedule, and performance.
The initial product was so successful that everyone agreed it would be unfair to use it as a baseline for the projects that were scheduled to follow. See also: Business Plan, Performance, Schedule Basis The cost or value of an asset as adjusted for tax purposes. Securities also have a basis, which is determined by the price an investor pays for the security plus any other incremental fees. The basis is then used to determine capital gains or losses for tax purposes when the stock is eventually sold. She had bought stock at a high price, but because she had been given more shares as a gift, the basis was very reasonable.
See also: Capital Gains, Taxes Behavior A manner, action, or set of actions performed by a person under specified circumstances that reveal some skill, knowledge, or attitude; a way of conducting oneself. The goal of training is to teach new employees the proper behavior in any situation, including unexpected or stressful ones. See also: Attitude, Knowledge, Skill Beliefs Assumptions and convictions that a person holds to be true regarding people, concepts, or things; an organization’s understanding of cause-effect relationships. Many people choose to work for organizations that share their political, social, or environmental beliefs.
See also: Behavior, Convictions, Mindset, Organizations big, hairy, audacious goals Benchmark A standard of reference used for comparison; a process of comparing practices within a company to the very best practices in some of the very best organizations, within and outside the industry; a process for measuring “best practice” performance and comparing the results to corporate performance in order to identify opportunities for improvement. The overwhelming success of the holiday ad campaign was the benchmark by which all other campaigns would be measured. See also: Competitive Advantage, Core Competencies, Metrics, Strategy Benefits
A collection of advantages; solutions offered to customers through a company’s products/services; the advantages that are inherent in a product/service or that customers expect to receive and that motivate customers to purchase it. An effective ad campaign communicates the benefits of buying a specific product well enough that consumers believe they need the product. See also: Communication, Marketing, Sales Bid An offer of money in exchange for an item that is for sale. Once the national chain made a bid for the shops, the medium-sized businesses dropped out because they knew they couldn’t match the prices the larger company could offer.
See also: Asking Price, Bid Price Bid Price A price offered by a prospective buyer to begin the negotiation process of buying a security or business asset. Although the firm had been in his family for years, the man was tempted by the increasingly high bid prices being offered by the competitors. See also: Bid, Negotiation Big, Hairy, Audacious Goals (BHAGs) A goal, vision, or plan that causes the organization to stretch to obtain the result; a challenge by leadership to an organization to fulfill a mission or strategy. By setting BHAGs, companies often accomplish far more than if they had set goals that would be expected to be met easily.
See also: Catalytic Mechanisms, Goals, Strategy B bill of sale B Bill of Sale A written agreement stating the terms by which ownership of goods is transferred to another party. It is wise to get a bill of sale for any large purchase item you cannot simply carry away. See also: Agreement, Term Sheet Bit The fundamental informational building block used by all computers. A bit is a single character in a binary number. The digital camera images contained 3 million bits of information. See also: Computer, Data, Information Blog A journal that is available on the Web; frequently updated, chronological entries on a particular topic.
This word was created from the combination of the words “Web log. ” These days, teenagers are as likely to host a blog in order to keep in touch with their friends as they are to use the phone. See also: Communication, Internet, Link, Media, Web Page, World Wide Web (WWW) Board of Directors A group of people elected by a corporation’s shareholders to oversee the management of the company. A board often consists of executive and nonexecutive directors. Executive directors play an active part in running the company, while non-executive directors are there to offer advice.
The program supervisors reported to the board of directors on a quarterly basis. See also: Chairman of the Board (COB), Chief Executive Officer (CEO), Strategy Bonds Debt securities that pays the holder a fixed sum on a regular schedule for a fixed term. Bonds are issued by corporations and governments; they come in a wide variety of types. In the past, the United States government has issued war bonds in order to maintain a cash flow during wartime. See also: Debt, Security bookkeeper Bonus A sum of money or equivalent incentives given to employees in addition to base compensation.
