Accounting, Business Studies and Economics Dictionary
Call - 1. option to buy (or call) an asset at a specified price within a specified period. Or 2. right to buy 100 shares of stock at a specified price that happens within a certain specified period. See also option. Or 3. the act of redeeming a preferred stock or bond issue prior to its maturity. A call provision is often issued on a security when the interest rate greater than one that has no call provision. This is because investors consider yield to call as opposed to yield to maturity.
Call centre - The section of an organisation that handles phone communications with the firms customers or clients.
Call premium - Amount in excess of par value that a company must pay when it calls a security. It is the difference between the call price and the maturity value. The issuer pays the premium to the security holder in order to acquire the outstanding security before the specified maturity date. The call premium is generally equal to one year's interest if the bond is called in the first year, and it declines at a constant rate each year thereafter.
Calorie supply per capita daily – The calories available to the people of a country. This is based on the total food supply produced and imported, divided by the population and the number of days in a year.
Capital (Accounting) - 1. the money invested into a business by the owners. Or 2. an amount of money put into the business (often by way of a loan) as opposed to money earned by the business.
Capital account of the balance of payments - A section of a balance of payments accounts that records payments and receipts arising from the Import and exports of long-term and shortterm financial capital.
Capital asset - Asset purchased for use in production over long periods of time rather than for resale. It includes (a) land, buildings, plant and equipment, mineral deposits, and timber reserves; (b) patents, goodwill, trademarks, and leaseholds; and (c) investments in affiliated companies.
Capital asset pricing model (CAPM) -Theory of asset pricing used to analyze the relationship between risk and rates of return in securities. The return of an asset or security is the risk-free return plus a risk premium based on the excess of the return on the market over the risk-free rate multiplied by the asset's systematic risk (which cannot be eliminated by diversification).
Capital budget - Plan of proposed acquisitions and replacements of long-term assets and their financing. A capital budget is developed using a variety of capital budgeting techniques such as the payback method, the net present value (NPV) method, or the internal rate of return (IRR) method.
Capital charge - Is an amount of money that is normally arrived at by the calculation of the money the firm has invested in capital multiplied by the (WACC) weighted average cost of capital. The capital charge is normally subtracted from a firms net operating profit minus tax to arrive at the economic profit figure.
Capital gains tax - When a fixed asset is sold at a profit, the profit may be liable to a tax called Capital Gains Tax. Calculating the tax can be a complicated affair (capital gains allowances, adjustments for inflation and different computations depending on the age of the asset are all considerations you will need to take on board).
Capitalisation - 1. total amount of the various securities issued by a corporation. Capitalisation may include bonds, preferred and common stock. Or 2. a technique used by real estate appraisers to convert the income of a property into a value estimate for that property.
Capital lease - One in which the lessee obtains significant property rights.
Capital loss - Refers to the higher purchase price above the sale price when the fixed are sold. The loss often given different or a special different treatment for tax purposes.
Capital rationing - Selecting the mix of acceptable projects that provides the highest overall net present value (NPV) when a company has a limit on the budget for capital spending. The probability index is used widely in ranking projects competing for limited funds
Capital replacement (economic depreciation) - This refers to repair and maintenance of machinery used in production. Capital replacement is often regarded as an expense which may be discretionary in any given year. Ultimately this money must be spent in order to keep the capital stock of an entity working so that over a period of time or in the longer term, the firm operations can continue.
Capital reserve - Refers to fund that are set aside for a specific identified purposes, thereby these funds cannot normally be used for other reasons.
Capital stock - The aggregate quantity of capital goods. Or equity shares in a corporation that is authorised by its Articles of Incorporation and issued to stockholders. The two basic types of capital stock are common stock and preferred stock.
Capital structure - The way in which funds are raised by a business.
Carrying value - Amount shown on an entity's books for assets, liabilities, or owners equity, net of reductions or offsets such as for accumulated depreciation, allowance for bad debts, and bond discount; also called book value. It may refer to the entire firm's excess of total assets over total liabilities.
Cash - Money deposited in a bank and items that a bank will accept for immediate deposit (e.g., paper money, coins, checks, money orders). Items not included in the definition of cash are post-dated checks, IOUs, and notes receivable. The cash on hand and cash on deposit in the bank are shown in the balance sheet as one figure. Cash is the most liquid of the current assets and is listed first. Note that restricted cash in a bank account is not considered a current asset. An example is cash held in a foreign country where remission restrictions exist.
