Glossary

Accounting

The process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities.

Accounts payable

Amounts the firm owes for credit purchases due within a year. This account is the liability counterpart of accounts receivable.

Accounts receivable

Amounts owed to the firm by customers who bought goods or services on credit.

Accrued expenses

Expenses, typically for wages and taxes, that have accumulated and must be paid at a specified future date within the year although the firm has not received a bill.

Acid-test (quick) ratio

The ratio of total current assets excluding inventory to total current liabilities; used to measure a firm’s liquidity.

Acquisitive growth

The growth of a company due to takeovers, acquisitions, or mergers.

Activity ratios

Ratios that measure how well a firm uses its assets.

Advertising

Paid communication designed to create an awareness of a product or company.

Angel investors

Wealthy, private individual seeking investment options with a greater potential return than is generally available with traditional publicly traded stocks.

Annual report

A yearly document that describes a firm’s financial status.

Arenas

In strategy, where the firm will be active and with how much emphasis.

Assets

Things of value owned by a firm. They may be tangible, such as cash, equipment, and buildings, or intangible, such as a patent or trademarked name.

Attribution theory

The cognitive process by which people interpret the reasons or causes for their behavior.

Auditing

The process of reviewing the records used to prepare financial statements and issuing a formal auditor’s opinion indicating whether the statements have been prepared in accordance with accepted accounting rules.

Autocratic leadership

Boss-centered, directive leadership.

Avoidance learning

Learning to behave in a certain way to avoid encountering an undesired or unpleasant consequence.

Balance sheet

A financial statement that summarizes a firm’s financial position at a specific point in time.

Basic research

Involves efforts to build knowledge and understand principles and phenomena. It often precedes practical applications and is generally undertaken without immediate commercial goals.

Behavioral segmentation

Dividing consumers by such variables as attitude toward the product, user status, or usage rate.

Benefit corporation

A designation recognized by a majority of U.S. states for a for-profit corporation that is driven by both mission and profit.

Best-cost provider

A combination or hybrid strategy that combines elements of cost leadership and differentiation.

Board of directors

A group of people elected by the stockholders to handle the overall management of a corporation, such as setting major corporate goals and policies, hiring corporate officers, and overseeing the firm’s operations and finances.

Bond

Long-term debt obligations (liabilities) issued by corporations and governments.

Bond ratings

Letter grades assigned to bond issues to indicate their quality or level of risk; assigned by rating agencies such as Moody’s and Standard & Poor’s (S&P).

Bonds

Long-term debt obligations (liabilities) of corporations and governments.

Bounded rationality

The idea that for complex issues, we cannot be completely rational because we cannot fully grasp all the possible alternatives, nor can we understand all the implications of every possible alternative.

Brand

An intangible asset with tangible value; made up of promotion efforts and customer meaning.

Brand equity

Added value generated by favorable consumer experiences with a product.

Brand value

The financial asset associated with a brand.

Breakthrough innovation

Seeks to solve problems that are well defined but exceptionally challenging to solve, often requiring knowledge and insights from seemingly unrelated domains.

Broker market

Consists of national and regional securities exchanges that bring buyers and sellers together through brokers on a centralized trading floor. The NYSE is a broker market.

Business

An organization that provides goods or services to consumers for the purpose of making a profit.

Business model

A plan for how venture will be funded; how the venture creates value for its stakeholders, including customers; how the venture’s offerings are made and distributed to the end users; and how income will be generated through this process.

Business model canvas

Developed by Osterwalder and Pigneur, used to develop a business model for a venture, including nine blocks that are mapped out to address customer segments, customer relationships, channels, revenue streams, value propositions, key partners, key activities, key resources, and cost structure.

Business model innovation

Creating, adapting, or fundamentally changing the way a company delivers value to its customers and/or generates revenue/

Business plan

A formal document that typically describes the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives.

Buyer cooperative

A group of cooperative members who unite for combined purchasing power.

C corporation

A conventional or basic form of corporate organization. A corporation is a legal entity with an existence and life separate from its owners, who are not personally liable for the entity’s debts. A corporation is chartered by the state in which it is formed and can own property, enter into contracts, sue and be sued, and engage in business operations under the terms of its charter.

Capital budgeting

The process of determining which long-term or fixed assets to acquire in an effort to maximize shareholder value.

Capital expenditures

A major expenditure that requires a large up-front investment and is expected to generate substantial cash inflow in return.

Career readiness

A foundation from which to demonstrate requisite core competencies that broadly prepare college students for success in the workplace and lifelong career management.

