Glossary Of Economic Terms
Click any alphabet to view Economic Terms.
- Backward Integration
The expansion of a business which takes the form of acquiring control over firms supplying it with its raw materials.
- Backward Linkage
Refers to the relationship between an industry or firm and the suppliers of its inputs. A change in the output of the industry willget transmitted backwards to the suppliers of its inputs by changing in demand for inputs.
Means a commodity or product which produces disutility for its consumer.
- Balanced Budget
A budget is said to be a balanced budget when current income equals to current expenditure.
- Balance Sheet
This is an ordered statement of
- the economic resources or assets of a company or other business organisation, each item having a value set upon it;
- the financial claims of persons or organizations upon the value of these assets.
- Balance of Payments
Refers to the relation between the payments of all kinds made from one country to the rest of the world and its receipts from all other countries.
- Balance of Trade
Refers to the relationship between the values of a country's imports and exports, i.e., the 'visible' balance. These items only form a part of the balance of payments, which also get influenced by
- 'invisible' items and
- movement of capital.
- Bank Credit
Refers to the lending by the banking system, by whatever means: bank advances, discounting bills or purchasing securities.
- Bandwagon Effect
Refers to the effect whereby as the price of the goods falls and demand by some sections or individuals in the community expands, other individuals or sections imitate the reactions and expand their demand also.
- Bank Deposits
The funds deposited in bank accounts. In reality they are simply records of indebtedness of a bank to the depositor and they arise from the character of banks as financial intermediaries.
- Bank Note
A note issued by a bank for a sum of money which it promises to pay the bearer on demand.
A legal proceeding under which the property of an insolvent debtor is taken for the benefit of his creditors generally.
Refers to the method of exchanging goods and services directly for other goods and services without employing a separate unit of account or medium of exchange.
A bear is a speculator who sells securities in anticipation of a fall in prices of securities.
The term used for an offer of payment which an individual or organization makes for possession orcontrol of assets, input, goods or services.
A short-term debt instrument, which is in the form of a document ordering the drawee (i.e., the debtor) to pay the drawer (the creditor) a stated sum at a specified date, or 'at sight' which means on demand. Once it is accepted, i.e., signed by the drawee (who may be an accepting house or bank) and endorsed, i.e., signed on the back by the acceptor, a bill becomes negotiable and may get discounted, i.e., sold at a discount on its face value, at a rate which reflects current short term rates of interest.
- Bill of Exchange
A Bill of Exchange is an instrument in writing, containing an unconditional order, signed by the banker,directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.
- Black Market
Any illegal market which has been established in a context where prices have been fixed at minimum or maximum level, usually by government. Thus, when maximum prices have been fixed, trading may occur at prices above the maximum.
- Blown Up Price
Descriptive of the final price of goods following a rise in the price of basic materials and fuel.
- Blue Chip
A consistently growing company both in terms of profit as well as market share is called a blue-chip company.
- Blue Chip Rate
Refers to the lowest interest rate payable by borrowers having the highest credit rate.
- Book Value
In its balance sheet a company may value assets in the form of asset investments at the prices shown in its books, namely the prices at which they were purchased, even though their current price on the stock exchange may be higher or lower.
Refers to a period of expansion of business activity. It is opposite of slump or recession. A boom reaches a peak when the economy has been working at full capacity.
- Brain Drain
Means the migration of educated and skilled labour from poorer to richer countries.
A brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and todifferentiate them from those of competitors.
Carrying on business in which neither profit nor loss is made.
One who buys and sells bonds and other financial assets. He is employed by other people on account of his knowledge of market conditions and procedures and because of his expert knowledge of the commodity dealt in. A Broker is usually paid commission for his services, known as 'brokerage'.
A fixed cost which is charged by the broker for cash of investment or encashment of bonds and other financial assets.
A budget is a financial statement showing the estimates of receipts and expenditure. The budget is divided into two parts : (a) revenue budget and(b) capital budget.
- Budget Deficit
Budget deficit is the difference between total revenues and total expenditure.
A bull is a speculator who purchases securities in anticipation of a rise in prices of securities.
Precious metals like gold or silver which have been held in bulk in the form of ingots or bars.