Cash book - A journal(s) where a business's cash sales and purchases are entered. A cash book can also be used to record the transactions of a bank account. The side of the cash book which refers to the cash or bank account can be used as a part of the nominal ledger (rather than posting the entries to cash or bank accounts held directly in the general ledger').
Cash budget - Budget for cash planning and control that presents expected cash inflow and outflow for a designated time period. The cash budget helps management keep cash balances in reasonable relationship to its needs. It aids in avoiding idle cash and possible cash shortages. The cash budget typically consists of four major sections: (I) receipts section, which is the beginning cash balance, cash collections from customers, and other receipts; (2) disbursement section comprised of all cash payments made by purpose; (3) cash surplus or deficit section showing the difference between cash receipts and cash payments; and (4) financing section providing a detailed account of the borrowings and repayments expected during the period.
Cash cow - A business or the segment of the business that generates tons of money.
Cash cycle - Refers to the period of time, often given days, in between the purchasing of the raw materials and the receipt of payment from accounts receivable which was generated from the final sale of the finished item.
Cash discount - A reduction of some portion of the amount to be paid because the buyer is willing to pay in cash, as compared buying on credit. Many individuals like cash payments as it can be used as a way of evading tax.
Cash flow - Cash inflows and outflows over a period of time.
Cash flow analysis - This is a analysis that considers the amount and timing of cash in to a entity with the timing and amount of cash out. A firm’s cash flow position (or liquidity) can have a large effect on the firms ability to keep running. This position is not necessarily shown in a cost-benefit analysis.
Cash flow forecast - An estimate of future cash inflows and outflows of a business, usually on a monthly basis.
Cash inflows - The sums of money received by a business during a period of time.
Cash outflows - The sums of money, paid out by a business during a period of time.
Cash ratio - A like the quick ratio but it only considers the ratio of cash and other marketable securities as compared to a firms current liabilities. This ratio is indicative of extent or degree to which liabilities of a firm could be turned into cash immediately. This ratio is also called the liquidity ratio.
Cash reserve ratio (CRR) - This is the ratio which individual banks need to keep on hand in the form of cash reserves with the central bank. The CRR is calculated as a percentage of the banks demand and time deposits from customers. The CRR is to ensure both the liquidity and safety of the depositors money with the banks. This ratio will directly affect the size of the credit multiplier.
Cash shortage and overage - Situation in which the physical amount of cash on hand differs from the book recorded amount of cash. When a business is involved with over-the-counter cash receipts, occasional errors may occur in making change. The cash shortage or overage is revealed when the physical cash count at the end of the day does not agree with the cash register tape. Assuming that the count is $600 and the cash register reading shows $620, the cash shortage and overage account would be charged for $20. It is shown in the income statement.
Catchline - A memorable phrase which seeks to strengthen a product's brand identity.
Catch-up effect - The property whereby countries that start off poor tend to grow more rapidly than countries that start off rich.
Caveat - Refers to a warning or prohibition against certain activities; under the law. It may also be a formal document filed with the court to suspend/stop a proceeding for a period of time.
Cellular manufacturing - Involves producing a 'family of products' in a small self-contained unit (a cell) within a factory.
Central bank - A bank that acts as banker to the commercial banking system and often to the government as well. In the modern world, usually a government owned-and-operated institution that controls the banking system and is the sole money-issuing authority.
Centralised - A management structure in which most decisions are taken at the centre, or at higher levels of management.
Central tendency - A measure of the most likely or common result from a set of data (the average).
Certainty - Situation in which there is absolutely no doubt about which event will occur, and there is only one state of nature with 100% probability attached.
Certificate of origin - Refers to a document that tells the place where the items were originally made. The certificate of origin document is often a legal requirement for countries if they wish to Import sensitive merchandise i.e. military equipment.
Certified accountant - Title given by the Association of Certified Accountants in the United Kingdom, Canada, Australia, India, and other British Commonwealth countries. They use the initials ACA (for member of the Association of Certified Accountants) or FCCA, which identifies a Fellow of the Association, one who has passed additional requirements. The accountant is authorized to provide an audit opinion on the propriety of a company'sfinancial statements.
Certified financial statements - Refers to financial statements which have had a formal audit carried out by by a CPA and contain a statements of certification given by the certified public accountant.
Chain of command - The structure within an organisation which allows instructions to be passed down from senior management to the lower levels of management.
