Terms A
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503b: tax sheltered annuity
504 loan program: EntreP SBA program that
borrows money from large investors, then uses the proceeds
to make small business loans.
A
ABC
method: System of classifying inventory by value.
ability-to-pay principle: the idea that the
more resources you have, the more you should be required to
contribute to public projects
absolute advantage: the ability to produce
some good or service at a lower absolute cost than other producers
absolute deprivation: lack of the minimal
necessities for sustaining life
absolute deviation: Difference between the
actual amount and the forecasted amount is always expressed
as a positive number.
abundance: resources are abundant to the
extent that they exist in plentiful supply for meeting various
goals
accelerated Cost Recover System (ACRS): U.S.
depreciation schedule that covered items which were placed
in use prior to January 1, 1987.
Accelerated Cost Recovery System: The system
established by the Economic Recovery Tax Act of 1981 to simplify
depreciation methods for tax purposes and to encourage investment
in capital by allowing rapid write-off of asset costs over
predetermined periods, generally shorter than the estimated
useful lives of the assets. The system remains in effect for
assets placed in service between 1981 and 1986 but was modified
by the Tax Reform Act of 1986 for assets placed in service
after 1986. See Modified Accelerated Cost Recovery System.
Accelerated depreciation: An accounting procedure
under which larger amounts of expense are apportioned to the
earlier years of an asset's depreciable life and lesser amounts
to the later years.
accelerator theory: theory of investment
that says current investment spending depends positively on
the expected future growth of real GDP.
acceptance sampling: Use of a random, representative
portion of a sample to determine the acceptability of the
whole.
account return on investment technique: Capital
budgeting technique that evaluates a capital expenditure based
on the average annual after-tax profits relative to the average
book value of an investment.
accounting costs: the costs of a project,
figured in terms of monetary outflows alone
Accounting period: The length of time covered
for reporting accounting information.
Accounting principles: The methods and procedures
used in preparing financial statements.
accounting profit EntreP Is what a business has left from
its revenues after paying all of its expenses. Is typically
shown on the bottom of a business income statement.
accounting rate of return (ARR) In capital
budgeting, it is the rate of return on an investment that
is found by dividing the average annual income by the average
cost.
accounting statements (financial statements): Reports of a company’s financial performance and resources,
including an income statement, a balance sheet, and a statement
of cash flows.
accounts payable (trade credit): Outstanding
credit payable to suppliers.
Accounts payable: Amounts owed to creditors
for items or services purchased from them.
accounts receivable EntreP Amount of credit
extended to customers for services or products.
accounts receivable turnover: Number of times
accounts receivable sold rolls over during an accounting cycle.
Accounts receivable turnover: See Summary
of financial ratios
Accounts receivable: Amounts owed to an entity,
primarily by its trade customers.
Accrual basis of accounting: A method of
earnings determination under which revenues are recognized
in the accounting period when earned, regardless of when cash
is received, and expenses are recognized in the period incurred,
regardless of when cash is paid.
accrual method (accrual-basis accounting):
Method of accounting that matches revenues when they are earned
against the expenses associated with those revenues.
accrued expenses:Short-term liabilities that
have been incurred but not paid.
accrued liabilities: Obligations of company
that are accumulated during the normal course of business
and are paid after the books are closed.
Accrued liabilities: Obligations resulting
from the recognition of an expense prior to the payment of
cash.
accumulated depreciation: Total depreciation
(wearing allowance) that an asset has on a balance sheet,
from the asset’s acquisition, until the asset is disposed
of by the business.
Accumulated depreciation: A balance sheet
account indicating the amount of depreciation expense taken
on plant and equipment up to the balance sheet date.
accurate: describes something that is correct,
even if only in a general way
acid-test ratio (quick ratio): Measure of
a company’s liquidity that excludes inventories.
Acid-test ratio: See Summary of financial
ratios.
acquisition: Purchase of a new venture, usually
made in order to add to an existing venture. First-time launch
by acquisition is usually referred to as a buyout.
Activity ratio: A ratio that measures the
liquidity of specific assets and the efficiency of the firm
in managing assets.
activity ratios:Those ratios that indicate
how efficiently a business is using its assets.
additional paid in capital: Equity contributions
to a corporation in excess of the par value of common stock
as shown on a corporate balance sheet.
