Glossary

A country has an absolute advantage in producing a good over another country if it uses fewer resources to produce that good. Absolute advantage can be the result of a country’s natural endowment.

Purchases for which a buyer has not yet paid the seller.

Accounting is the organizational function that is focused on recording, keeping, analyzing and communicating financial information.

Accounting equation is the principle that the book value of a company's assets must equal the finance that has purchased those assets. Accounting Equation is expressed as:
Assets = Liabilities + Owner's Equity

Sales for which a firm has not yet been paid.

Acquisition is a term used when one company purchases another company.

The balance of payments (BOP) is the difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out.

Balance of trade (BOT) is the difference between the value of a country's exports and the value of a country's imports for a given period.

Balance sheet is a statement of an organization's assets, liabilities and the owner's equity at a specific point in time.

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 are long-term debt obligations (liabilities) of corporations and governments. A bond certificate is issued as proof of the obligation.

Branding is about establishing an identity for a company's product that distinguishes it from the competition. Successful branding adds value to a product and can ensure brand loyalty.

Breakeven is the point where total sales revenue equals expenses that is the point with no profit or loss.

A business is an organization that produces or sells goods and/or services for a profit. Other organizations, such as non-profits, may provide goods or services, but do not do so for a profit.

The business cycle is the regular economic pattern of upturns and downturns in demand and output within the economy that tend to repeat themselves every three to five years or may last much longer.

Business ethics is the study of how a business should act when faced with ethical dilemmas and controversial situations in a business context.
Business ethics is important because it enables a business to work within the boundaries of the law, and ensures that the the business is not committing crimes against its employees, customers, consumers and other stakeholders and interested parties.

Business participants are the people who participate in conducting the work of the business. These always include the employees and managers, but often include suppliers, customers, and shareholders.

The process of analyzing long-term projects and selecting those that offer the best returns while maximizing the firm’s value.

Investments in long-lived assets, such as land, buildings, machinery, equipment, and information services, that are expected to provide benefits over a period longer than one year.

The Cash Flow Statement reports cash inflows and outflows and provides valuable information about a company's expenses and receipts and allows insights into its future income needs in order to be able to meet its future obligations (expenses).

The inflow and outflow of cash for a business.

The process of making sure that a firm has enough cash on hand to pay bills as they come due and to meet unexpected expenses.

Coincident indicators show the state of the economy today.

Commercial paper is unsecured short-term debt—an IOU—issued by a financially strong corporation.

A country has a comparative advantage when a good can be produced at a lower cost in terms of other goods. The idea is that countries can benefit from specializing in the production of goods at which they are relatively more efficient. This implies that consumers in each country gain the maximum benefit from international trade.

Competitors are other organizations that compete in one or more areas of business. Competitors play an important role in the business's success. In fact, suppliers can be participants, stakeholders, and an external environmental influence.

Complexity in the external environment is related to the extent to which the business requires specialized and differing knowledge in order to understand the influences of the environment and how to operate the business.

The Consumer Price Index (CPI) represents changes in prices as experienced by Canadian consumers. It measures price change by comparing, through time, the cost of a fixed basket of goods and services.

A cooperative is a business owned and controlled by those who use its services - producers, customers or consumers..

A corporation is a legal entity that is entirely separate from the parties who own it. Once businesses reach a substantial size, it is advantageous to organize as a corporation so that its owners can limit their liability.

Cross-functional teams are teams where team members come from different organizational functional areas.

Current assets, include cash and any other assets (accounts receivable and inventory) that can be converted to cash within a year.

Customers buy the products and/or services from the business. Customers are extremely important to the business. In fact, they are participants, stakeholders, and an external environmental influence.

The debt ratio is defined as the ratio of total debt to total assets. It measures the extent of a company’s leverage.

Deflation is downward pressure upon the level of economic activity. It is a period of falling demand and prices. It is usually accompanied by reduce output and rising unemployment.

Demand is the quantity of a product that buyers are willing to purchase at various prices.

Payments to stockholders from a corporation’s profits.

Dumping describes the selling of a good in another country at less than its cost price.

An economic indicators are the monthly statistics that provide information on the country's economic performance. There are different types of indicators which are all subject to considerable error, so it is unwise to draw any conclusions from just one month's data.