Cash

Funds on hand or in a bank.

Cash flow from financing activities

Cash flows related to debt and equity financing.

Cash flow from investment activities

Cash flows related to the purchase and sale of fixed assets.

Cash flow from operating activities

Cash flows related to the production of the firm’s goods or services.

Cash flows

The inflows and outflows of cash.

Cash management

Making sure that enough cash is on hand to pay bills as they come due and to meet unexpected expenses.

Centralization

In organizational structure, where decision making is concentrated at the top of the organizational hierarchy.

Certificates of deposit

Savings products offered by banks and credit unions. You generally agree to keep your money in the CD without taking a withdrawal for a specified length of time. Withdrawing money early means paying a penalty fee to the bank.

Certified B Corporation

A certification by B Lab that requires companies to meet rigorous standards for transparency, accountability, and social and environmental performance.

Chain of command

The authority relationships among people working at different levels of the organization.

Channels

One of the nine elements of the business model canvas: how a company communicates with and reaches its customer segments to deliver its value propositions.

Circuit breakers

Procedures for coordinated cross-market trading halts if a severe market price decline reaches levels that may exhaust market liquidity. These procedures, known as market-wide circuit breakers, may halt trading temporarily or, under extreme circumstances, close the markets before the normal close of the trading session.

Clustering

In marketing, combining segmenting criteria.

Coercive power

The power a person has because people believe that the person can punish them by inflicting pain or by withholding or taking away something that they value.

Cohesion

The degree of camaraderie within a team.

Commercial paper

Unsecured short-term debt—an IOU—issued by a financially strong corporation.

Common stock

A security that represents an ownership interest in a corporation.

Compound interest

The continual addition of interest to the original principal sum of a loan or deposit, often referred to as interest on interest.

Compounding

The process that takes a present valuation of money to some point in the future.

Confirmation bias

The tendency to pay more attention to information that confirms our existing beliefs and less attention to information that is contrary to our beliefs.

Convertible bonds

Bonds that allow the bondholder to exchange each bond for a specified number of shares of common stock.

Cooperative corporation

A legal entity typically formed by people with similar interests, such as suppliers or customers, to reduce costs and gain economic power. A cooperative has limited liability, an unlimited life span, an elected board of directors, and an administrative staff; all profits are distributed to the member-owners in proportion to their contributions.

Corporate social responsibility (CSR)

The practice in which a business views itself within a broader context, as a member of society with certain implicit social obligations and responsibility for its own effects on environmental and social well-being.

Cost leadership

A strategy in which the focus is on minimizing costs, which often results using product price as a competitive edge.

Cost of goods sold

The total expense of buying or producing a firm’s goods or services.

Cost structure

One of the nine elements of the business model canvas: costs incurred to operate your business model.

Coupon rate

The amount of annual interest paid by the bond issuer; is multiplied by the face value of a bond to determine annual interest or coupon payment amounts.

Creativity

Generating and developing original ideas.

Current assets

Assets that can or will be converted to cash within the next 12 months.

Current liabilities

Short-term claims that are due within a year of the date of the balance sheet.

Current portion of long-term debt

Any repayment on long-term debt due within the year.

Current ratio

The ratio of total current assets to total current liabilities; used to measure a firm’s liquidity.

Customer division

A divisional departmentalization based on customer segments.

Customer relationships

One of the nine elements of the business model canvas: the types of relationships a company establishes with its customer segments.

Customer segments

One of the nine elements of the business model canvas: the different groups of people or organizations a company aims to reach and serve.

Customer-relationship management

A marketing strategy that focuses on using information about current customers to nurture and maintain strong relationships with them.

Dealer markets

In contrast to broker markets, buyers and sellers do not trade securities directly. Instead they work through securities dealers called market makers, who make markets in one or more securities and offer to buy or sell securities at stated prices. A security transaction in the dealer market has two parts: the selling investor sells his or her securities to one dealer, and the buyer purchases the securities from another dealer (or in some cases, the same dealer). The NASDAQ is a dealer market.

Debt financing

Borrowing funds that must be repaid, usually with interest.

Debt ratios

Ratios that measure the degree and effect of a firm’s use of borrowed funds (debt) to finance its operations.

Debt-to-equity ratio

The ratio of total liabilities to owners’ equity; measures the relationship between the amount of debt financing (borrowing) and the amount of equity financing (owner’s funds).

Decentralization

In organizational structure, where decision making is delegated to lower-level employees.

Default risk

The risk that the issuer of a financial security will be unable to make payments as specified in the terms of a financial contract.