- Business Plan
A Business Plan is a formal document containing a mission statement, description of the firm's goods or services, market analysis, financial projections and a description of management strategies for attaining goals.
- Call Loan
A loan which may be terminated or called at any time by the lender or borrower.
- Call Money
Funds borrowed by discount houses from the clearing and houses banks in many countries, and which they employ in holding a portfolio of assets. A high proportion of these funds are borrowed literally at call.
- Call Option
Refers to a contract giving the option for buying shares at a future date within a prearranged time limit.
The term used for the estimated maximum level of production from a plant on a sustained basis,permitting all necessary shut - downs, holidays etc.
- Capacity Utilization
Refers to the ratio of actual output to potential output.
Capital is one of the factors of production and has been defined as wealth used in the production of further wealth. For business purposes, capital generally has to be considered in terms of money.
- Capital Asset
The term used for an asset, which is not bought or sold as part of the everyday running of a business. Examples include real estate, plant equipment.
- Capital Authorised, Nominal or Registered
Synonymous terms for capital fixed by the Memorandum of Association of a company.
- Capital Expenditure
Expenditure of a non-recurrent nature resulting in the acquisition of assets.
- Capital Employed
The term used for the capital in use in a business; it consists of the total assets minus the current liabilities.
- Capital Employed, Return On
The relation of profit to the estimate of average capital employed to yield a ratio, commonly called the primary ratio, as follows:Primary ratio = Profit/Capital
- Capital Gain
Refers to the difference between the purchase price of an asset and its resale price at some later date, where that difference has been positive.
- Capital Goods
Goods which are made for the purpose of producing consumer goods and other capital goods, e.g. machinery of all kinds. This term is synonymous with 'producers goods'.
- Capital Intensity
The ratio of capital to labour employed in production.
- Capital Market
A market comprising institutions which are involved in the purchase and sale of securities, e.g., the new issue market and the stock exchange.
- Capital Market Instruments
Financial instruments like company shares and bonds, long-term government bonds, and local government bonds.
- Capital Output Ratio
Means the ratio of the amount of capital to the amount of output produced by that capital.
Refers to a formal agreement between business firms to co-operate on agreed norms relating to prices & output. Cartels mostly occur in oligopolies.
Money in the form of bank notes and coins.
- Cash Crops
This term used for crops grown by peasant farmers specifically for sale in the market as opposed to crops directly consumed for subsistence purposes.
- Cash Flow
Refers to the sum of retained earnings and depreciation provision made by firms. As such it is the source of internally generated long term funds available to the company.
- Cash Market
The term used for a market for the immediate delivery of, and payment for, commodity.
- Cash Reserve Ratio (CRR)
All banks must keep a certain percentage of their total time (like fixed deposits) anddemand (like savings accounts) liabilities with the RBI. The CRR is fixed by the RBI and is hence variable. The upper limit of CRR is 15% while there is no lower limit.
- Central Excise Duties
These duties are levied by the Central Government on commodities, which are produced within the country. But commodities on which State Governments impose excise duties (as for instance, on liquor and drugs) are exempted from Central Excise Duties.
- Certificate of Deposit (CD)
A document, which is issued by a bank acknowledging a deposit of money with it and constituting a promise to repay that sum, to the bearer, at a specified future date. It is negotiable i.e., can be transferred.
- Cheap Money
A term used to describe a situation where bank rate and other rates of interest are low. A policy of cheap money may be adopted in a time of industrial depression to stimulate recovery.
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise on demand.
- C.I.F (Cost, Insurance and Freight)
Term used of goods shipped where the price includes shipping and insurance charges. A C.I.F. quotation implies that the seller must ship the goods, meeting all charges upto on board and paying insurance and freight.
- Closed Economy
A concept which is used mainly in theoretical models to describe an economy having no external trade, which is completely self-sufficient and insulated from external processes.
Means an agreement between firms to co-operate so as to avoid mutually damaging rivalry.
- Commercial Banks
A general term denoting those banks, which conduct a general rather than a specialized type of business. They accept deposits, make advances, etc.
A committee is a group of persons constituted to deal with specific issues or problems of the organisation.