Change in the quantity demanded - An increase or decrease in the specific quantity bought, represented by a change from one point on a demand curve to another point, either on the original demand curve or on a new one.
Change in the quantity supplied - An increase or decrease in the specific quantity supplied, represented by a change from one point on a supply curve to another point, either on the original supply curve or on a new one..
Changes in demand or supply – These changes cause markets to adjust. Whenever such changes occur, the resulting 'disequilibrium' will bring an automatic change in prices, thereby restoring equilibrium (Le. a balance of demand and supply)
Channel costing - The fulfilment cost information pertaining to distribution channels.
Channel of communication - The route by which a message is communicated from sender to receiver.
Charge back - Refers to a credit card order which has been processed and is subsequently cancelled by the cardholder contacting the credit card company directly (rather than through the seller). This results in the amount being 'charged back' to the seller (often incurs a small penalty or administration fee to the seller).
Chart of accounts - A list showing all the accounts held in the nominal ledger (also called general ledger). The Chart of Accounts normally consist of and are arranged normally in this following way: Assets, liabilities, owners equity or stockholdersequity, revenue, and expenses.
Cheque (check) - A draft or demand drawn or presented against a specific bank, that is payable upon the demand (when presented to) to the bank by the person or entity who is named on the draft.
Churn rate - The proportion of clients/customers (e.g., cable TV subscribers) who cancels the subscription they have each month on average.
Circulating assets - The opposite to fixed assets . Circulating assets describe those assets that turn from cash to goods and back again (hence the term circulating). Typically, you buy some raw materials, start to manufacture a product (the asset is called work in progress at this point), produce a product (it is now stock ), sell it (it is now back to cash again).
Classification - The process of separating and distributing items into classes/categories of the same or similar type. In accounting information is often classified as: assets, liabilities or equity and there may be subsets to these three classifications.
Clearance letter (document) – Documented certification or a letter from a recognised authority that the person or business cleared has met certain specific requirements, actions, payments and such forth.
Clearing account - Usually a temporary account containing costs or amounts that are to be transferred to another account. An example is the income summary account containing revenue and expense amounts to be transferred to retained earnings/profit at the close of a fiscal period.
Closing cash (or bank) balance - The amount of cash held by the business at the end of each month. This becomes next month's opening cash balance.
Closely held corporation - Firm that has only a few stockholders. It contrasts with a privately held corporation in that a closely held corporation is public although few of the shares are traded. The socalled "corporate pocket-books" may become subject to the additional personal holding company tax on income not distributed. For example, deductions and losses in transactions between a major stockholder and the corporation may be disallowed under certain circumstances.
Closing entry - Is a journal entry used at the end of a particular financial period with the intention of transferring the net of revenue minus expense items from the income (profit and loss) statements to the owners equity. Entries are for nominal accounts and not real accounts. At the end of the year, expenses are credited so that zero balances are left in them, and the total is debited to the income summary account revenue accounts are debited to arrive at zero balances, and the total is credited to the income summary account. The net income or loss that now exists in the income summary account is then transferred to retained earnings/profit. After the closing entries, the new year will start fresh in that no income statement account balances will exist.
Closing the books - A term used to describe the journal entries necessary to close the sales and expense accounts of a business at year end by posting their balances to the profit and loss account, and ultimately to close the profit & loss account too by posting its balance to a capital or other account.
Cluster sampling - Method of selecting groups of units. The first unit of each group is selected with the use of a random number table. This allows selection of more than one item at a time. In cluster sampling, the population is broken into groups of items, and a random sample is selected from all the clusters. Each cluster becomes a sampling unit.
COD - Cash On Delivery; which is exactly what it means.
Coding of accounts - Assignment of an identification number to each account in the financial statements. A chart of accounts lists the account titles and account numbers being used by a business. For example, the numbers I to 29 may be used exclusively for asset accounts; numbers from 30 to 49 may be reserved for liabilities; numbers in the 50s may signify owners equity accounts; numbers in the 60s may represent revenue accounts; and numbers from 70 to 99 may designate expense accounts. In large or complex businesses with many more accounts, a more elaborate coding system would be needed. Some companies use a four-digit coding system. The coding system is especially necessary for computerised accounting.
COGS (Cost of good sold) ratio = COGS / Total Sales.
Collateralise - To pledge asstes to secure a debt. These assets will be given up if the borrower defaults on the terms and conditions specified in the debt agreement. An example is pledging Inventory to collateralize a bank loan.