Delegation

The process of entrusting work to subordinates.

Demographic segmentation

Divides the market into groups based on such variables as age, marital status, gender, ethnic background, income, occupation, and education.

Departmentalization

Grouping specialized jobs into meaningful units.

Depreciation

The allocation of the asset’s original cost to the years in which it is expected to produce revenues.

Design thinking

A technique for creative problem-solving that involves keeping the user at the center of everything and is focused around asking different questions and looking at problems in new ways. It involves empathizing, defining, ideating, prototyping, and testing.

Designated leaders

Leaders who are put into positions of leadership by formal processes; designated leaders also known as formal leaders.

Differentiation

A strategy that involves offering a unique product that is in some way different than other offerings.

Differentiators

In strategy, the things that are unique to a firm.

Discount rate

The interest rate used to determine the present value of future cash inflows; may derive from several sources, such as stated contract rates, costs to borrow, or expected rates of return on investments.

Discounting

The process that takes a future value of money and equates it to present dollar value terms.

Disruptive innovation

“Describes a process by which a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors."

Christensen Institute. (n.d.) Disruptive innovation. Retrieved March 8, 2024, from https://www.christenseninstitute.org/disruptive-innovations/

Distributive justice

One type of organizational justice, which refers to the perceived fairness of outcomes.

Diversifiable risk

Also called unsystematic risk, a risk that can be eliminated without the loss of expected return by holding a portfolio of securities.

Diversification

Holding a variety of assets in a portfolio, in order to manage risk.

Diversity

Identity-based differences among and between people that affect their lives as applicants, employees, and customers.

Dividends

Payments to stockholders from a corporation’s profits.

Divisional organization

A form of departmentalization in which each division contains most of the functional areas (production, marketing, accounting, finance, human resources); in other words, divisions are similar to stand-alone companies, and they function relatively autonomously.

Double-entry bookkeeping

A method of accounting in which each transaction is recorded as two entries so that two accounts or records are changed.

Early stage

Company lifecycle stage in which the product or service has begun development.

Earnings per share (EPS)

The ratio of net profit to the number of shares of common stock outstanding; measures the number of dollars earned by each share of stock.

Economic logic

How a firm makes money above its cost of capital.

Economies of scale

A situation where producing more of a product (or service) results in a lower per-unit cost, as a result of fixed costs spread over more units, volume discounts, or both.

Economies of scope

A situation where producing one product (or service) reduces the cost of producing a different product (or service), as a result of sharing resources or operations.

Emergent leaders

Leaders who emerge from the dynamics and processes that unfold within and among a group of individuals as they endeavor to achieve a collective goal.

Emotional intelligence

The capability of individuals to recognize their own emotions and others’ emotions.

Empowerment

In individuals, autonomy and discretion to make their own decisions, as well as control over the resources needed to implement those decisions.

Entrepreneur

Someone who identifies and acts on an idea or problem that no one else has identified or acted on in quite the same way.

Entrepreneurial opportunity

The point at which identifiable consumer demand meets the feasibility of satisfying the requested product or service and meets the following conditions: significant market demand, significant market structure and size, significant margins, and resources to support the venture’s success.

Equity financing

Funds provided in exchange for a share of ownership in a business.

Equity theory

A theory of motivation that holds that worker satisfaction is influenced by employees’ perceptions about how fairly they are treated compared with their coworkers.

Escalation of commitment

The tendency of decision makers to remain committed to poor decision, even when doing so leads to increasingly negative outcomes.

Ethics

Principles or standards of behavior to which we hold ourselves.

Exchange-traded fund (ETF)

A security similar to a mutual fund; holds a broad basket of stocks with a common theme but trades on a stock exchange so that its price changes throughout the day.

Expectancy

In expectancy theory, the link between effort and performance, which refers to the strength of the individual’s expectation that a certain amount of effort will lead to a certain level of performance.

Expectancy theory

A theory of motivation that holds that the probability of an individual acting in a particular way depends on the strength of that individual’s belief that the act will have a particular outcome and on whether the individual values that outcome.

Expenses

The costs of generating revenues.

Expert power

The power a person has because others believe that the person has and is willing to share expert knowledge that they need. 

External locus of control

A tendency for individuals to attribute things that happen to them as being caused by someone or something else.

Externality

Occurs when an exchange between two parties (where a party can be an individual or organization) has an impact on a third party who is not part of the exchange. An externality, which is sometimes also called a spillover, can have a negative or a positive impact on the third party.