Additional paid-in-capital: The amount by
which the original sales price of stock shares sold exceeds
the par value of the stock.
administrative capitalism: a national system
characterized by private corporate ownership and a substantial
reliance on public administration (as well as exchange) as
a mode of organization
administrative organization: decision-making
authority given to some person or agency
administrative socialism: a national system
in which state ownership predominates, and activity is primarily
organized by public administration (command)
Adverse opinion: Opinion rendered by an independent
auditor stating that the financial statements have not been
presented fairly in accordance with generally accepted accounting
principles.
advertising: Presentation of a business idea
through mass media for promotional purposes.
advertising plan: Portion of the overall
marketing plan that includes the mix of advertising media,
the relative allocation of resources to each medium, the message
to be communicated, and the scheduling of the advertising.
advisory council: Group that functions like
a board of directors but acts only in an advisory capacity
and has no voting rights.
agency power: Ability of any one partner
to legally bind the other partners.
agents/brokers: Intermediaries that do not
take title to the goods they distribute but process them.
aggregate demand: Relationship between the
level of prices and the quantity of real GDP demanded.
aggregate supply: Relationship between the
level of prices and the quantity of output supplied.
aging schedule: Categorization of accounts
receivable based on the length of time they have been outstanding.
allocative efficiency: the allocation of
resources to their most (market-) valued uses
Allowance for doubtful accounts: The balance
sheet account that measures the amount of outstanding accounts
receivable expected to be uncollectable.
altruistic motivation: the motive for action that is especially
concerned with the well-being of others
American Option: Is a right, to buy or sell
some asset over some defined period of time in the future
for a price that is agreed upon now.
amortization: Reduction of the loan balance
by applying each month principal payment is amortization.
Amortization: The process of expense allocation
applied to the cost expiration of intangible assets.
angels: Informal investors willing to provide
capital for high-risk ventures.
Annual report: The report to shareholders
published by a firm; contains information required by generally
accepted accounting principles an/or by specific Securities
and Exchange commission requirements.
annual return on a share of stock: the sum
of its dividends and any capital gains (or losses)
annuity due: Payments which are made or received
at the beginning of each time period.
annuity: Stream of payments paid or received
usually over a period of 12 months.
antecedent factor: Combination of variables
in an individual’s background that influences the decision
to start a venture.
application software: Programs that allow
users to perform specific tasks on a computer.
appreciation: an increase in an asset's value
over time
area developers: Individuals or companies
that obtain the legal right to open several franchised outlets
in a given area.
articles of partnership: Document that states
explicitly the rights and duties of partners.
artisan entrepreneur: Person who starts a
business with primarily technical skills and little business
knowledge such as an artist.
Asian Pacific Economic Cooperation (EPIC) organization:
Organization of 18 Asian nations that attempts to reduce trade
barriers between their nations.
aspirational group: a group to which we would
like to belong assets: the stock of valuable things you possess
asset-based loan: Line of credit secured
by the assets of a company.
asset-based valuation approach: Determination
of the value of a business by estimating only the value of
its assets.
assets: Uses of the funds of a bank, including
loans and reserves.
Assets: Items possessing service or use potential
to owner.
asymmetric information: One side of the market—
either buyers or sellers—has better information about
the good than the other.
At-The Money: A condition in which an underlying
stock is trading at the option's striking (exercise) price.
attitude: Enduring opinion based on knowledge,
feeling, and behavioral tendency.
attribute inspection: Determination of product
acceptability based on whether it will or will not work.
attributes (or characteristics): the specific
qualities of a good or service, that are of interest to the
consumer
auction market: a market where an item is
sold to the highest bidder
Auditor's report: Report by independent auditor
attesting to the fairness of the financial statements of a
company.
Austrian economics: the school of economics
that emphasizes the development of markets over time, information,
and entrepreneurship, along with marginal thinking, markets,
and prices
automatic stabilizers: Taxes and transfer
payments that stabilize GDP without requiring policy-makers
to take explicit action.
autonomous consumption spending: Part of
consumption that does not depend on income.
average collection period: Average time it
takes a company to collect its accounts receivables.
Average collection period: See Summary of
financial ratios.
Average cost method: A method of valuing
inventory and cost of products sold; all costs, including
those in beginning inventory, are added together and divided
by the total number of units to arrive at a cost per unit.
Average Down: A strategy used to lower the
average cost of a stock by purchasing more shares at a lower
price.
average pricing: Approach in which total
cost for a given period is divided by quantity sold in that
period to set a price.
average-cost pricing policy: Regulatory policy
under which the government picks the point on the demand curve
at which price equals average cost.