Economics is concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources.

Economy is a region's or country's system for selling, trading, and consuming goods and services (1). The economy is an external environment influence on the business. It affects the money available to the customers and to the business. Factors, such as interest rates, inflation, and deflation, greatly influence the buying behaviours of customers and how the businesses should adapt their offerings.

Efficiency ratios measures a company's ability to use its assets to generate income.

Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, telephones without the direct intervention of bank staff.

Employees are the people who work for an organization. Sometimes, when talking about organizations, managers' roles are differentiated from other workers' roles because their responsibilities are different. Nonetheless, managers and workers are all employees of the organization.

The term ethics is used to describe moral principles that governs a person's behavior or conduct during an activity.

Exporting refers to the sales of products and services in foreign countries that are sourced or made in the home country.

Extended reality (XR) is an umbrella term referring to all real-and-virtual combined environments and interactions generated by computer technology. It includes augmented reality (AR) and virtual reality (VR).

External environmental factors are the factors outside the organization that influence the business. These often include the social and cultural, natural environment, political, legal, technological, and economic factors.

Factoring is a form of short-term financing in which a firm sells its accounts receivable outright at a discount to a factor.

Finance is the organization function that is about planning what financial resources are needed, procuring the necessary financial resources, and then maintaining financial health for the business.

Financial accounting is concerned with the production and reporting of the financial accounts according to the requirements of the International Financial Reporting Standards (IFRS) so that users of the accounts have an accurate view of the company's financial position.

Financial Management is the art and science of managing a firm’s money so that it can meet its goals.

Financial risk is the chance that the firm will be unable to make scheduled interest and principal payments.

Fiscal policy is a government towards its raising of revenue and its level of public spending.

Foreign direct investment refers to the buying or establishing tangible assets in another country.

Franchise is a business based upon the name, logo and trading method of an existing successful business (franchisor). To obtain a franchise requires the payment of an initial fee and the signing of a contract that imposes constraints and restrictions on the franchisee.

Free market system is defined as an economy operating by free competition.

The term full employment describes the level of employment which provides jobs for all those who wish to work.

When we look at the functional area of business, we are organizing the work in terms of the type of work. The most common function areas are marketing, information technology, human resources, finance, operations, and accounting.

These are functions that important are for the business to do. In small businesses, the owner may do the finance, accounting, and human resource functions along with overseeing the operations. In large businesses, these functions are often broken down into departments that have large groups of people working within each function.

The highest level of influence; in our globalized society, this can have an impact on all external factors.

Governmental agencies are made up of the agencies, policy makers, and other actors within the government. These agencies are stakeholders impacted by the business and its decisions. For example, the government can benefit from the business's innovations that help improve the government's work. A major impact for governmental agencies is from the taxes that come from the business's profits.

Gross domestic product (GDP) is defined as the market value of all goods and services produced by the economy in a given year.

Gross national product is the value of all products and services produced by citizens of a country both domestically and internationally minus income earned by foreign residents.

A group is a collection of individuals who coordinate their individual efforts.

Group cohesiveness is the tendency for a group to be in unity while working towards a goal.

Groupthink is the tendency to conform to group pressure in making decisions, while failing to think critically or to consider outside influences.

Horizontal merger is when companies in the same industry merge.

Hostile takeover is an act of assuming control that is resisted by the targeted company’s management and its board of directors.

The human resources is an organizational function that is about searching for, selecting, training, and maintaining workers.

Importing refers to buying goods and services from foreign sources and bringing them back into the home country. Importing is also known as global sourcing.

Income statement shows revenues, or sales, and expenses—the costs of doing business.

Inflation is a sustained rise in the average prices of goods within an economy. It can also be explained as the fall in the purchasing power of money, since it is usual for wages to move ahead at least as fast as the price level.

Information technology is the organizational function that aims to understand the information and data needs of the company in terms of obtaining, analyzing, and protecting information.

Inputs are the elements which goes into producing a good or service such as labor, raw materials, capital, land, entrepreneurship etc.

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

International Monetary Fund (IMF) is the banker to the world's central banks. If a country requires to borrow money it can apply for a loan from the IMF. There will be conditions tied to the loan.

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

Joint ventures is where one or two companies set up a business division that will be operated jointly.

