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Economic Terms

Economic Terms

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Economic Terms


Abandoned Option Means a share option not exercised because the price is against the buyer (or taker) on declaration day i.e., the situation has become unprofitable.

Absolute Monopoly Means the control of the entire output of a commodity or service, for which there exists no substitute, by a single producer or supplier. This kind of situation rarely arises in real life. It is also known as pure monopoly or perfect monopoly.

Accommodation Bill A bill which is drawn, accepted or endorsed for the sole purpose of discounting it, no goods being given or received for it, thus offering short-term cash accommodation.

Account Refers to a running record of transactions which are taking place between two transactors, who may be in two departments of one business and a basic element in all systems of recording business transactions. In retail trading it refers to the credit facility which is automatically extended to a customer with whom an account is operated.

Accountability Accountability is a subordinate�s obligation to render an account or report of his ac tivities to his superior.

Administered Prices A price set not by the force of demand and supply but by some authority like the government or a regulatory authority.

Ad Valorem Tax A duty, which is imposed on commodities in proportion to their value i.e., a duty, which is expressed as a percentage and not a flat amount.

A.O.B. Abbreviation of �Any Other Business�, as an item on the agenda of a meeting.

Appreciation An increase in the value: 1. 2. 3. of stocks and shares when their prices rise on the stock exchange; of a currency when its value increases in terms of other currencies; of stocks held by manufacturers and merchants during a period of rising prices.

Economic Terms


Arbritrage It is a speculative activity. It seeks to make profit out of differences in prices of a security in two markets. If the price of a certain share is higher in one market than in another, the speculator will purchase them in the cheaper market and sell in the dearer market.

Articles of Association The Articles of Association prescribe a set of rules to govern the internal working of the company. They cover such things as the issue and transfer of the company�s shares, the procedure to be followed in calling general meetings, shareholders� voting rights, and many other matters. Articles of Association require to be registered with the Registrar of Companies.

Asset When the balance sheet of a business is drawn up, everything which it owns at the time which has a money value is listed as an asset. They may be classified as: 1. 2. 3. Current Assets - consisting of cash, stock and book debts. Fixed Assets - consisting of buildings, plant and machinery. Intangible Assets - being the value of goodwill, patents.

Asset / EmployeeRatio Refers to a ratio which is used as an indication of the capital intensity of a company.

Authorised Capital When a new company is to be registered, its application for registration is accompanied by a statement indicating the amount of Capital with which it proposes to be registered. This is known as its nominal, registered, or authorised capital.

Authority Authority may be defined as the force to command others, to act or not to act in a manner deemed by the possess of the authority to achieve organisational objectives. It creates a relationship between the superior and the subordinate.

Average Cost Average cost is the cost per unit of output, where the cost of all inputs (factors of production) are included.

Average Revenue Refers to revenue per unit output.

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.

Bad 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 1. 2. 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 1. 2. '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.

e.  Bankruptcy A legal proceeding under which the property of an insolvent debtor is taken for the benefit of his creditors generally. . sold at a discount on its face value. trading may occur at prices above the maximum.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. when maximum prices have been fixed. which is in the form of a document ordering the drawee (i.  Barter 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..  Bid The term used for an offer of payment which an individual or organization makes for possession orcontrol of assets. at a rate which reflects current short term rates of interest. signed on the back by the acceptor.  Bill A short-term debt instrument.  Blown Up Price Descriptive of the final price of goods following a rise in the price of basic materials and fuel. signed by the drawee (who may be an accepting house or bank) and �endorsed�. signed by the banker. a bill becomes negotiable and may get discounted.  Bill of Exchange A Bill of Exchange is an instrument in writing.  Bear A bear is a speculator who sells securities in anticipation of a fall in prices of securities. i. Once it is accepted. input. containing an unconditional order. usually by government. i.e.e.. Thus..Economic Terms  Shashank Bank Deposits The funds deposited in bank accounts. i. the debtor) to pay the drawer (the creditor) a stated sum at a specified date. 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. or 'at sight' which means on demand.e.. goods or services.