Collectables - Art, stamps, coins, antiques, and other related items. They offer capital gains potential, inflation protection, and aesthetic enjoyment. Collectibles are acquired through dealers, at auctions, or directly from previous owners. Among the drawbacks are high security and insurance cost, poor liquidity, lack of income, and possible forgeries. Information about collectibles sometimes appears in magazines like Money and creditor/Investor, and major categories of collectibles have magazines and newsletters devoted exclusively to them
Collection period - Number of days it takes to collect accounts receivable. The collection period should be or can be compared to the terms of sale. A long collection period may indicate higher risk in collecting account; it ties up funds that could be invested elsewhere or used to make timely payments. It equals the number of days in a year divided by the accounts receivable turnover. Assume a 360-day year and turnover rate of 10 times. The collection period is 36 days.
Collective agreements - The agreements reached through the process of collective bargaining.
Collective bargaining - A method of determining conditions of work and terms of employment through negotiations between employers and employee representatives.
Collusive oligopoly - Where oligopolists agree, (formally or informally) to limit competition between themselves. They may set output quotas, fix prices, limit product promotion or development, or agree not to 'poach' each other's markets.
Collusive tendering - Where two or more firms secretly agree on the prices they will tender for a contract. These prices would be above those which would be put in under a genuinely competitive tendering process.
Combined financial statements - 1. presentation in which the balance sheet accounts or income statement accounts of a related group of entities have been added together so they are considered as one reporting entity. Inter-company transactions are eliminated in a combined statement. Or 2. in governmental accounting, statement in which the balance sheets of all fund and account groups are shown without inter-fund transfers being eliminated
Comfort letters - Term used when underwriters request "comfort" from an auditor about financial information in SEC registration statements not covered by the auditor's opinion and on subsequent events after the opinion date.
Command-and-control (CAC) systems - The use of laws or regulations backed up by inspections and penalties (such as fines) for non-compliance.
Commercial loan - Short-term business loan usually issued for a term of up to six months.
Commercial paper - Short-term unsecured loan of a financially strong company having a maturity up to 270 days. It is typically issued on a discount basis meaning that the interest is subtracted immediately from the face of the debt to obtain the cash proceeds.
Commercial policy - A government's policy involving restrictions placed on international trade. Also called trade policy.
Commission - A payment system where employees are paid a percentage of the value of each good or service that is sold.
Commitment - Expected expenditure backed by an agreement. A commitment may be disclosed in a footnote but generally is not given accounting recognition. Disclosure includes its nature and amount. However, a commitment can be recorded in the case of a loss commitment on a purchase contract where the market price has significantly declined below the agreed-upon delivery contract price. The entry for the difference is to debit loss on purchase commitment and credit estimated liability. But a gain on a purchase contract is not recognized because it violates conservatism.
Committed costs - Costs, usually fixed costs, which the management of an organization has a long-term responsibility to pay. Examples include rent on a long-term lease and depreciation on an asset with an extended life.
Commodity - An article of commerce or product that can be used for commerce. In a narrower sense, commodity is product traded on an authorised commodity exchange. Some types of commodities: agricultural products, metals, petroleum, foreign currencies, financial instruments and indices, etc.
Commodity money - Money that takes the form of a commodity with intrinsic value common resources goods that are rival but not excludable.
Commodities futures - Contracts in which sellers promise to deliver a given commodity by a certain date at a predetermined price. Price is agreed to by open outcry on the floor of the commodity exchange. The contract specifies the item, the price, the expiration date, and a standardised unit to be traded.
Common law (case law) -An unwritten body of law based on general custom in England.
Common stock - Share in a public company or privately held firm. Common stockholders have voting and dividend rights. The issuing company shows common stock at its total par value, or no-par value, or stated value in the capital stock section of stockholders' equity.
Communication - The transferring of a message from the sender to the receiver, who understands the message.
Communication media - The written, oral or methods used to communicate a message.
Communication nets - The ways in which members of a group communicate with each other.
Communist country - A country in which there is limited private ownership of productive capital and of firms, limited reliance placed on the market as a means of allocating resources, and in which government agencies plan and direct the production and distribution of most goods and services.
Comparability - The quality or state of being similar or alike.
Competitive advantage (business) - The advantage that a business has over rivals who are competitors. It can be gained in a variety of ways.