The process by which people attempt at sharing meaning through the transmission of symbolic messages.
A joint stock company is a legal entity set up for the purpose of conducting commercial or industrial operations, and with a capital divided into shares, held by members.
- Company Savings
Refers to that part of firms' profits which have neither been paid out in taxes nor distributed to shareholder as dividend.
- Consumer Credit
Refers to a loan, which is given to the consumer for a short period of time, for the purchase of a specific commodity. This can take the form of hire purchase or be in the form of a personal loan from a bank.
- Consumer Durable
A commodity of relatively long life, like a refrigerator or a washing machine, as distinct from, say foodstuffs.
- Consumer Goods
Products in the actual form in which they reach domestic consumers.
- Consumer's Surplus
Means the excess of the price which a person would be willing to pay rather than go without an article over that which he/one actually pays; it may be termed as consumers rent.
Means the act of using goods and services to satisfy current wants.
- Consumption Expenditure
Refers to aggregate expenditure on goods and services to satisfy current wants.
A stock exchange term meaning carry-over. A broker who wishes to postpone settlement of a transaction to the following account may do so on payment of interest on the sum due. The term Contango is also used to mean the extra payment itself.
Control consists in verifying whether everything occurs in conformity with the plans adopted, the instructions issued and principles established. It has for its object to point out weaknesses and errors in order to rectify them and prevent recurrence. It operates on everything, people, things, action. (Henry Fayol)
Controlling is the process of ensuring that the organisation is moving in the desired direction and that progress is being made towards the achievement of goals.
An agreement, oral or written whereby one party undertakes to do or not to do something for the other party to the contract.
Refers to the freedom to exchange any currency for another currency at the current exchange rate.
The sole right to reproduce a literary work or a musical composition. It gives the owner a monopoly of a particular piece of property, which like other property can be assigned in return for payment to another person or persons.
- Corporate Tax
Corporate tax is a tax on income of the companies.
It is the condition of the market in which almost the entire supply of particular security is held by an individual or a group of individuals. The speculator who corners the security will dictate his own price.
- Corporate Paper
Notes which are sold by large corporations in the money market as a means of getting funds.
- Corporate Risk
The total risk involved in a business is termed as corporate risk. It comprises two types of risk. Financial risk which arises out of debt finance, and business risk i.e., the basic risk involved in the firms day to day operations.
The term used for a contemporary form of business having two distinct characteristics: it is a legal entity separated from its owners,the stockholders; and it is usually on a scale much larger for the sole proprietor or partnership to manage or fund.
Cooperation refers to the collective efforts of people who associate voluntarily to achieve specified objective.
Coordination is the task of blending the activities of individual and group efforts in order to maximise the contribution towards the accomplishment of common goals.
The cost of producing a certain output of a commodity is the sum of all the payments to the factors of production engaged in the production of that commodity.
- Cost of Sales
The cost which is incurred in a manufacturing unit in converting raw materials into a finished product: such costs include raw materials, labour, and factory overheads.
- Cost of Production
Expenditure which is incurred by way of payments for rent, mortgages, interest on loans, dividends, salaries and wages, buildings, plant and machinery and raw materials, in the production of a commodity or a service, including development and marketing costs.
- Countervailing Duty
A duty imposed on imported goods where there is evidence of an export subsidy in the country of origin which may adversely affect the domestic producers in the importing country.
A wide term which has been used in connection with operations or states involving lending, generally at short-term. To give credit is to finance, directly or indirectly, the expenditure of others against future repayment.
- Credit Card
A card which is issued by a bank or group of bodies or other agency which provides the holder direct access to credit e.g., from a merchant location, hotel etc., or, in the case of some cards issued by banks, to cash from the banks operating the particular scheme.
- Credit Rating
Means an evaluation of the soundness of an individual or business firm as a credit risk. It is usually based on
- companys track record
- companys current and prospective business
- financial risk
- quality of management.
This means drawing two parallel lines across the face of a cheque, the effect of which is to make it necessary to pay it into a banking account.
- Cumulative Preference Share
A preference share which entitles the holder to receive not only the current dividend but also any unpaid arrears, before any dividend has been paid to ordinary shareholders.