 Budget A budget is a financial statement showing the estimates of receipts and expenditure. even though their current price on the stock exchange may be higher or lower. or design.  Book Value In its balance sheet a company may value assets in the form of asset investments at the prices shown in its books. sign. .Economic Terms  Shashank Blue Chip A consistently growing company both in terms of profit as well as market share is called a blue-chip company. namely the prices at which they were purchased. The budget is divided into two parts : (a) revenue budget and(b) capital budget. known as 'brokerage'.  Brain Drain Means the migration of educated and skilled labour from poorer to richer countries. symbol.  Broker One who buys and sells bonds and other financial assets. term. A boom reaches a peak when the economy has been working at full capacity.  Blue Chip Rate Refers to the lowest interest rate payable by borrowers having the highest credit rate. 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.  Brand A brand is a name. 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. It is opposite of slump or recession.  Brokerage A fixed cost which is charged by the broker for cash of investment or encashment of bonds and other financial assets.  Boom Refers to a period of expansion of business activity. A Broker is usually paid commission for his services.  Break-Even Carrying on business in which neither profit nor loss is made.

 Capital Capital is one of the factors of production and has been defined as wealth used in the production of further wealth. holidays etc. For business purposes.�  Call � Option Refers to a contract giving the option for buying shares at a future date within a prearranged time limit.  Capacity The term used for the estimated maximum level of production from a plant on a sustained basis. Shashank  Bull A bull is a speculator who purchases securities in anticipation of a rise in prices of securities. .  Capacity Utilization Refers to the ratio of actual output to potential output. and which they employ in holding a portfolio of assets.  Business Plan A Business Plan is a formal document containing a mission statement.permitting all necessary shut . description of the firm�s goods or services. A high proportion of these funds are borrowed literally �at call.  Bullion Precious metals like gold or silver which have been held in bulk in the form of ingots or bars. 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. capital generally has to be considered in terms of money.downs.Economic Terms  Budget Deficit Budget deficit is the difference between total revenues and total expenditure.  Call Money Funds borrowed by discount houses from the clearing and houses banks in many countries. market analysis.

plant equipment. e. and local government bonds. Examples include real estate. commonly called the primary ratio. . which is not bought or sold as part of the everyday running of a business. it consists of the total assets minus the current liabilities. e. the new issue market and the stock exchange.g.  Capital Expenditure Expenditure of a non-recurrent nature resulting in the acquisition of assets.  Capital Employed. machinery of all kinds.  Capital Employed The term used for the capital in use in a business. Nominal or Registered Synonymous terms for capital fixed by the Memorandum of Association of a company. long-term government bonds.  Capital Market A market comprising institutions which are involved in the purchase and sale of securities.  Capital Intensity The ratio of capital to labour employed in production.Economic Terms  Shashank Capital Asset The term used for an asset. 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.g. This term is synonymous with 'producers goods'.  Capital Output Ratio Means the ratio of the amount of capital to the amount of output produced by that capital.  Capital � Authorised. Return On The relation of profit to the estimate of average capital employed to yield a ratio.  Capital Goods Goods which are made for the purpose of producing consumer goods and other capital goods.  Capital Market Instruments Financial instruments like company shares and bonds.

 Cash Flow Refers to the sum of retained earnings and depreciation provision made by firms. Cartels mostly occur in oligopolies.I. It is negotiable i. which is issued by a bank acknowledging a deposit of money with it and constituting a promise to repay that sum. at a specified future date.  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.  Certificate of Deposit (CD) A document. The CRR is fixed by the RBI and is hence variable. on liquor and drugs) are exempted from Central Excise Duties. commodity.  Cash Market The term used for a market for the immediate delivery of. which are produced within the country. A policy of cheap money may be adopted in a time of industrial depression to stimulate recovery.  Cash Money in the form of bank notes and coins. Insurance and Freight) . can be transferred..e.  Cheque A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise on demand.F (Cost. to the bearer.  Cheap Money A term used to describe a situation where bank rate and other rates of interest are low.Economic Terms  Cartel Shashank Refers to a formal agreement between business firms to co-operate on agreed norms relating to prices & output.  Central Excise Duties These duties are levied by the Central Government on commodities. As such it is the source of internally generated long � term funds available to the company. But commodities on which State Governments impose excise duties (as for instance. The upper limit of CRR is 15% while there is no lower limit. and payment for.  C.  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.

