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More Terminologies

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‘AND MORE TERMINOLOGIES

These are terminologies used in the business/financial sector. This session is a follow-up on the terminologies published in June 2016 and September 2016. Understanding terminologies is important if you want to be a good analyst, it is also important for doing business.

Minimum wage

The smallest hourly/monthly wage that an employee may be paid as mandated by federal law. Inflation and other factorsmay necessitate periodicadjustments to the actualnumber.

 Surety bond

  1. A bond issued by an entity on behalf of a secondparty, guaranteeing that the secondparty will fulfill an obligation or series of obligations to a third party. In the event that the obligations are not met, the third party will recover its losses via the bond.
  2. A fee that is charged when a personloses a physical security issued to him/her and has to have a duplicate issued.

Pure competition

A market characterized by a large number of independent sellers of standardized products, free flow of information, and free entry and exit. Each seller is a “price taker” rather than a “price maker”.

Royalty

A payment made for the use of property, especially a patent, copyrighted work, franchise, or natural resource. The amount is usually a percentage of revenues obtained through its use.

Charge off

Accounts receivable that will likely remain uncollectable and will be written off. Charge offs appear as an expense on the company’sincome statement, thus reducing net income. In general, companiesmake an estimate of charge off expenses that might be incurred in the current time period based on past records as part of the process of estimating earnings.

Interest income

The term that companies use on their income statement for reporting the interest earned on cash temporarily held in savings accounts, certificates of deposits, or other investments. Because the interest wasn’t part of the original investment, they record it separately, as interest income.

Abatement

A reduction in or reprieve from a tax, debt or any other paymentobligation. An abatement is sometimes included in a contract, for example abatement of rent in the event that a building is destroyed by fire, flood or other accident.

Buying on margin

A risky technique involving the purchase of securities with borrowed money, using the shares themselves as collateral. Usually done using a margin account at a brokerage, and subject tofairly strict SEC regulations.

Supply-side economics

An economic theory which holds that reducing tax rates, especially for businesses and wealthy individuals, stimulatessavings and investmentfor the benefit of everyone. Also, called trickle-down economics.

Division of labor

An approach to the completion of a complex task which involves breaking the task into a number of simpler tasks and assigning these tasks to specialists who generally perform only their assigned task.

Supply curve

A graph showing the hypothetical supply of a product or service that would be available at different pricepoints. The supply curve usually slopes upward, since higher prices give producers an incentive to supply more in the hope of making greater revenue. In the short run the price-supply tradeoff is greater than in the long run.

Monopolistic competition

A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole.

Standard of living

The financial health of a population, as measured by the quantity of consumption by the members of that population. The measure most frequently used to estimate standard of living is gross national incomeper capita. One drawback to the standard of living measurement is that it does not take into account some factors which are important but hard to quantify, such as crimerate or environmental factors.

Globalization

Name for the process of increasing the connectivity and interdependence of the world’smarkets and businesses.

This process has sped up dramatically in the last few decades as technological advancesmake it easier for people to travel, communicate, and do business internationally. Two major recent driving forces are advances in telecommunications infrastructure and the growth of the internet.

Living trust

A trust created for the trustor and administered by another party while the trustor is still alive. A living trust can be either revocable or irrevocable. A living trust avoidsprobate and therefore gets assets distributed significantly more quickly than a will does.

Quick ratio

A measure of a company’sliquidity and ability to meet its obligations. Quick ratio, often referred to as acid-test ratio, is obtained by subtracting inventories from current assets and then dividing by current liabilities. Quick ratio is viewed as a sign of company‘s financial strength or weakness (higher numbermeans stronger, lowernumber means weaker).

Cottage industry

An industry where the creation of products and services is home-based, rather than factory-based. While products and services created by cottage industry are often unique and distinctive given the fact that they are usually not mass-produced, producers in this sector often face numerous disadvantages when trying to compete with much larger factory-based companies.

Reaganomics

Economicprogram utilized during the Reagan administration, which emphasized low taxes, decreased economicregulation, low social services spending, and high military spending. Contributed to low interest rates, low inflation, and large budget deficits. Some of the major legislations passed during his presidency included the Economic Recovery Tax Act of 1981, the Tax Equity and Fiscal

Forum Discussion:

In rounding up, I hope someday the economic program of one of our leaders, will be a reference point. What do you think about the following economic policies: OBJnomics, Jonathanomics, and Buharinomics? What are the positives and what are their downsides?

References

http://www.investorguide.com/

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