- Current Assets
Items such as cash, accounts receivable, marketable securities, and inventories assets that could be turned into cash at a reasonable predictable value within a relatively short time period (typically, one year).
- Current Liabilities
Debts, such as accounts payable, short-term loans, and unpaid taxes, that will have to be paid off during the current fiscal period.
- Current Ratio
Also known as the Acid-test Ratio, it is the relation between the current assets and the current liabilities of a business.
- Customs Duties
These are taxes on imports.
- Dated Security
Refers to any security, like a bond, which has a stated redemption date. Such securities are conventionally divided into short-dated, medium-dated and long-dated securities depending on the length of time which has to elapse before they 'mature'.
- Dead Horse
Work which is paid for but is yet to be completed; a situation in which goods and services have been paid for in advance of production or performance.
- Dear Money
A period when rates of interest are high, so that borrowing is expensive.
Refers to a sum of money, or quantity of goods or services, owned by one individual or body to another.
- Decision Making
The process of identifying and selecting a course of action to solve a specific problem.
A deed is a legal document or written agreement. There are different types of deeds viz, deed of assignment, deed of partnership etc.,
Refers to a situation where outgoings exceed income on an ongoing basis, or where liabilities exceed assets at a specific point in time.
- Deficit Financing
Refers to a situation where expenditure exceeds income such that a deficit is deliberately operated.
Means a situation, in which prices and money incomes have been falling, accompanied by an increase in the value of the monetary unit.
- Del Credere Agent
An agent who, in return for a higher rate of commission, guarantees that his principal will receive payment for the goods he has sold on his behalf.
The act of assigning formal authority and responsibility for completion of specific activities to a subordinate.
- Delegation of Authority
Authority is said to be delegated when a superior entrusts a part of his rights to his subordinate. In other words, to delegate means to extend authority to a subordinate in certain defined areas and to make him responsible for results.
By demand is meant the quantity of a commodity that will be bought at a particular price and not merely the desire for a thing. Generally at a high price,less will be bought than at a low price.
- Demand Draft
A Demand Draft is a Bill of Exchange and negotiable instrument.
- Demand Price
Refers to the price which buyers are prepared to pay for a given quantity of goods or service.
Departmentation may be defined as the process of grouping individual jobs into departments. It is a means of dividing one large and complex organisation into smaller and flexible administrative units.
Division of a company into departments that are similar and logically connected.
Means prolonged and severe slowing-down of economic activity exemplified by mass unemployment and a level of national income well below its potential level. It is more severe and long-lasting than a recession.
- Derived Demand
Refers to the demand for a commodity not needed for its own sake, but its contribution to the manufacture of another commodity.
Refers to a fall in the external value (or exchange rate) of one currency vis-'-vis other currency.
Directing is the managerial function of guiding, supervising, motivating, and leading people towards the attainment of planned targets of performance. It is the executive of management because it is concerned with the execution of plans and policies.
- Direct Tax
A tax levied directly on individuals or firms. These taxes are not transferable. Some examples are income tax & capital gains tax.
- An inducement offered by a creditor to debtors to pay promptly. (Cash Discount).
- A deduction from the catalogue price of an article generally allowed by a wholesaler to a retailer, that is, trade discount.
- With reference to a bill of exchange, to discount a bill means to acquire it by purchase for a sum less than its face value, the amount of this discount depending partly on the length of the unexpired term of the bill and partly on the amount of risk involved.
- When a recently issued stock falls below its issue price it is said to stand at a discount.
A Bill of Exchange is dishonoured when the drawee has insufficient funds to discharge it when it falls due for payment. Similarly, a cheque is dishonoured when the drawee has insufficient funds to meet it.
A mild form of deflation. A policy adopted to check inflation by restricting demand.
A situation where consumption expenditure exceeds current income. In such a case, consumption is financed through borrowing in anticipation of future income.
In the case of limited companies, the rate of dividend is the amount of distributed profit as a percentage of the nominal value of the share capital to which it relates.Dividends are usually declared annually but many companies pay something on account as an interim dividend. Dividend Warrant
- Division of Labour
The breakdown of a complex task into components so that individuals are responsible for a limited set of activities instead of the task in total. Sometimes referred to as division of work.