Extinction

The principle that suggests that undesired behavior will decline as a result of a lack of positive reinforcement.

Extrinsic rewards

Rewards that come from outside the individual—things like pay raises, promotions, bonuses, and prestigious assignments.

Finance

Planning for, obtaining, and managing a company’s funds.

Financial accountants

Responsible for preparing financial statements to help users, both inside and outside the organization, assess the financial strength of the company.

Financial accounting

Accounting that focuses on preparing external financial reports that are used by outsiders such as lenders, suppliers, investors, and government agencies to assess the financial strength of a business.

Financial management

The art and science of managing a firm’s money so that it can meet its goals.

Financial risk

The chance that the firm will be unable to make scheduled interest and principal payments.

Financing

Raising money for an intended purpose.

Fixed assets

Long-term assets used by the firm for more than a year.

Fixed costs

Costs that do not change regardless of the level of production.

Flat

In organizational structure, when an organization has only a few layers of management.

Focus group

A small group, typically 8 to 12 people, who are asked several questions by a moderator and encouraged to build upon each other’s responses.

Focused differentiation

A strategy in which a differentiated product is marketed to a narrow market.

Focused low-cost

A low-cost, narrowly-focused market strategy in which a company focuses on a specific segment, such as a particular buyer segment or a particular geographic segment.

Formal leadership

A leadership role that is officially recognized.

Forming stage

The first stage of team development—the positive and polite stage.

Fraud

the act of intentionally deceiving a person or organization or misrepresenting a relationship in order to secure some type of benefit, either financial or nonfinancial.

Fraud triangle

The three factors that increase the likelihood of an individual committing fraud, as well as other forms of ethical violations; these factors are pressure, opportunity, and rationalization.

Free-rein leadership

Subordinate-centered, hands-off leadership. Also called laissez-faire leadership.

Frontline managers

Managers at the lowest level of management who report to middle managers; they coordinate activities, supervise employees, and are involved in day-to-day operations.

Functional organization

A form of departmentalization that groups together people who have comparable skills and perform similar tasks.

Fundamental attribution error

The tendency to underestimate the effects of external or situational causes of behavior and to overestimate the effects of internal or personal causes.

Funds

Financial resources for acquiring assets.

Future value (FV)

The value that a current amount will grow to at a given interest rate over a given period of time.

General and administrative expenses

Business expenses that cannot be linked to either cost of goods sold or sales. Examples of general and administrative expenses are salaries of top managers and office support staff; utilities; office supplies; interest expense; fees for accounting, consulting, and legal services; insurance; and rent.

Generally accepted accounting principles (GAAP)

The financial accounting standards followed by accountants in the United States when preparing financial statements.

Generic branding

When the maker attaches no branding information to a product except a description of its contents.

Generic strategies

Strategies that can be applied to any size or form of business: cost leadership and differentiation. These can take either a broad or narrow scope, giving rise to four primary options: cost leadership, focused low cost, broad differentiation, and focused differentiation.

Geographic segmentation

Dividing a market according to such variables as climate, region, and population density (urban, suburban, small-town, or rural).

Geographical division

A divisional departmentalization based on geographical location.

Giving Voice to Values (GVV)

An approach to values-driven leadership development that helps you learn how to effectively act on your values and ethical principles in the context of your professional responsibilities.

Goal-setting theory

A theory of motivation based on the premise that an individual’s intention to work toward a goal is a primary source of motivation.

Goods

Tangible items manufactured by businesses.

Greenwashing

Carrying out superficial CSR efforts that merely cover up systemic ethics problems for the sake of public relations.

Gross profit

The amount a company earns after paying to produce or buy its products but before deducting operating expenses.

Gross sales

The total dollar amount of a company’s sales.

Ground rules

Basic rules or principles of conduct that govern a situation or endeavor.

Groupthink

The tendency to conform to team pressure in making decisions, while failing to think critically or to consider outside influences.

Growth rate

The percentage increase of a specific variable within a specific time period; synonymous with interest rate in the context of the time value of money.

In-group

A group that we identify with or see ourselves as belonging to.

Income statement

A financial statement that summarizes a firm’s revenues and expenses and shows its total profit or loss over a period of time.

Income taxes payable

Taxes owed for the current operating period but not yet paid. Taxes are often shown separately when they are a large amount.

Inflation risk

The risk of reduced purchasing power of goods and services due to rising prices.

Informal leadership

Leadership that is exhibited without an official position.

Informational power

The power a person has because they have access to or control over valuable information.