Comparative advantage (theory of) - A country has a comparative advantage in producing a good over another if the opportunity cost of producing that good is lower. The law of comparative advantage. Provided opportunity costs of various goods differ in two countries/both of them can gain from mutual trade if they specialise in producing :(and exporting) those goods that have relatively low opportunity costs compared within the other country.
Compensating error - A double-entry term applied to a mistake which has cancelled out another mistake.
Competitor analysis - Identifying the strengths and weaknesses of competitors and their products.
Competition based pricing - Methods of pricing be upon the prices charged by competitors.
Competitive marketing strategies - Marketing strategies directly based upon particular approaches to dealing with competitors.
Competitive pricing - A pricing strategy where the product is priced in line with, or just below, competitors' prices to try to capture more of the market.
Compilation - The presentation of financial statement information by the entity without theaccountant’s assurance as to conformity with Generally Accepted Accounting Principles (GAAP). In performing this accounting service, the accountant must conform to the AICPA Statements on Standards for Accounting and Review Services (SSARS).
Complement - Two goods are considered complements if a change in the price of one causes an opposite shift in the demand for the other. For example, if the price of computers goes up, the demand for computer games will fall; if the price of computers goes down, the demand for computer games will increase.
Compliance audit - The review of financial records to determine whether the entity is complying with specific procedures or rules.
Component bar chart - A chart where each bar is divided into a number of sections to illustrate the components of a total.
Compound interest - Apply interest on the capital plus all interest accrued to date. Eg. A loan with an annually applied rate of 10% for 1000 over two years would yield a gross total of 1210 at the end of the period (year 1 interest=100, year two interest=110). The same loan with simple interest applied would yield 1200 (interest on both years is 100 per year).
Compromise strategy - One whose worst outcome is better than the maximax strategy and whose best outcome is better than the maximin strategy.
Computer aided design (CAD) - The use of computers when designing products.
Computer aided manufacture (CAM) - The use of computers in the manufacture of products.
Computer numerically controlled machines - Machines which have their operations controlled by a computer program.
Concentration ratio - The percentage of all sales contributed a small number (4,8) of the largest firms in an industry.
Conduit - The primary means by which something is transmitted.
Confidence level - A statistical calculation which allows a business t
Condorcet paradox - The failure of majority rule to produce transitive preferences for society constant returns to scale the property whereby long run average total cost stays the same as the quantity of output changes.
o gauge the extent of its confidence in the results of research
Conservatism principle - Accounting guideline that understates assets and revenues and overstates liabilities and expenses. Expenses should be recognised earlier than later while revenue should be recognized later than sooner. Thus, net income will result in a lower figure. Conservatism holds that in financial reporting it is preferable to be pessimistic (understate) than optimistic (overstate) since there is less chance of financial readers being hurt by relying on prepared financial statements. One can argue that pessimism is needed to counteract the optimism of management. However, excess conservatism may result in misguided decisions.
Consignment - When goods are offered for sale on behalf of another without the seller actually purchasing or taking title to the goods. Only when there is a subsequent sale does the owner receive any payment.
Consistency principle - 1. uniformity of accounting procedures used by an accounting entity from period to period. Or 2. uniformity of measurement concepts and procedures used for related items within the company's financial statements for one period. It is difficult for financial statement users to make projections when data are not measured and classified in the same manner over time. A change in accounting principle should not be made unless it can be justified as being preferable.
Consolidated entity – A user-defined combination of several consolidation units, grouped together for consolidation and reporting purposes.
Consolidated financial statements - Statement that brings together all assets, liabilities, and operating accounts of a parent company and its subsidiaries. It presents the financial position and results of operations of the parent company and its subsidiaries as if the group were a single company with one or more branches.
Consolidation - Similar to refinancing, but there is no loan fee. It simplifies loan repayment by combining several types of federal education loans into one new loan. (In the case of Direct Loan consolidation, the interest rate may be lower than one or more of the underlying loans.).
Consortium - An association of companies for some definite purpose.
Constraints - Factors which restrict decision making.
Consumable - A resource attribute representing a type of capacity. A resource with consumable capacity can have its capacity value permanently altered as a result of being tasked, e.g. chemicals in a manufacturing process or office supplies.
Consumers - Individuals who use or 'consume' goods and services to satisfy their needs and wants.
Consumer panels - Groups of people who agree to provide information about a specific product or general spending patterns over a period of time.