 Consumer�s Surplus .  Consumer Durable A commodity of relatively long life.  Committee A committee is a group of persons constituted to deal with specific issues or problems of the organisation. which is completely self-sufficient and insulated from external processes. as distinct from. They accept deposits. for the purchase of a specific commodity.  Collusion Means an agreement between firms to co-operate so as to avoid mutually damaging rivalry.  Communication The process by which people attempt at sharing meaning through the transmission of symbolic messages.I. held by members. etc. A C. and with a capital divided into shares. say foodstuffs.  Consumer Goods Products in the actual form in which they reach domestic consumers.  Closed Economy A concept which is used mainly in theoretical models to describe an economy having no external trade.F.  Company A joint stock company is a legal entity set up for the purpose of conducting commercial or industrial operations. meeting all charges upto �on board� and paying insurance and freight.  Company Savings Refers to that part of firms' profits which have neither been paid out in taxes nor distributed to shareholder as dividend. which is given to the consumer for a short period of time. like a refrigerator or a washing machine. make advances. This can take the form of hire purchase or be in the form of a personal loan from a bank. quotation implies that the seller must ship the goods.  Consumer Credit Refers to a loan.  Commercial Banks A general term denoting those banks.Economic Terms Shashank Term used of goods shipped where the price includes shipping and insurance charges. which conduct a general rather than a specialized type of business.

. things.Economic Terms that which he/one actually pays.  Copyright The sole right to reproduce a literary work or a musical composition. action�. It has for its object to point out weaknesses and errors in order to rectify them and prevent recurrence.  Contango A stock exchange term meaning carry-over.  Contract An agreement. the instructions issued and principles established. which like other property can be assigned in return for payment to another person or persons. people. It gives the owner a monopoly of a particular piece of property.  Control �Control consists in verifying whether everything occurs in conformity with the plans adopted.  Cornering 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. 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. It operates on everything. (Henry Fayol)  Controlling 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. The speculator who corners the security will dictate his own price. The term �Contango� is also used to mean the extra payment itself. oral or written whereby one party undertakes to do or not to do something for the other party to the contract. Shashank Means the excess of the price which a person would be willing to pay rather than go without an article over  Consumption Means the act of using goods and services to satisfy current wants.  Corporate Tax Corporate tax is a tax on income of the companies. it may be termed as consumer�s rent.  Convertibility Refers to the freedom to exchange any currency for another currency at the current exchange rate.  Consumption Expenditure Refers to aggregate expenditure on goods and services to satisfy current wants.

 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.  Corporation The term used for a contemporary form of business having two distinct characteristics: it is a legal entity separated from its owners. labour.  Credit A wide term which has been used in connection with operations or states involving lending. the expenditure of others against future repayment. dividends. buildings.  Cost 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.  Coordination 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.  Corporate Risk The total risk involved in a business is termed as corporate risk. . generally at short-term.. directly or indirectly. plant and machinery and raw materials. It comprises two types of risk. the basic risk involved in the firm�s day to day operations. and it is usually on a scale much larger for the sole proprietor or partnership to manage or fund.  Cost of Production Expenditure which is incurred by way of payments for rent.e.  Cooperation Cooperation refers to the collective efforts of people who associate voluntarily to achieve specified objective.the stockholders. mortgages. and factory overheads.  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. To �give credit� is to finance. salaries and wages. in the production of a commodity or a service. interest on loans. and business risk i. including development and marketing costs.Economic Terms  Shashank Corporate Paper Notes which are sold by large corporations in the money market as a means of getting funds. Financial risk which arises out of debt finance.