Lagging indicators show the health of the economy in the recent past.

Leading indicators give a prediction of future events.

Legal factors are the laws, policies, and legal systems. For businesses, legal factors are a type of external environmental influence on the business. Here are some examples:

-The legal system affects how laws are passed.
-The legal system affects how civil proceedings, such as lawsuits, are conducted.
-The legal system also impacts the workers' and business owner's rights and responsibilities.

Licensing agreements allows firms to choose foreign individuals or organizations to manufacture or market their products in another country.

Limited liability company is where the owners or shareholders are financially only responsible for the amount they have invested in the company rather than their personal wealth. The importance of limiting the amount of a shareholder's liability is that it encourages people to invest with relatively little risk.

A limited partnership (LP) exists when two or more partners go into business together, but the limited partners are only liable up to the amount of their investment. A limited partnership have limited partners and a general partner with unlimited liability.

Liquidity ratios is the measurement of a company's ability to meet its short-term debts.

The local area in which a company operates, such as Vancouver, Burnaby, Richmond, or Surrey in British Columbia, can affect all areas of the external environment.

The macro environment is the external forces (economic, demographic, technological, social and cultural, legal and political) which influence a firm's decision making and have an impact upon its performance.

Management accounting is the production and use of accounting information for internal managerial purposes of analysis, planning, review and control rather than for historical financial records.

Manager-led team is where the manager is the team leader and is in charge of setting team goals, assigning tasks, and monitoring the team’s performance.

Managers are the people who "plan, organize, lead, and control" (1) the activities and work of the people in the organization.

Market segmentation is finding specific subsets of the overall target market that have common characteristics that influence buying decisions.

Market securities are short-term investments that are easily converted into cash.

Marketing is the organizational function that aims to promote and sell the goods and/or services of the business.

The marketing concept involves identifying consumer needs and wants and then producing products (which can be goods, services, or ideas) that will satisfy them while making a profit.

Marketing mix refers to the set of actions, tools or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix - Price, Product, Promotion and Place. In recent years commentators refer to the 7 Ps which includes People, Process and Physical Evidence.

A merger is a term used to describe an agreement between the management and shareholders of two companies of approximately equal size to bring both companies together under a common board of directors.

A mixed market economy is defined as an economic system blending elements of a market economy with elements of a planned economy, markets with state interventionism, or private enterprise with public enterprise.

Monetary policy is concerned with the money supply, rates of interest, exchange rates and the amount of credit available in order to control the level of spending within the economy.

Money is a medium of exchange, serves as a measure of value and a store of value.

Monopolistic competition occurs when an industry has many firms offering products that are similar but not identical. Unlike a monopoly, these firms have little power to curtail supply or raise prices to increase profits.

A monopoly is a market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute.

Mortgage loan is a long-term loan made against real estate as collateral.

Multinational corporation is a company that operates - design, produces and market products in many countries.

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

The country's influence on the company's operations; for most companies, this level has a broad reaching impact on most to all areas of the external environment, especially companies that are in more than one province or global.

National debt is the liabilities of the government sector. Historically, government deficits have occurred much more often than surpluses since government typically spends more than it takes in.

Oligopoly means few sellers. In such an oligopolistic market, each seller supplies a large portion of all the products sold in the marketplace.

Operations is the organizational function that is focused on producing the goods and/or services of the business.

In business, we look at opportunities as positive options for the business that arise from the external environment.

Opportunity cost measures cost in terms of the next best or highest-valued alternative foregone. Opportunity cost may be measured in money terms or not.

Output is the finished product coming from a production process.

Outsourcing is a business practice in which a company hires a third-party in a foreign country to perform tasks, handle operations or provide services for the company.

Business participants are the people who participate in conducting the work of the business. These always include the employees and managers, but often include suppliers, customers, and shareholders.

A partnership is a business owned jointly by two or more people. Partnership have unlimited liability where each partner is liable for the debts of the other partners, including their tax liability.

Perfect competition exists when there are many consumers buying a standardized product from numerous small businesses. Because no seller is big enough or influential enough to affect price, sellers and buyers accept the going price.

Planned system is an economic system in which the elements of an economy (such as labor, capital, and natural resources) are subject to government control and regulation designed to achieve the objectives of a comprehensive plan of economic development.