Consumer sovereignty - The concept of the consumer as the one who, by his or her spending, ultimately determines which goods and services will be produced in the economy. In principle, competition among producers causes them to adjust their production to the changing desires of consumers.
Consumer surplus - The difference between the total value that consumers place on all units consumed of a product and the payment that they must make to purchase that amount of the product.
Consumption - The process of using up goods and services.
Consumption function - The relationship between total desired consumption expenditure and all the variables that determine it; in the simplest cases, the relationship between consumption expenditure and disposable income and consumption expenditure and national income.
Consumption goods - Goods that are bought by households to use up, such as theatre tickets, food and clothing.
Consumption of domestically produced good and services (Cd) -The direct flow of money payments from households to firms.
Contingency plan - A plan that provides an outline of decisions and measures to be taken if defined circumstances, outside the control of the affected organisation, should occur.
Contingent asset - Item that depends on some future happening that mayor may not occur. Its existence or value is not assured. A contingent asset may emanate from a contingent liability. An example of a contingent asset may be a successful lawsuit claiming damages of another party. It cannot be shown as an asset on the balance sheet because it violates conservatism. However, footnote disclosure may be made.
Contingent liability - Potential liability that may exist in the future depending on the outcome of a past event. Examples are an adverse tax court decision, lawsuit, and notes receivable discounted. Footnote disclosure is required of the circumstances for possible losses. Note that an estimated liability can be booked only if there is a probable loss.
Continuity assumption - Accounting assumption that expects a business to continue in life indefinitely; also called going concern. It is the basis for using historical cost to value accounts rather than liquidation value since the company will remain in existence.
Contra account - Refers to an account which role is to offset another account. i.e. If a purchase is returned the 'purchase returns' account is a contra account - it reduces the value of purchases. For sales it would be the 'sales returns account.
Contract law - That body of law which regulates the enforcement of contracts. Contract law has its origins thousands of years ago as the early civilizations began to trade with each other, a legal system was created to support and to facilitate that trade. The English and French developed similar contract law systems, both referring extensively to old Roman contract law principles such as consensus ad idem or caveat emptor.
Contract of employment - A legal agreement between employer and employee listing the rights and responsibilities of workers.
Contractor - The person or entity who will provide the goods or services under the provisions of the contract..
Contribution margin (CM) - The difference between sales and the variable cost s of the product or service, also called marginal income. It is the amount of money available to cover fixed costs and generate profits.
Contribution margin analysis - A technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio. The manager asks what will happen to profits if a new product is added or an existing product is discontinued. Calculations take into account additional revenues, additional costs, effects on other products in the portfolio (referred to as cannibalization), and competitors' reactions.
Contribution sales ratio (C/S Ratio) - A tool used in profit management. It is important to establish the C/S ratio: C/S ratio = (Sales revenue – Variable cost of sales)/Sales revenue x 100. If a company achieves a high average marginal profit ratio of say, 40%, it does not mean that it will achieve high profits. The eventual profit will be dependent on the level of fixed costs within the organization.
Control Account - Is an account which gives a summary of the balance of all the accounts another ledger. subsidiary ledger will normally have a control account which will be shown in the general ledger.
Convention - Is an agreement, principle or statement expressed or implied that is used to solve given types of problems. Conventions allow a standardised approach to problem solving and behaviour in certain situations. An example of a convention is placing debits on the right and credits on the left of an account is termed an accounting convention.
Cooperative - 1. non-taxable entity that is formed to eliminate the middleman and gain profits or savings that would have been paid to it. Profit or savings is periodically distributed by the proportion of transactions and not in proportion to each member's investment. Or 2. an entity owned by members. For example, in terms of real estate, ownership shares in the apartment building are held by the occupants. They make decisions regarding the property.
Copyright - Protection given by law to authors of literary, musical, artistic, and similar works. The copyright holder enjoys the following exclusive rights: (1) to print, reprint, and copy the work; (2) to sell, assign, or distribute copies; and (3) to perform the work. A copyright is recorded at its acquisition price. The legal life of a copyright is the life of the author plus 70 years. Rarely will the economic life of a copyright exceed its legal life. For example, some textbooks become obsolete in five years. As other limited life intangible assets, copyrights are amortized over the period benefited.
Core business - The sector(s) of business activity that is the reason or purpose for being, e.g. providing meals within a restaurant would be considered core, while sales of art works on the wall may be non core.