and inventories � assets that could be turned into cash at a reasonable predictable value within a relatively short time period (typically. it is the relation between the current assets and the current liabilities of a business. that will have to be paid off during the current fiscal period. . from a merchant location. or. medium-dated and long-dated securities depending on the length of time which has to elapse before they �mature�.  Current Ratio Also known as the �Acid -test� Ratio. hotel etc. Such securities are conventionally divided into short-dated. marketable securities.  Dated Security Refers to any security.Economic Terms  Shashank 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. company�s track � record company�s current and prospective business financial risk quality of management.g. which has a stated redemption date. in the case of some cards issued by banks. such as accounts payable. like a bond. 2. It is usually based on 1. before any dividend has been paid to ordinary shareholders. short-term loans. the effect of which is to make it necessary to pay it into a banking account.  Credit Rating Means an evaluation of the soundness of an individual or business firm as a credit risk. to cash from the banks operating the particular scheme. one year).  Cumulative Preference Share A preference share which entitles the holder to receive not only the current dividend but also any unpaid arrears.  Customs Duties These are taxes on imports. and unpaid taxes.  Current Liabilities Debts..  Current Assets Items such as cash. 3.. accounts receivable. 4.  Crossing This means drawing two parallel lines across the face of a cheque.

a situation in which goods and services have been paid for in advance of production or performance. In other words. to delegate means to extend authority to a subordinate in certain defined areas and to make him responsible for results..  Deficit Refers to a situation where outgoings exceed income on an ongoing basis. . deed of partnership etc. There are different types of deeds viz.  Decision Making The process of identifying and selecting a course of action to solve a specific problem.  Delegation The act of assigning formal authority and responsibility for completion of specific activities to a subordinate. so that borrowing is expensive.Economic Terms  Shashank Dead Horse Work which is paid for but is yet to be completed. in which prices and money incomes have been falling. in return for a higher rate of commission. guarantees that his principal will receive payment for the goods he has sold on his behalf.  Debt Refers to a sum of money.  Deficit Financing Refers to a situation where expenditure exceeds income such that a deficit is deliberately operated.  Delegation of Authority Authority is said to be delegated when a superior entrusts a part of his rights to his subordinate. or quantity of goods or services.  Deed A deed is a legal document or written agreement.  Dear Money A period when rates of interest are high.  Deflation Means a situation. accompanied by an increase in the value of the monetary unit.  Del Credere Agent An agent who. or where liabilities exceed assets at a specific point in time. deed of assignment. owned by one individual or body to another.

supervising. It is the executive of management because it is concerned with the execution of plans and policies. Some examples are income tax & capital gains tax. It is more severe and long-lasting than a recession. These taxes are not transferable.  Discount 1. motivating.  Demand Price Refers to the price which buyers are prepared to pay for a given quantity of goods or service. but its contribution to the manufacture of another commodity. and leading people towards the attainment of planned targets of performance. It is a means of dividing one large and complex organisation into smaller and flexible administrative units. .  Devaluation Refers to a fall in the external value (or exchange rate) of one currency vis-�-vis other currency. Generally at a high price.  Demand Draft A Demand Draft is a Bill of Exchange and negotiable instrument.  Directing Directing is the managerial function of guiding.  Depression Means prolonged and severe slowing-down of economic activity exemplified by mass unemployment and a level of national income well below its potential level.less will be bought than at a low price.Economic Terms  Shashank Demand 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.  Departmentation Departmentation may be defined as the process of grouping individual jobs into departments.  Direct Tax A tax levied directly on individuals or firms.  Departmentalization Division of a company into departments that are similar and logically connected.  Derived Demand Refers to the demand for a commodity not needed for its own sake. An inducement offered by a creditor to debtors to pay promptly. (Cash Discount).

 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.  Dividend In the case of limited companies. it entitles the holder to take possession of the goods. With reference to a bill of exchange. trade discount. A policy adopted to check inflation by restricting demand. eachagreeing not to compete against the other in its share of the market. a cheque is dishonoured when the drawee has insufficient funds to meet it. perhaps on a territorial basis.  Disinflation A mild form of deflation.  Dishonour A Bill of Exchange is dishonoured when the drawee has insufficient funds to discharge it when it falls due for payment.Economic Terms 2.  Dividend Warrant 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. 3. Shashank A deduction from the catalogue price of an article generally allowed by a wholesaler to a retailer. In such a case. 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.  Dock Warrant A receipt for goods stored in a warehouse. they may agree to share the market. Such a situation can be given to cut-throat competition of a particularly irrelevant type. Dividends are usually declared annually but many companies pay something on account as an interim dividend. 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. that is.  Dumping Means the sale of a good in a foreign market at a price below its marginal cost.  Dissaving A situation where consumption expenditure exceeds current income. consumption is financed through borrowing in anticipation of future income. Sometimes referred to as division of work. . and to prevent both parties being ruined by it.  Duopoly A form of imperfect competition where there are only two producers of a commodity. 4. Similarly. When a recently issued stock falls below its issue price it is said to stand at a discount. to discount a bill means to acquire it by purchase for a sum less than its face value.