Initial public offering (IPO)

Process by which a company lists its ownership shares on a public stock exchange.

Innovation

A new idea, product, service, process, or business model, or a change to an existing product, service, process, or business model.

Insider trading

The use of information that is not available to the general public to make profits on securities transactions.

Institutional investors

Investment professionals who are paid to manage other people’s money.

Instrumentality

In expectancy theory, the link between performance and outcome, which refers to the strength of the expectation that a certain level of performance will lead to a particular outcome.

Intangible asset

A nonphysical resource that provides advantages.

Intangible assets

Long-term assets with no physical existence, such as patents, copyrights, trademarks, and goodwill.

Interactional justice

One type of organizational justice, which refers to the manner in which an employee is treated.

Interest

The amount of money that is paid by a borrower to a lender for the use of their money, typically calculated from an annualized rate.

Internal locus of control

A tendency for individuals to attribute their successes and failures to their own abilities and efforts.

Intrinsic rewards

Rewards that come from within the individual—things like satisfaction, contentment, sense of accomplishment, confidence, and pride.

Inventory

Stock of goods being held for production or for sale to customers.

Inventory turnover ratio

The ratio of cost of goods sold to average inventory; measures the speed with which inventory moves through a firm and is turned into sales.

Investment bankers

Firms that act as intermediaries, buying securities from corporations and governments and reselling them to the public.

Jargon

Unnecessarily complicated language used to impress, rather than to inform, your audience.

Job satisfaction

The degree to which individuals enjoy their job.

Junk bonds

High-risk, high-return bonds often used by companies whose credit characteristics would not otherwise allow them access to the debt markets.

Key activities

One of the nine elements of the business model canvas: the most important things a company must do to make its business model work.

Key partnerships

One of the nine elements of the business model canvas: the network of suppliers and partners that make the business model work.

Key resources

One of the nine elements of the business model canvas: the most important assets required to make a business model work.

Leadership

The process of guiding and motivating others toward the achievement of organizational goals.

Legal compliance

The extent to which a company conducts its business operations in accordance with applicable regulations, statutes, and laws.

Legitimate power

The power a person has because others believe that the person possesses the “right” to influence them and that they ought to obey.

Liabilities

What a firm owes to its creditors; also called debts.

Limited liability company (LLC)

A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation.

Limited liability partnership

Similar to a general partnership except that partners are not held responsible for the business debt and liabilities.

Limited partnership

A partnership with one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of their investment in the company.

Liquidity

The speed with which assets can be turned into cash.

Liquidity ratios

Ratios that measure a firm’s ability to pay its short-term debts as they come due.

Long-term liabilities

Claims that come due more than one year after the date of the balance sheet.

Macro environment

Aspects of a company's external environment that can impact the business but over which the company generally has little direct control, such as the economy and political activity.

Maintenance needs

Needs related to interpersonal interactions and relationships. For instance, a leader attending to maintenance needs may help manage conflict or decision-making by reducing tension and encouraging full participation.

Management

The process of guiding the development, maintenance, and allocation of resources to attain organizational goals.

Managerial accountants

Responsible for preparing information, such as reports on the cost of materials used in the production process, for internal use only.

Managerial Accounting

Accounting that provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations.

Manufacturer branding

When a company sells products under its own brand names.

Market segments

Groups of potential customers with common characteristics that influence their buying decisions.

Marketable securities

Temporary investments of excess cash that can readily be converted to cash.

Marketing

The process of creating, communicating, and delivering offerings that have value for customers.

Marketing concept

The philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs while achieving organizational goals.

Marketing mix

The four key elements—product, price, place, and promotion—that shape the development and execution of marketing objectives to reach a target market.

Marketing research

The process of collecting and analyzing the data that are relevant to a specific marketing situation.

Mass market

A large group of customers with generally similar problems and needs.

Matrix structure

A form of departmentalization that combines elements of functional and divisional structures.

Mature stage

Company lifecycle stage in which the business has reached commercial viability

Middle managers

Managers who report to top management and oversee the activities of frontline managers. Their responsibilities include allocating resources and developing and implementing activities.

Mortgage bonds

Bonds secured by property such as land, buildings, or equipment.

Mortgage loan

A long-term loan made against real estate as collateral.

Motivation

The set of forces that prompt a person to release energy, or exert effort, in a certain direction.

Multi-branding

Assigning different brand names to products covering different segments of the market.

Multiproduct-branding

Selling many products under one brand name.

Municipal bonds

Bonds issued by states, cities, counties, and other state and local government agencies.