Core workers -Workers, normally with specific skills, who are employed on a permanent long-term basis.
Corporate culture - The values. beliefs and norms that are shared by people and groups in an organisation.
Corporate governance - The system of checks and balances designed to ensure that corporate managers are just as vigilant on behalf of long-term shareholder value as they would be if it was their own money at risk. It is also the process whereby shareholders-the actual owners of any publicly traded firm-assert their ownership rights, through an elected board of directors and the CEO and other officers and managers they appoint and oversee. In the heels of corporate scandals including the Enron debacle in 2002, a series of sweeping changes are being sought, such as forcing boards to have a majority of independent directors, granting audit committees power to hire and fireaccountants, banning sweetheart loans to officers and directors, and requiring shareholder's approval for stock option plans. More specifically, the following principles constitute good governance:
1. To avoid conflicts of interest, a company's board of directors should include a substantial majority of independent directors-independent meaning that directors don't have financial or close personal ties to the company or its executives.
3. A board should obtain shareholder approval for any actions that could significantly affect the relationship between the board and shareholders, including the adoption of anti-takeover measures such as "poison pills."
4. Companies should base executive compensation plans on pay for performance and should provide full disclosure of these plans.
Corporate responsibility – The willingness of a business to accept responsibility for its actions and their impact on a range of stakeholders.
Corporation - Business organised as a separate legal entity with ownership evidenced by shares of stock. The corporation is a legal entity separate from its owners. Advantages of a corporation are the ability to obtain large amounts of financing through a public issuance, ease of transferring shares, limited liability of owners, unlimited life, and professional management.
Correlation - The relationship between two sets of variables.
Correlation coefficient - A measure of the extent of the relationship between two sets of variables.
Cost - 1. the sacrifice, measured by the price paid, to acquire, produce, or maintain goods or services. Prices paid for materials, labour, and factory overhead in the manufacture of goods are costs. Or 2. an asset. The term cost is often used when referring to the valuation of a good or service acquired. When it is used in this sense, a cost is an asset. The concepts of cost and expense are often used interchangeably. When the benefits of the acquisition of the goods or services expire, the cost becomes an expense or loss. An expense is a cost with expired benefits. A loss is an expense (expired cost) with no related benefit.
Cost accumulation - Collection of costs in an organized fashion by means of a cost accounting system. There are two primary approaches to cost accumulation: JOB ORDER and PROCESS COSTING. Under a job order system, the three basic elements of manufacturing costs - direct materials, direct labour, and factory overhead are accumulated according to assigned job numbers. Under a process cost system, manufacturing costs are accumulated according to processing department or cost centre.
Cost-benefit analysis - A technique which involves taking into account all social costs and benefits. when deciding on a course of action.
Cost driver - Any activity or series of activities that takes place within an organization and causes costs to be incurred. Cost drivers are used in a system of activity-based costing to charge costs to products or services. Cost drivers are applied to cost pools, which relate to common activities. Cost drivers are not restricted to departments or sections, as more than one activity may be identified within a department.
Cost effective - When a judgment is made that something is economical in terms of the goods or services received for the money spent.
Costing - The process of measuring the likely economic consequences of a particular business activity or operation.
Cost of capital – 1. rate of return that is necessary to maintain the market value (or stock price) of a firm also called hurdle rate. Or 2. is the rate of return that a business could earn if it so chose other investments with the equivalent risks. Also can be stated as opportunity cost of the funds used due to the investment decision.
Cost of Goods Sold (COGS) - A formula that is used to work out the direct costs associated with the items sold. It is calculated as opening Inventory plus purchases (an freight in) minus closing inventory. (same as cost of sales)
Cost plus pricing – A method of determining payment based on the actual cost of production or service provisioning plus an agreed-upon fee or rate of profit ; for example, a cost-plus government contract.
Cost of Sales - A formula that is used to work out the direct costs associated with the items sold. It is calculated as opening Inventory plus purchases (an freight in) minus closing inventory. (same as cost of goods sold)
Cost-push inflation - Inflation that has its origin in cost increases. This Inflation which occurs as a result of , businesses facing increased costs, which are then passed on to consumers in the form of higher prices.
Cost volume profit analysis (break even analysis) (CVPA) - Examines the behaviour of total revenue, total costs and profit as changes occur in the output level, selling price and variable costs per unit or fixed costs.
Covenant - A clause in a contract that requires one party to do, or refrain from doing, certain things. It is usually a restriction on a borrower imposed by a lender.