 Economic Growth The rate of expansion of the national income or total value of production of goods and services of a country.Economic Terms  Shashank Duopsony Refers to a market situation in which there are only two buyers of a particular goods/service.  Entrepreneur The term used for the organizing factor in production. the amount demanded normally decreases.  Elasticity of Demand Means the response of demand to a change in the price of commodity. It may result from policy action to reduce interest rates. how much to produce and what method of production to adopt. . often used to describe a share in a company.  Elasticity of Supply Means the response of supply to a change in the price of commodity. Elasticity may be defined as a measure of the percentage change in one variable in respect of a percentage change in another variable. If the price rises. increase liquidity of the banking system.  Easy Money Refers to a general state of ease and cheapness of borrowing in the financial system. resulting from an expanded level of output. They are also known as �long run increasing returns�.  Equity Another name for ownership. the quantity demanded normally increases. If the price rises.  Elasticity The degree of responsiveness of demand or supply to a change of price. Entrepreneurs are responsible for such economic decisions as what to produce. release any non-price restrictions on lending like credit ceilings and restrictive conditions on hire-purchase contracts.  Economies of Scale Refers to the reduction in the average cost of a product in the long run.

 Excise Duties Taxes on home produced goods to raise revenue. Labour. interest for capital.  Face Value Means the nominal value.  Factors of Production The resources required for production. Factors of production are resources required for production. Excise duties may be imposed either to raise revenue or to check the consumption of the commodities on which they are imposed. & profit for organizer. wage for labour.  Fiat Money Money which the State declares to be legal tender.  Finance The term is applicable to funds from almost any source which is used to undertake any kind of expenditure. as distinct from customs duties which are taxes on imports not primarily imposed to raise revenue. .  Finished Goods Refers to the goods. of a security (bond/share). The value written on a coin or a bank note is also termed as face value. as distinct from the market value.  Fiscal Policy Generally refers to the use of taxation and government expenditure for regulating the aggregate level of economic activity.  Export The term used for a goods/service which is produced in one country and sold to a consumer in another. Capital and Entrepreneur (Organization). The four factors of production are Land.  Factor Income Income accruing to factors of production � rent for land.Economic Terms  Exchange Shashank Exchange is the act of obtaining a desired product from someone by offering something in return. which are used for the purpose of consumption and not utilized as inputs by the firms in the process of production.

 Goal The purpose that an organization strives to achieve. From there on.I. Organizations often have more than one goal. paying for freight. the buyer must take responsibility. and all subsequent expenses  Forward Market A Forward market transaction involves a contract to buy or sell commodities. services owned by another organization. quotation implies that the exporter will deliver the goods free on board a ship in accordance with the contract at the port named. For example.  Fixed Cost Refers to the production costs which tend to be unaffected by variations in the volume of output. the purchase department handles purchases on behalf of the entire organisation.F. property.O. insurance. (Free on Board) Term used of goods shipped where the price does not include shipping and insurance charges. An F. equipment. irrespective of whether it is in any sense �good� or �bad�. and other items used on a continuing basis to produce its goods and services. Every functional department servesthe rest of the organisation.  Good This term is used of any commodity or service for which there is a demand. .B. opposite to C. equipment.  F.B.  Franchise A type of licensing arrangement in which an organization sells a package containing a trademark. patents. or securities at a fixed future date at a price agreed in a contract.Economic Terms  Fixed Assets Shashank Includes the monetary value of the company�splant.  Functional Organisation In a functional organisation.O.  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. materials. the enterprise is divided into a number of functional departments. he pays all expenses up to that point.