Mutual fund

A financial-service company that pools investors’ funds to buy a selection of securities that meet its stated investment goals.

Narrow span of control

A span of control with few direct reports.

National Association of Securities Dealers Automated Quotation system (NASDAQ)

The first and largest electronic stock market, which is a sophisticated telecommunications network that links dealers throughout the United States.

Need

The gap between what is and what is required.

Negative reinforcement

Removing an undesirable consequence to encourage desired behavior.

Net loss

The amount obtained by subtracting all of a firm’s expenses from its revenues, when the expenses are more than the revenues.

Net profit (or net income)

The amount obtained by subtracting all of a firm’s expenses from its revenues, when the revenues are more than the expenses.

Net profit margin

The ratio of net profit to net sales; also called return on sales. It measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted.

Net sales

The amount left after deducting sales discounts and returns and allowances from gross sales.

Net working capital

The amount obtained by subtracting total current liabilities from total current assets; used to measure a firm’s liquidity.

New York Stock Exchange (NYSE)

The oldest and most prestigious broker market, which has existed since 1792 and is located on Wall Street in downtown New York City.

Niche market

A specific, specialized customer segment with problems or needs that differ from other customer segments.

Non-diversifiable risk

Risk that cannot be eliminated by simply holding a portfolio of securities; also known as systematic risk.

Nonprofit corporations

An organization formed to serve some public purpose rather than for financial gain. Nonprofits whose activity is for charitable, religious, educational, scientific, or literary purposes can be exempt from paying income taxes.

Norming stage

The third stage of team development—when team resolves its differences and begins making progress.

Not-for-profit

An organization that exists to achieve some goal other than the usual business goal of profit.

Notes payable

Formal short-term borrowings usually evidenced by a specific written promise to pay.

Notes receivable

Amounts owed to the firm by customers or others to whom it lent money; typically longer-term than accounts receivable and includes interest.

Open innovation

An approach in which organizations actively seek external insights and ideas.

Operating expenses

The expenses of running a business that are not directly related to producing or buying its products.

Operations management

The business function that designs and oversees the transformation of resources into goods or services.

Organic growth

The growth rate of a company excluding takeovers, acquisitions, or mergers.

Organizational chart

A diagram delineating the interrelationships of positions within the organization.

Organizational justice

Employee perceptions of fairness in the workplace, encompassing three distinct forms of justice: distributive (fair outcomes), procedural (fair process), and interactional (the manner in which a person is treated).

Organizational structure

the various roles within an organizational, which positions report to which, and how an organization will departmentalize its work

Out-group

A group that we don’t belong to and that we view as fundamentally different from us.

Owners’ equity

The total amount of investment in the firm minus any liabilities; also called net worth.

Par value

Also called face amount or face value. This is equal to the principal amount that the issuer will repay at the end of the bond term or maturity date.

Partnership

An association of two or more individuals who agree to operate a business together for profit.

Performing stage

The fourth stage of team development—when hard work leads to the achievement of the team’s goal.

Personal interviews

An interview that happens on an individual level between researcher and respondent.

Personal selling

One-on-one communication with customers or potential customers.

Place

Where a product is purchased.

Plain language

Communication your audience can understand the first time they read or hear it.

Political risk

The risk of local, state, or national governments “changing the rules” and disrupting firm cash flows.

Pooled interdependence

When team members may work independently and simply combine their efforts to create the team’s output.

Portfolio

A collection of financial investments, such as stocks, bonds, mutual funds, certificates of deposit, etc.

Positive reinforcement

A desirable consequence that satisfies an active need or that removes a barrier to need satisfaction.

Power

The ability to influence others.

Preferred stock

An equity security for which the dividend amount is set at the time the stock is issued and the dividend must be paid before the company can pay dividends to common stockholders.

Present value (PV)

The current value of a future amount, calculated by discounting the future value back at a known discount or interest rate for a specified period of time.

Price

What a consumer pays in exchange for a product.

Primary data

New information that is collected by the researcher with the current project in mind.

Primary market

The securities market where new securities are sold to the public.

Principal

The amount borrowed by the issuer of a bond; also called par value.

Private accountants

Accountants who are employed to serve one particular organization.

Private branding

When a company makes a product and sells it to a retailer who in turn resells it under its own name.

Procedural justice

One type of organizational justice, which refers to the fairness of the process used to determine outcomes.

Process division

A divisional departmentalization based on distinct stages of the production process.

Process innovation

The implementation of a new or significantly improved production or delivery method.

Product

The good or service that a company provides.