- Dock Warrant
A receipt for goods stored in a warehouse; it entitles the holder to take possession of the goods.
Means the sale of a good in a foreign market at a price below its marginal cost.
A form of imperfect competition where there are only two producers of a commodity. Such a situation can be given to cut-throat competition of a particularly irrelevant type, and to prevent both parties being ruined by it, they may agree to share the market, perhaps on a territorial basis, eachagreeing not to compete against the other in its share of the market.
Refers to a market situation in which there are only two buyers of a particular goods/service.
A draft issued by a limited company and made payable to a shareholder for the amount of dividend due to him for a stated period.
- Easy Money
Refers to a general state of ease and cheapness of borrowing in the financial system. It may result from policy action to reduce interest rates, increase liquidity of the banking system, release any non-price restrictions on lending like credit ceilings and restrictive conditions on hire-purchase contracts.
- Economic Growth
The rate of expansion of the national income or total value of production of goods and services of a country.
- Economies of Scale
Refers to the reduction in the average cost of a product in the long run, resulting from an expanded level of output. They are also known as long run increasing returns.
The degree of responsiveness of demand or supply to a change of price. Elasticity may be defined as a measure of the percentage change in one variable in respect of a percentage change in another variable.
- Elasticity of Demand
Means the response of demand to a change in the price of commodity. If the price rises, the amount demanded normally decreases.
- Elasticity of Supply
Means the response of supply to a change in the price of commodity. If the price rises, the quantity demanded normally increases.
The term used for the organizing factor in production. Entrepreneurs are responsible for such economic decisions as what to produce, how much to produce and what method of production to adopt.
Another name for ownership; often used to describe a share in a company.
Exchange is the act of obtaining a desired product from someone by offering something in return.
- Excise Duties
Taxes on home produced goods to raise revenue, as distinct from customs duties which are taxes on imports not primarily imposed to raise revenue. Excise duties may be imposed either to raise revenue or to check the consumption of the commodities on which they are imposed.
The term used for a goods/service which is produced in one country and sold to a consumer in another.
- Face Value
Means the nominal value, as distinct from the market value, of a security (bond/share). The value written on a coin or a bank note is also termed as face value.
- Factors of Production
The resources required for production. The four factors of production are Land, Labour, Capital and Entrepreneur (Organization). Factors of production are resources required for production.
- Factor Income
Income accruing to factors of production rent for land, wage for labour, interest for capital, & profit for organizer.
- Fiat Money
Money which the State declares to be legal tender.
The term is applicable to funds from almost any source which is used to undertake any kind of expenditure.
- Finished Goods
Refers to the goods, which are used for the purpose of consumption and not utilized as inputs by the firms in the process of production.
- Fiscal Policy
Generally refers to the use of taxation and government expenditure for regulating the aggregate level of economic activity.
- Fixed Assets
Includes the monetary value of the company's plant, equipment, property, patents, and other items used on a continuing basis to produce its goods and services.
- Fixed Cost
Refers to the production costs which tend to be unaffected by variations in the volume of output.
- F.O.B. (Free on Board)
Term used of goods shipped where the price does not include shipping and insurance charges; opposite to C.I.F. An F.O.B. quotation implies that the exporter will deliver the goods free on board a ship in accordance with the contract at the port named; he pays all expenses up to that point. From there on, the buyer must take responsibility, paying for freight, insurance, and all subsequent expenses
- Forward Market
A Forward market transaction involves a contract to buy or sell commodities, or securities at a fixed future date at a price agreed in a contract.
A type of licensing arrangement in which an organization sells a package containing a trademark, equipment, materials, services owned by another organization.
- Free Market
Refers to a market in which there is an absence of intervention by government and where the process of demand and supply are permitted to operate freely.
- Functional Organisation
In a functional organisation, the enterprise is divided into a number of functional departments. Every functional department servesthe rest of the organisation. For example, the purchase department handles purchases on behalf of the entire organisation.
The purpose that an organization strives to achieve. Organizations often have more than one goal.
This term is used of any commodity or service for which there is a demand, irrespective of whether it is in any sense 'good' or 'bad'.