Bonuses can also come in the form of extra vacation time, gifts, and other nonmonetary awards. Even when business was slow, the store owner made sure his staff received holiday bonuses to show his appreciation for their hard work. See also: Compensation, Intangible Rewards, Perquisite or Perk Rewards Book Inventory The balance of the inventory account after all incoming inventory is added and the cost of outgoing goods is subtracted. The book inventory type of perpetual inventory system is usually verified annually by taking a physical inventory and reconciling any discrepancies. See also: Accounting, Inventories Book Value
The value of an asset as reflected in the books of the company owning the item. The book value of the items at auction could never accurately represent the sentimental value several of the pieces had to the buyers. See also: Accounting, Assets, Balance Sheet, Liability, Net Worth Book-to-Bill Ratio A measure of sales trends of a company or overall industry. The ratio divides the amount of new orders “booked” by the value of the products shipped each month (or “billed”). The strength of the technology industry can be measured in part by watching the book-to-bill ratio every month. See also: Ratio Analysis, Revenue, Sales Bookkeeper
A person who records the accounts or transactions of a business in a general ledger. The store owner hired a bookkeeper to handle finances when she opened her second shop. See also: Accounting, General Ledger B bookkeeping 0 B Bookkeeping The practice or profession of recording the accounts and transactions of a business through a systematic and convenient record of money transactions in order to show the condition of a business enterprise. Having an accurate and trustworthy bookkeeping staff is vital to the success of any large business. See also: Accounting, Bookkeeper Bookmark A marker or address that identifies a Web site or Web page.
Most Web browsers allow users to save and organize bookmarks as a convenient way to mark Web sites for future reference. Most browsers have a section called “favorites” where users can bookmark their favorite sites for easy access. See also: Application Software, Web Page, World Wide Web (WWW) Boom A period when business expands and the economy experiences rapid growth and rising prices. During such a period, there is an increased demand for goods and services and unemployment rates fall. The boom that resulted after the election showed the country’s faith in the new president’s economic policies.
See also: Demand, Economics, Leading Indicators Boot Camp An indoctrination program in some aspect of leadership or management; going to such a program means being immersed in a discipline or topic with a group or team of cohorts. The board recommended everyone on the management team attend boot camp on cultural differences before the expansion into Europe took place. See also: Leadership, Teams Bootstrapping A management approach that uses internal methods to generate money to be used for a proposed project or venture; a low start-up, pay-as-you-go approach to launching businesses.
Many managers believe that bootstrapping rather than waiting until a new company has more than enough start-up monies helps create a sense of excitement and energy that bonds the staff and makes the company stronger in the long run. See also: Seed Capital, Start-Up, Venture Capital brainstorming 1 Boston Consulting Group Box (BCG Box) A framework for analysis and communication strategy for a business with a portfolio of products, services, programs, strategic business units or companies. The consultants used a BCG Box to present the analysis of the programs.
See also: Cash Cow, Competitive Advantage, Dog, Harvest, Strategic Business Unit (SBU), Strategy Bottleneck Anything that slows down or impedes by creating an obstruction or that halts the progress or flow of an activity, process, or operation in an organization. The computer glitch caused a bottleneck throughout the entire production line. See also: Barriers, Obstacle Bottom-Up An estimating technique in which every activity is individually estimated and then added together to determine the total project estimate. Each department was required to provide the CEO and the treasurer with a bottom-up budget every year.
See also: Budget, Business Plan, Decentralized, Organizations, Planning, Structure Bottom Line The line in a financial statement that shows net income or loss. Based on the bottom figure on a profit-and-loss statement, it refers to an organization’s most important measure of success: profits. Even established businesses must keep an eye on the bottom line in order to continue to be successful. See also: Income Statement, Loss, Profit, Valuation Brainstorming A management technique used to foster ideas, solve problems, set goals, establish priorities, and make assignments for employee accomplishments.
As a semistructured creative group activity, this method is used most often in ad-hoc business meetings to come up with new ideas for innovation or improvement. The committee came up with several good fundraising ideas in one brainstorming session. See also: Creativity, Innovation B brand B Brand The symbolic embodiment of key information that differentiates a product or service from the competition. Brands matter because companies act just like people when it comes to evaluating what products or services to buy. Many teenagers can identify popular brands faster than they can identify current world leaders.
See also: Brand Equity, Brand Loyalty, Brand Management, Customer Loyalty, Marketing, Value Proposition A brand and branding today is a strategic tool that helps the supplier cut through the morass of the market, get noticed, and connect with the customer on many levels and in ways that matter. Consumers are drawn to brands’ irrational benefits (status, prestige, affinity, self-security). Business customers specify and purchase based on rational drivers (pricing, product performance, metrics). Brand Equity The total or intrinsic value of a brand.
Awareness of a firm’s products or services are measured by consumer goodwill, l