Product division

A divisional departmentalization based on product lines.

Product Innovation

The development of a new product, an improvement in the performance of the existing product, or a new feature to an existing product.

Product-market fit

The degree to which a product satisfies a strong market demand.

Profession

An occupation that involves mastery of complex knowledge and skills through prolonged training, education, or practical experience.

Professionalism

Understanding and demonstrating effective work habits and acting in the interest of the larger community and workplace.

Profit

The money left over after all costs are paid.

Profitability ratios

Ratios that measure how well a firm is using its resources to generate profit and how efficiently it is being managed.

Promotion

Comprised of advertising, sales, and other communication efforts the company utilizes to attract customers.

Promotion mix

Tactics marketers use to communicate with the customer.

Psychographic segmentation

Classifies consumers on the basis of individual lifestyles as they’re reflected in people’s interests, activities, attitudes, and values.

Public accountants

Independent accountants who serve organizations and individuals on a fee basis.

Public company

A company that is subject to public reporting requirements and whose securities trade on public markets.

Public relations

Any actions that help to create and maintain a favorable public image.

Publicity

Notice or attention given by the media.

Punishment

Anything that decreases a specific behavior.

Ratio analysis

The calculation and interpretation of financial ratios using data taken from the firm’s financial statements in order to assess its condition and performance.

Reciprocal interdependence

Occurs when two or more team members depend on one another for inputs.

Referent

Another person, used for comparison purposes.

Referent power

The power a person has because others want to associate with or be accepted by them.

Reinforcement theory

A theory of motivation that holds that people do things because they know that certain consequences will follow.

Restructuring

Altering existing organizational structures to become more competitive once conditions have changed.

Retained earnings

The amounts left over from profitable operations since the firm’s beginning; equal to total profits minus all dividends paid to stockholders.

Return

In finance, the opportunity for profit.

Return on equity (ROE)

The ratio of net profit to total owners’ equity; measures the return that owners receive on their investment in the firm.

Revenue

The money a company receives by providing services or selling goods to customers.

Revenue streams

One of the nine elements of the business model canvas: the ways a company generates cash from customer segments.

Revenues

The dollar amount of a firm’s sales plus any other income it received from sources such as interest, dividends, and rents.

Reward

Anything that increases a specific behavior.

Reward power

The power a person has because people believe that they can bestow rewards or outcomes, such as money or recognition that others desire.

Risk

The potential to lose time and money or otherwise not be able to accomplish an organization’s goals.

Risk (finance)

In finance, the potential for loss, or the chance that an investment will not achieve the expected level of return.

Risk-return tradeoff

A basic principle in finance which states that the higher the risk, the greater the return that is required.

S corporation

A hybrid entity that is organized like a corporation, with stockholders, directors, and officers, but taxed like a partnership, with income and losses flowing through to the stockholders and taxed as their personal income.

Sales promotion

Promotion that creates an incentive to purchase; provides for a fairly immediate increase in sales in the short term.

SCAMPER technique

A technique for creative brainstorming that draws on existing products, services, and business models. It involves substituting, combining, adapting, modifying, putting to other uses, eliminating, and/or rearranging.

Secondary data

Any research or data that was completed or collected, within the organization or outside of the organization, for another purpose.

Secondary market

The securities market where old (already issued) securities are bought and sold, or traded, among investors; includes broker markets, dealer markets, the over-the-counter market, and the commodities exchanges.

Secured loans

Loans that require the borrower to pledge specific assets as collateral, or security.

Securities

Investment certificates that represent either equity (ownership in the issuing organization) or debt (a loan to the issuer).

Securities and Exchange Commission (SEC)

The SEC is an independent federal agency, established pursuant to the Securities Exchange Act of 1934, whose mission is "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

Seed Stage

Company lifecycle stage in which the business is largely still an idea.

Self-fulfilling prophecy

An expectation held by a person that alters their behavior in a way that tends to make it true.

Self-serving bias

The tendency for individuals to attribute their successes to their own actions while attributing their failures to others.

Seller cooperative

A group made up of individual producers who join together to compete more effectively with large producers.

Selling expenses

Related to marketing and distributing the company’s products. They include salaries and commissions paid to salespeople and the costs of advertising, sales supplies, delivery, and other items that can be linked to sales activity, such as insurance, telephone and other utilities, and postage.

Sequential interdependence

Exists when the outputs of one team member becomes the inputs for another.

Service innovation

Introducing new services or improving the delivery of existing services.

Services

Intangible offerings of businesses that can’t be held, touched, or stored.