Any action taken by a buyer / seller to protect his interest by spreading / lowering risk due to a change in price.
The line of authority in an organization that runs in order of rank from top management to the lowest level of the enterprise.
With reference to the structure of an industry it is the tendency to specialize in single processes instead of undertaking the entire production of the commodity from start to finish.
Money that moves across country/borders in response to interest rate differences and that, which moves away when the interest rate differential disappears.
A hypermarket is a multi-brand, multi-department store under one roof meant to offer cost-effective shopping for household requirements.
Refers to the pledging of securities as collateral; for example to secure the debit balance in a margin account.
- Idle Money
An inactive money that does not contribute to productive assets in an economy. It results from what Keynes called 'Liquidity Preference' i.e.; the desire to hold money rather than risk it on interest-earning assets, or goods which may have little utility.
Personal income tax is levied on individuals by the Central Government and the proceeds are shared between the Centre and the States. The income tax is progressive; that is, the tax rate is not uniform but rises progressively with the rise in money income.
Services which are regarded as essential for the creation of a modern economy; e.g.; power, transport, housing, education, health services.
Means the state of being unable to pay one's debts.
A payment by a borrower for the use of a sum of money for a period of time. It is the reward for the use of capital in the process of production.
The goods which find use at some point in the production process of other goods, rather than final consumption. Inventory
The raw materials, work in progress and finished goods in organization maintained to meet its operational needs. A term used for the quantity of stock held by a business.
A document used in business giving a complete summary of a transaction involving the sale of goods.
The actual amount of capital issued by a company and allotted in shares to investors. It may be the same or less than the authorised capital.
A jobber is an independent dealer in securities. He purchases and sells securities in his own name. He is not allowed to deal with non-members directly.
All human resources which are available to society for use in the process of production.
Labour'Costs Per Unit of Output
Refers to the cost of the labour in real terms which is involved in making each unit of output.
Refers to a policy of non-interference by the State in economic affairs.
Communication between departments of an organization that generally follows the work flow rather than the chain of command, and thus provides a direct channel for coordination and problem solving.
This occurs when a firm branches or absorbs other businesses engaged in producing commodities related in same way to its own main products.
The term used for an agreement in which one agent obtains the right of use of some property owned by another agent for a given period of time in return for an agreed fixed charge (which is generally paid in periodic instalments).
Letter of Credit
A document which is issued by a bank on behalf of a customer which guarantees payment by the bank of cheques drawn by the customer, or more commonly today of bills drawn on that customer by parties from whom he has bought goods. Letters of Credit are used largely in association with bills of exchange, to which they give added security in the financing of foreign trade.
Letter of Hypothecation
The term used for a letter from an exporter to his bank authorizing it, in the event of the importer failing to accept or pay a bill of exchange, to sell the goods exported and remit the proceeds less expenses.
Refers to any claims, actual or potential, of an individual or institution. The term usually refers to financial liabilities of which the commonest form has been a debt of any kind. Thus, some deposits, which are banker's debts, are commonly termed as 'deposit liabilities'.
Means a claim against property. A bond is usually secured by a lien against specified property of the company.
LIFO (Last In, First Out)
This is a method of costing adopted by firms which carry many items of stock of the same kind bought at different times and at different prices as shown in the books. Under the more common FIFO system, it is assumed that whenever an item is sold it was the first to be purchased, whereas under the LIFO system it is assumed to have been purchased last.
Means the restriction of an owner's loss in a business to the extent of the capital that he has invested in it.
Line organisation refers to a direct chain of command from top to bottom. Here, the lines of direction are straight and vertical. Every superior has complete command over his subordinates and every subordinate is directly accountable to only one superior immediately above him.
Means assets either in the form of money or which can be quickly converted into money.
Liquidation (Winding Up)
Refers to the process where-by the existence of a company gets terminated, its property having been realized and distributed among its creditors and in the event of a surplus, among its members.
The term indicates availability of cash, and of assets readily convertible into cash (called liquid assets), to meet immediate obligations; a volume of reserves plus credit facilities, reflected in an ability to meet current financial liabilities in cash.
The process of planning, organizing,leading, and controlling the work of members of an organization and of using all available organizational resources to reach stated organizational goals.