Political factors are political climate, systems, and other factors in a political environment that affect organizations. For businesses, political factors are a type of external environmental influence for the business. Here are some examples of the impacts:

-Political climate (left-, center-, or right-leaning) affects the amount of taxation, regulation, and incentives business have.
-Political systems (communist, socialist, etc.) can impact the type of ownership and how the market in an area is managed.
-Political factors are also closely linked with legal systems as political climate and systems affect the laws and policies that impact a business.
-Political factors also influence the trade relationships between countries when can affect the supply of products.

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.

Price stability is the stable level of prices in the economy, which avoids long periods of inflation or deflation and sustains the value of money over time.

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

Principal is the amount borrowed.

Profitability ratios measures profit in proportion to a yardstick such as net assets (return on investments) or sales revenue.

The province in which the company operates, sometimes referred to as "State" in countries that have states instead of provinces; this level impacts all areas of the external environment.

Quota is a form of import protection that limits the sales of foreign goods to a specified quantity or market share.

The region in which the local community belongs, such as MetroVancouver, Fraser Valley, or Cariboo Chilcotin, often affects many to allareas of the external environment.

The influence of the nation's region, such as North America, often has a clear influence on the legal, political, cultural, social, and economic factors as well as others.

Profits that have been reinvested in a firm.

Risk is the uncertainty about future events. It is the potential for loss or the chance that an investment will not achieve the expected level of return.

Risk-return trade off Is a concept which explains the basic principle in finance that the higher the risk, the greater the return that is required.

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.

A self-managed team is a small group of employees who take full responsibility for delivering a service or product through peer collaboration without a manager's guidance. This team often works together long-term to make decisions about a particular process.

A social audit is an official evaluation of an organization's involvement in social responsibility projects or endeavors.

Sole proprietorship is an individual who may or may not employ other people but owns and operates the business.

Stakeholders are those affected by the business's operations and its decisions. Examples of stakeholders include shareholders, investors, the community, customers, competitors, and governmental agencies.

Payments to stockholders in the form of more stock; may replace or supplement cash dividends.

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

A strategic alliance is an agreement between two companies (or a company and a nation) to pool resources in order to achieve business goals that benefit both partners.

Suppliers provide the materials needed for the business to create the products and/or services the business sells for profit. Suppliers are essential to the business's success. In fact, suppliers are participants, stakeholders, and an external environmental influence.

Supply is the quantity of a product that sellers are willing to sell at various prices.

Target market is a specific group of consumers who are particularly interested in a product, would have access to it, and are able to buy it.

Tariff is a tax imposed on an imported good. This is likely to reduce the demand and make any domestic competitor more attractive to consumers.

Team (or a work team) is a group of people with complementary skills who work together to achieve a specific goal

A team contract is an agreement between you and your teammates about how your team will operate. The team focusses on issues that the team considers most important. All team members must sign the contract indicating their agreement.

Term loan is a business loan with a maturity of more than one year. Term loans generally have maturities of 5 to 12 years and can be unsecured or secured.

The Equilibrium Price is the price point at which the demand and supply curves intersect.

In business, we look at threats as positive impacts for the business that arise from changes in the external environment.

Trade Controls are restrictions imposed on the transfer of items from one country to another by any individual, company, government or public body.

The extension of credit by the seller to the buyer between the time the buyer receives the goods or services and when it pays for them.

The level of uncertainty a company faces is related to the extent to which the factors in the environment change in a predictable manner. If the changes are steady and change predictable, then there is low uncertainty. If they change often and in unpredictable ways, there is high uncertainty.

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

The unemployment rate is the percentage of the labour force that is unemployed and actively seeking work.

Loans for which the borrower does not have to pledge specific assets as security.

Vertical merger is when one of the companies in the merger is a supplier or customer to the other.

Virtual team is where geographically dispersed members interact electronically in the process of pursuing a common goal.

A virtual team usually refers to a group of individuals who work together from different geographic locations and rely on communication technology such as email, instant messaging, and video or voice conferencing services in order to collaborate to achieve a common goal.

World Bank provide aid to developing countries in the form of loans and technical assistance.

The World Trade Organization is an international free trade club, where member countries commit themselves to work towards the elimination of barriers to imports and thereby encourage free and fair trade.