 Hot Money Money that moves across country/borders in response to interest rate differences and that.  Hypermarket A hypermarket is a multi-brand.  Income Tax Personal income tax is levied on individuals by the Central Government and the proceeds are shared between the Centre and the States. or goods which may have little utility. the tax rate is not uniform but rises progressively with the rise in money income.  Horizontal Integration 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.  Hypothecation Refers to the pledging of securities as collateral. the desire to hold money rather than risk it on interest-earning assets. that is.Economic Terms Shashank  Hedge Any action taken by a buyer / seller to protect his interest by spreading / lowering risk due to a change in price. The income tax is progressive. for example to secure the debit balance in a margin account. It results from what Keynes called �Liquidity Preference� i.e. . which moves away when the interest rate differential disappears..  Hierarchy The line of authority in an organization that runs in order of rank from top management to the lowest level of the enterprise. multi-department store under one roof meant to offer cost-effective shopping for household requirements.  Idle Money An inactive money that does not contribute to productive assets in an economy.

 Interest A payment by a borrower for the use of a sum of money for a period of time. housing.g. rather than final consumption. He is not allowed to deal with non-members directly. health services. e.  Insolvent Means the state of being unable to pay one�s debts.  Laissez-Faire .  Intermediate Goods The goods which find use at some point in the production process of other goods. It is the reward for the use of capital in the process of production. A term used for the quantity of stock held by a business. transport.  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.  Invoice A document used in business giving a complete summary of a transaction involving the sale of goods.  Issued Capital The actual amount of capital issued by a company and allotted in shares to investors. education. work in progress and finished goods in organization maintained to meet its operational needs. It may be the same or less than the authorised capital.  Jobber A jobber is an independent dealer in securities. power.  Inventory The raw materials.Economic Terms  Shashank Infrastructure Services which are regarded as essential for the creation of a modern economy.  Labour All human resources which are available to society for use in the process of production.. He purchases and sells securities in his own name.

 Liabilities Refers to any claims. A bond is usually secured by a lien against specified property of the company.  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. and thus provides a direct channel for coordination and problem solving.  Limited Liability Means the restriction of an owner�s loss in a business to the extent of the capital that he has invested in it. of an individual or institution.  Letter of Hypothecation The term used for a letter from an exporter to his bank authorizing it. Under the more common FIFO system. whereas under the LIFO system it is assumed to have been purchased last. to sell the goods exported and remit the proceeds less expenses. which are banker's debts.  Lien Means a claim against property. Shashank  Lateral Communication Communication between departments of an organization that generally follows the work flow rather than the chain of command. are commonly termed as 'deposit liabilities'. The term usually refers to financial liabilities of which the commonest form has been a debt of any kind. to which they give added security in the financing of foreign trade.  Lateral Integration This occurs when a firm branches or absorbs other businesses engaged in producing commodities related in same way to its own main products. or more commonly today of bills drawn on that customer by parties from whom he has bought goods. Thus. it is assumed that whenever an item is sold it was the first to be purchased. . Letters of Credit are used largely in association with bills of exchange. actual or potential.Economic Terms Refers to a policy of non-interference by the State in economic affairs.  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.  Lease 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). in the event of the importer failing to accept or pay a bill of exchange. some deposits.

 Market 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. the lines of direction are straight and vertical. and of assets readily convertible into cash (called liquid assets). organizing.  Market Economy . manpower means the organisation of work force for its utilization in different sectors of the economy. Here. reflected in an ability to meet current financial liabilities in cash. and controlling the work of members of an organization and of using all available organizational resources to reach stated organizational goals. In non-marketing terms the function of a market is to enable an exchange of goods or services to take place.  Marketing 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.  Liquid Assets Means assets either in the form of money or which can be quickly converted into money. manpower means the working population of a country. to meet immediate obligations.  Management The process of planning.  Manpower In ordinary language.  Liquidity The term indicates availability of cash.  Liquidation (Winding� Up) Refers to the process where-by the existence of a company gets terminated.leading. its property having been realized and distributed among its creditors and in the event of a surplus. a volume of reserves plus credit facilities. Every superior has complete command over his subordinates and every subordinate is directly accountable to only one superior immediately above him.Economic Terms  Shashank Line Organisation Line organisation refers to a direct chain of command from top to bottom. In economics. among its members. a means by which buyers and sellers are brought into contact with one another.