Credible threat (or promise) - One that is believable to rivals because it is in the threatener’s interests to carry it out.
Creative accounting - A colloquial term used to describe the process of altering or presenting financial information in a way that makes the information more appealing to those to whom it is being shown
Credit - 1. The right hand side of a journal or ledger account entry. 2. Money available for a client to borrow 3. To gain goods or services now and pay in the fututre. 4. To return goods and be given'credit' against fututre purchases.
Credit control - The process of monitoring and collecting the money owed to a business.
Credit multiplier (Money multiplier): Is a measure of the extent to which the creation of money in the banking system causes the growth in the money supply to exceed growth in the monetary base
Creditors - Are suppliers that the business owes money to.
Creditors days (creditors turnover) - The number of days it takes the company to pay trade creditors. This ratio provides an indication of the amount of credit given to the business by its suppliers. The formula is trade creditors divided by sales multiplied by 365 days.
Credit sales - Merchandise or services sold on the promise to pay later.
Crises - Unstable situations which arise. often in unforeseen circumstances.
Critical path - In an operation which consists of a sequence of activities, this is the one sequence which cannot afford any delays without prolonging the operation.
Critical path analysis - A technique used to find the cheapest or fastest way to complete an operation.
Cross-price elasticity of demand – The percentage change in the demand for one good divided by the percentage change in the price of a related good. Cross-price elasticity of demand is a measure of the responsiveness of one good's quantity demanded to changes in a related good's price.
Crude (birth/death rate) - Crude rates do not take a . country's age structure into account. Thus, for example, the crude death rate of a developed country may be higher than a developing one due to the higher proportion of old people.
Crude birth rate - The number of births in a y one thousand population e.g. 30 per 1000, the as a 3% birth rate.
Crude death rate - The number of deaths in a year per one thousand population e.g. 10 per 1000, the same as a 1 % death rate.
Culture gap – A difference between the culture that a business has and what it would like it to be.
Cumulative causation – The principle that an initial event can cause an ultimate effect that is much larger.
Cumulative earnings - The sum of all earnings over the time periods in question.
Cumulative frequency - The total frequency up to a particular item or class boundary.
Currency - The paper bills and coins in the hands of the public.
Current account - A part of the balance of payments accounts that records payments and receipts arising from trade in goods and services and from interest and dividends that are earned by capital owned in one country and invested in another.
Current account balance of payments - Exports of goods and services minus imports of goods and services plus net incomes and current transfers from abroad. If inflows of money (from the sale of exports, etc.) exceed outflows of money (from the purchase of imports, etc.), there is a 'current account surplus' (a positive figure). If outflows exceed inflows, there is a 'current account deficit' (a negative figure).
Current cash / debt ratio - Measures ability to pay current liabilities in given year with cash derived from operating activities. Calculated using net cash from operating activities divided by average current liabilities.
Current liabilities - Debts that have to be repaid within a year:
Current ratio (working capital ratio) - Measure of liquidity. Current assets are divided by current liabilities. It is a commonly used measure of short-run solvency, i.e., the immediate ability of a firm to pay its current debts as they come due. Current ratio is particularly important to a company thinking of borrowing money or getting credit from their suppliers. Potential creditors use this ratio to measure a company's liquidity or ability to pay off short-term debts. Though acceptable ratios may vary from industry to industry below 1.00 is not atypical for high quality companies with easy access to capital markets to finance unexpected cash requirements. Smaller companies, however, should have higher current ratios to meet unexpected cash requirements. The rule of thumb Current Ratio for small companies is 2:1, indicating the need for a level of safety in the ability to cover unforeseen cash needs from current assets. Current Ratio is best compared to the industry.
Curriculum vitae (resume) - A list of the applicant's personal details, experience and qualifications. .
Custodian - An entity entrusted with guarding and keeping property or records.
Customers - Individuals who buy goods and services supplied by businesses.
Cut off rate - The predetermined maximum rate and/or minimum rate at which the subject is still acceptable, but where a rate above the proscribed higher or below the proscribed lower rate is no longer acceptable.
Cyclically adjusted deficit (CAD ) - An estimate of the government budget deficit (expenditure minus tax revenue), not as it actually is but as it would be if national income were at its potential level.
The church says the earth is flat, but I know that it is round, for I have seen the shadow on the moon, and I have more faith in a shadow than in the church.
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