In ordinary language, manpower means the working population of a country. In economics, manpower means the organisation of work force for its utilization in different sectors of the economy.
A market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want. In non-marketing terms the function of a market is to enable an exchange of goods or services to take place, a means by which buyers and sellers are brought into contact with one another.
Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with others.
Means an economy in which crucial economic decisions and choices are made in a decentralized manner by private individuals and firms operating through a free price-and-market mechanism. Equilibrium of prices and quantities are determined in a market economy through the laws of supply and demand.
Refers to pressures by the free play of market supply and demand, which induce adjustment in prices and / or quantities traded.
Means the price determined by the equilibrium between demand and supply in a market period (or very short period).
Its purpose is to create an impression in the market that a security is very active. For this purpose, two sets of brokers are employed - one for buying and the other for selling at prices determined in advance by the speculator.
An organizational structure in which each employee reports to both a functional or division manager and to a project group manager.
Means the date on which a loan or bond or debenture becomes due and is to be paid off i.e., the capital refunded.
Means a union of two or more firms in a transaction by which one absorbs the other(s), or a new firm gets created utilising the assets of the absorbed firms.
Refers to the conveyance of property by a debtor (mortgager) to a creditor (mortgagee) as security for a debt, with a condition that the property will have to be reconveyed on payment of the debt.
MNC (Multi National Corporation)
A large corporation with operations and decisions spread over several countries but controlled by a central headquarters.
- Near Money
Assets which are readily convertible into money e.g. deposit accounts, deposit with savings banks and building societies, and certain short-term agreement securities.
A claim, the title to which passes by delivery. Examples of such claims include bills of exchange,cheques, promissory notes, dividend warrants and debentures payable to bearer. Transfer is by delivery only. A bill of exchange payable to a certain person 'only' is not a negotiable instrument. Neither is a cheque with 'not negotiable' written on it. Bill of Lading, Dock Warrants, and Postal Orders are not negotiable.
NAV (Net Asset Value)
The value of a fund's investment. For a mutual fund, the net asset value per share usually represents the fund's market price.
Net Book Value
A statement of the value of fixed assets which is used in accounting. The appropriate amount of depreciation is deducted from the original cost of purchase of the asset to give its net book value.
Means gross profit minus deduction of tax payments and depreciation provisions.
- Open Economy
An economy, which is engaged in international trade. The degree of openness of an economy is appreciated by the rise of its foreign trade sector relative to its gross domestic product.
Budget indicating the goods and services that an organization expects to consume within a budget period.
Means the real cost of satisfying a want. It is expressed in terms of the cost of the sacrifice of alternative activities.
Organising is the process of establishing harmonious authority'responsibility relationships among the members of the enterprise. It is the function of creating a structure of duties and responsibilities.
Two or more people who work together in a structured way to achieve a specific goal or set of goals.
The way, in which an organization's activities are divided, organized and coordinated.
Refers to a system of bank lending, by which the borrower is permitted to draw cheques beyond the credit balance in his account, up to an agreed limit, and to pay interest only on the daily amounts by which the account is overdrawn.
Costs which are not directly chargeable to any unit produced. They include rent of premises, salaries of salesmen, research, etc.,
- Paid-Up Capital
That part of the issued capital, which is paid up by the shareholders. The actual amount of capital that shareholders have subscribed. It may be less than the authorised capital.
Shares are fully paid ' up when the full amount has been paid. Sometimes shares are only partly paid ' up, the company being able to call for the balance to be paid whenever it requires this additional capital.
A general term which is used for money in the form of bank notes.
Paradox of Value
Means paradox on which an essential to life item, such as water is normally valued little, but a luxury item, such as diamonds, carry a high price.
Means the nominal or face value of a share or security.
A book supplied to customers by a bank, in which entries are made of all deposits and withdrawals.
An economy where crucial economic processes are determined to a large extent not by market prices, but by an economic planning body.
Planning, a primary function of management, implies looking ahead and deciding in advance what to do, when to do it, how to do it and who is to do it.
The ability to exert influence i.e. the ability to change the attitudes or behavior of individuals or groups.