 MNC (Multi National Corporation) A large corporation with operations and decisions spread over several countries but controlled by a central headquarters.one for buying and the other for selling at prices determined in advance by the speculator.g. For this purpose.  Maturity Means the date on which a loan or bond or debenture becomes due and is to be paid off i.. dividend warrants and debentures payable to bearer. the capital refunded.Economic Terms Shashank 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.  Mortgage Refers to the conveyance of property by a debtor (mortgager) to a creditor (mortgagee) as security for a debt.  Near Money Assets which are readily convertible into money e.  Matrix Structure An organizational structure in which each employee reports to both a functional or division manager and to a project group manager.  Market Forces Refers to pressures by the free play of market supply and demand. Transfer is by delivery only. Equilibrium of prices and quantities are determined in a market economy through the laws of supply and demand. deposit accounts. which induce adjustment in prices and / or quantities traded. deposit with savings banks and building societies. the title to which passes by delivery.  Merger Means a union of two or more firms in a transaction by which one absorbs the other(s).e. A bill of .  Negotiable Instrument A claim. with a condition that the property will have to be reconveyed on payment of the debt. or a new firm gets created utilising the assets of the absorbed firms. Examples of such claims include bills of exchange.  Market Price Means the price determined by the equilibrium between demand and supply in a market period (or very short period). two sets of brokers are employed . promissory notes.cheques.  Matched Order Its purpose is to create an impression in the market that a security is very active. and certain short-term agreement securities.

It is expressed in terms of the cost of the sacrifice of alternative activities. The appropriate amount of depreciation is deducted from the original cost of purchase of the asset to give its net book value.  Opportunity Cost Means the real cost of satisfying a want. The degree of openness of an economy is appreciated by the rise of its foreign trade sector relative to its gross domestic product.  Overdraft . organized and coordinated. Dock Warrants.  Net Profit Means gross profit minus deduction of tax payments and depreciation provisions.  Open Economy An economy. Neither is a cheque with �not  NAV (Net Asset Value) The value of a fund�s investment. and Postal Orders are not negotiable.  Operating Budget Budget indicating the goods and services that an organization expects to consume within a budget period. Bill of Lading. It is the function of creating a structure of duties and responsibilities. For a mutual fund. Shashank exchange payable to a certain person �only� is not a negotiable instrument.  Organizational Structure The way. the net asset value per share usually represents the fund�s market price.  Organization Two or more people who work together in a structured way to achieve a specific goal or set of goals.  Organising Organising is the process of establishing harmonious authority�responsibility relationships among the members of the enterprise.Economic Terms negotiable� written on it. in which an organization�s activities are divided. which is engaged in international trade.  Net Book Value A statement of the value of fixed assets which is used in accounting.

when to do it. . Sometimes shares are only partly paid � up. The actual amount of capital that shareholders have subscribed. up to an agreed limit. They include rent of premises.  Planned Economy An economy where crucial economic processes are determined to a large extent not by market prices. which is paid up by the shareholders. research. salaries of salesmen.  Overheads Costs which are not directly chargeable to any unit produced. such as water is normally valued little. a primary function of management. etc.  Paradox of Value Means paradox on which an essential to life item. the company being able to call for the balance to be paid whenever it requires this additional capital. such as diamonds.. and to pay interest only on the daily amounts by which the account is overdrawn. in which entries are made of all deposits and withdrawals.  Paper Note A general term which is used for money in the form of bank notes.  Par Value Means the nominal or face value of a share or security.  Pass Book A book supplied to customers by a bank.Economic Terms Shashank Refers to a system of bank lending.  Paid�Up Shares Shares are fully paid � up when the full amount has been paid. but by an economic planning body.  Planning Planning. by which the borrower is permitted to draw cheques beyond the credit balance in his account. how to do it and who is to do it. carry a high price. but a luxury item. It may be less than the authorised capital. implies looking ahead and deciding in advance what to do.  Paid-Up Capital That part of the issued capital.