Short-term expenses

Outlays used to support current production and selling activities.

Showrooming

The process that occurs when a customer visits a brick-and-mortar store to check out a product in person and then goes home to order it online.

Similar-to-me bias

The tendency to prefer the familiar, specifically people that look and think like us.

Slotting fees

Allowances paid by a manufacturer to a retailer to secure space on store shelves.

Social loafing

The tendency of individuals to put in less effort when working in a group context.

Social media marketing

Using social media platforms, such as Facebook, Instagram, LinkedIn, and TikTok, to deliver content that drives engagement with your brand

Social or (interpersonal) influence

The ability to effect a change in the motivation, attitudes, and/or behaviors of others.

Sole proprietorship

A business that is established, owned, operated, and often financed by one person.

Span of control

The number of people reporting to a particular manager.

Specialization

Organizing activities into clusters of related tasks that can be handled by certain individuals or groups.

Staging and pacing

The sequence and speed of strategic moves.

Stakeholders

Those with a legitimate interest in the success or failure of the business and the policies it adopts; include customers, clients, employees, shareholders, communities, the environment, the government, and the media, among others.

Statement of cash flows

A financial statement that provides a summary of the money flowing into and out of a firm during a certain period, typically one year.

Stereotype

A widely held generalization about a group of people. Stereotyping is a process in which attributes are assigned to people solely on the basis of their class or category. It is particularly likely to occur when one meets new people, since very little is known about them at that time.

Stock dividends

Dividend payments in the form of more stock.

Stockbroker

A person who is licensed to buy and sell securities on behalf of clients.

Storming stage

The second stage of team development—when people are pushing against the boundaries.

Strategy

Making choices about what an organization will and won't do to achieve goals and competitive advantage.

Strategy diamond

A framework for checking and communicating strategy, made up of arenas, differentiators, economic logic, vehicles, and staging and pacing.

Surveys

Also known as a questionnaire, a series of several questions that can collect a variety of qualitative and quantitative data.

Sustainability

The capacity to maintain or improve the state and availability of desirable materials or conditions over the long term.

Sustaining innovation

Also referred to as incremental innovation; involves making small-scale improvements to existing products, services, processes, and business models.

Tall

In organizational structure, when an organization has many layers of management.

Tangible asset

Something of value that physically exists.

Target market

Group of people with some shared characteristics that a company has identified as potential customers for its products.

Task interdependence

In teams, the degree that team members are dependent on one another to get information, support, or materials from other team members to be effective.

Task needs

Needs related to task completion or goal achievement. For instance, a leader attending to task needs may help analyze problems, distribute assignments, gather information, make sure everyone is heard from, keep the group focused, and facilitate the group reaching a consensus or final recommendations.

Term loan

A business loan with a maturity of more than one year.

Time value of money (TVM)

The concept that an amount of money is worth more today than the exact same amount of money at some point in the future.

Top managers

The highest level of management which is responsible for setting objectives; scanning the environment for opportunities and threats; and planning and decision making.

Treasury bills

Short-term debt obligations of one year or less issued by the US government.

Triple bottom line (TBL)

A measure that accounts for an organization’s results in terms of its effects on people (social), the planet (environmental), and profits (economic).

Turnover

The rate at which workers who leave an organization and must be replaced.

Underwriting

The process of buying securities from corporations and governments and reselling them to the public; the main activity of investment bankers.

Unity of command

Occurs when each employee reports to only one supervisor.

Unsecured loans

Loans that do not require assets as security and that are are made on the basis of the firm’s creditworthiness and the lender’s previous experience with the firm.

Valence

In expectancy theory, the outcome, which refers to the degree to which the individual expects the anticipated outcome to satisfy personal needs or wants. Some outcomes have more valence, or value, for individuals than others do.

Valuation

Estimate of a company’s worth.

Value proposition

One of the nine elements of the business model canvas: the products and services and their attributes that create value for customer segments.

Variable costs

Costs that increase or decrease based on the level of production.

Vehicles

In strategy, how a company will achieve its objectives; for example, internal development versus acquisitions.

Venture capital

Financing obtained from venture capitalists, investment firms that specialize in financing small, high-growth companies and receive an ownership interest and a voice in management in return for their money.

Venture capitalist

Individual or investment firm that specializes in funding startup companies.

Volatility

Fluctuations in a security or index over time.

Want

The gap between what is and what is desired.

Wide span of control

A span of control with many direct reports.

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Foundations of Business Copyright © 2024 by Charlotte Hoopes is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.