Means the practice of diminishing prices down to unprofitable levels for a period, so as to weaken or eliminate existing competitors.
Securities are said to be 'at a premium' when they stand above par on the stock exchange.
Refers to the value of a commodity or service in terms of money. Also it is the amount of money that has to be paid for a commodity or service.
Refers to the charging of different prices to different groups of individuals for the same goods or services for reasons not associated with difference in costs.
Refers to the production of goods from agriculture, forestry and fishing, mines that constitute the natural wealth of a nation.
Probation is a period when a new worker is being tested before getting a permanent job.
A standing plan that contains detailed guidelines for handling organizational actions that occur regularly.
Refers to goods made for the purpose of producing consumer goods and other capital goods e.g. machinery of all kinds. This is synonymous with capital goods.
A product can be defined as anything that can be offered to satisfy a need or want. The term 'Product' can be used to cover both 'goods and services'.
Means output per unit of input employed.
Refers to profit per unit of output which is expressed as a percentage of price.
An invoice sent to a buyer before the goods are sent, so that payment can be made or business documents can be produced.
A single use plan that covers a relatively large set of organizational activities and specific major steps, their order and timing, and the unit responsible for each step.
A programme is a concrete scheme of action designed to accomplish a given task. It specifies the steps to be taken, resources to be used, time limits for each step, and assignments of task.
Solutions to routine problems determined by rule, procedure, or habit.
A project is a distinct cluster of functions and facilities for a definite purpose. It is defined in terms of capital investment,specific objective and interdependence of tasks.
- Rate of Return
Refers to the basis of earnings from the investment of capital, where earnings are expressed as a proportion of the outlay.
Rate of Turnover
The number of times the value of the average stockof a business is sold during a period.
Repo is a short term for repurchase agreement for RBI selling a governmentsecurity at a competitive rate in the market to absorb what it considers is excess liquidity. The buyers are either banks or registered primary dealers.
Rules are rigid and definite plans that specify what is to be done or not done in a given situation. A rule provides no scope for discretion and judgment.
Boards carried in front of and behind a person to carry advertisements
A man who carries sandwich boards to carry advertisements.
Scab (also called blackleg)
A scab is a worker who goes on working when there is a strike.
A schedule specifies time limits within which activities are to be completed. It is the process of establishing a time sequence for the work to be done.
It is the art of knowing exactly what you want men to do and then seeing that they do it in the best and cheapest way'. (F.W. Taylor)
Span of Control
The number of subordinates reporting directly to a given superior. Also called span of management control.
Staffing is the process of filling all positions in the organisation with adequate and qualified personnel. It consists of manpower planning, recruitment, selection, training, compensation, integration and maintenance of employees.
A speculator who buys a large amount of a new issue of shares or stock if he thinks the price is likely to rise above the offer price when dealings in it begin on the stock exchange, so that he hopes to sell soon at profit.
Business founded by individuals intending to change the environment of a given industry by the introduction of either a new product or a new production process.
A highly organised market for dealings in stocks and shares. Only members are admitted and business is transacted according to a prescribed set of rules. An investor who wishes to sell or buy securities must act through a broker.
A strategy may be defined as an administrative course of action designed to achieve success in the face of difficulties.
Strategic planning is long term in nature. Strategic planning is formulated mainly at the top level of management. It has mainly an external focus as it is designed to achieve the organisational objectives in the face of challenges and opportunities.
The situation in which the whole is greater than its units. In organizational terms, synergy means the departments that interact cooperatively are more productive than they would be if they operated in isolation.
Total sales of a business during a particular period.
- VAT (Value Added Tax)
A tax levied on the value of each of the processes carried out by a business.
- Variable Costs
Expenses that vary directly with the amount of work being performed.
- Wash Sales
It is a transaction in which a speculator sells a security and then buys it at a higher price through another broker. This will create an impression that there is great demand for that security. As a result, people may be induced to purchase them at a very high price.
Wear and Tear
The depreciation of the value of a thing as a result of ordinary usage as distinct from damage resulting from negligence or accidental causes.
To bring a limited company to an end either voluntarily or by order of the court.
The return on a security, based on its current earnings in relation to its current price on the stock exchange. Money produced as a return on an investment.