the ability to change the attitudes or behavior of individuals or groups. .  Primary Industry Refers to the production of goods from agriculture.  Price Discrimination 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. mines that constitute the natural wealth of a nation.e.  Product A product can be defined as anything that can be offered to satisfy a need or want.  Probation Probation is a period when a new worker is being tested before getting a permanent job.Economic Terms  Power Shashank The ability to exert influence i. so as to weaken or eliminate existing competitors.  Producers� Goods Refers to goods made for the purpose of producing consumer goods and other capital goods e. This is synonymous with capital goods.  Profit Margin Refers to profit per unit of output which is expressed as a percentage of price. forestry and fishing. Also it is the amount of money that has to be paid for a commodity or service.  Productivity Means output per unit of input employed.  Procedure A standing plan that contains detailed guidelines for handling organizational actions that occur regularly.g.  Premium Securities are said to be 'at a premium' when they stand above par on the stock exchange. machinery of all kinds.  Price Refers to the value of a commodity or service in terms of money. The term �Produ ct� can be used to cover both 'goods and services'.  Predatory Pricing Means the practice of diminishing prices down to unprofitable levels for a period.

resources to be used. It is defined in terms of capital investment.Economic Terms  Shashank Pro Forma An invoice sent to a buyer before the goods are sent.  Rate of Turnover The number of times the value of the average stockof a business is sold during a period. . and the unit responsible for each step.  Program A single use plan that covers a relatively large set of organizational activities and specific major steps. The buyers are either banks or registered primary dealers. so that payment can be made or business documents can be produced. or habit. and assignments of task. A rule provides no scope for discretion and judgment. where earnings are expressed as a proportion of the outlay.  Repo 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.  Rules Rules are rigid and definite plans that specify what is to be done or not done in a given situation. time limits for each step.  Programme A programme is a concrete scheme of action designed to accomplish a given task.  Project A project is a distinct cluster of functions and facilities for a definite purpose.  Rate of Return Refers to the basis of earnings from the investment of capital.specific objective and interdependence of tasks. their order and timing.  Programmed Decisions Solutions to routine problems determined by rule. procedure. It specifies the steps to be taken.

Economic Terms Shashank  Sandwich Boards Boards carried in front of and behind a person to carry advertisements  Sandwich Man A man who carries sandwich boards to carry advertisements. selection.  Scab (also called blackleg) A scab is a worker who goes on working when there is a strike. training. Also called span of management control.  Staffing Staffing is the process of filling all positions in the organisation with adequate and qualified personnel. An investor who wishes to sell or buy securities must act through a broker. It consists of manpower planning.W.  Start-Up 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.  Stag 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.  Scientific Management �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�. so that he hopes to sell soon at profit. Only members are admitted and business is transacted according to a prescribed set of rules. It is the process of establishing a time sequence for the work to be done. integration and maintenance of employees.  Schedule A schedule specifies time limits within which activities are to be completed.  Strategy . Taylor)  Span of Control The number of subordinates reporting directly to a given superior.  Stock Exchange A highly organised market for dealings in stocks and shares. (F. compensation. recruitment.

Economic Terms difficulties. It has mainly an external focus as it is designed to achieve the organisational objectives in the face of challenges and opportunities.  Synergy The situation in which the whole is greater than its units.  Wash Sales It is a transaction in which a speculator sells a security and then buys it at a higher price through another broker.  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.  Wind Up To bring a limited company to an end either voluntarily or by order of the court. people may be induced to purchase them at a very high price. . synergy means the departments that interact cooperatively are more productive than they would be if they operated in isolation.  Variable Costs Expenses that vary directly with the amount of work being performed. Shashank A strategy may be defined as an administrative course of action designed to achieve success in the face of  Strategic Planning Strategic planning is long term in nature. In organizational terms. Strategic planning is formulated mainly at the top level of management. As a result.  VAT (Value Added Tax) A tax levied on the value of each of the processes carried out by a business.  Turnover Total sales of a business during a particular period. This will create an impression that there is great demand for that security.

Money produced as a return on an investment.Economic Terms Shashank  Yield The return on a security. based on its current earnings in relation to its current price on the stock exchange. .

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