DECA Finance Cluster Exam Terms

BUSINESS BFS DECA

equipment

tangible property (other than land or buildings) used in the operations of a business

acreage

an area of land, typically when used for agricultural purposes, but not necessarily measured in acres

trademark

a symbol, design, or word used by a business to identify a good or service and is registered with the government to prevent its use by others; an example of intangible business property

tangible assets

an asset with exchange value and a physical form

duty of care

basic principle that expects all individuals and businesses to exhibit socially responsible behavior by using caution to prevent harm and by watching out for one another; violated when a tort is filed

tort

a private wrongdoing that potentially harms another person or entity; a business may be liable for this if it or one of its employees breaches the duty of care

business entity

an organization created by an individual or individuals to conduct business, engage in a trade or partake in similar activities

doctrine of sovereign immunity

universally accepted principle that each nation has the right to manage its own government and develop its own laws

punitive damages

a type of compensation awarded in a lawsuit that goes beyond just covering the actual harm or loss suffered. They are intended to punish the wrongdoer for particularly harmful behavior and to deter others from acting similarly. Essentially, if someone acted in a way that was especially reckless or malicious, the court might award punitive damages to signal that such actions are unacceptable.

micro-cap stock

stock of public companies in the United States which have a market capitalization of roughly $50 - $300 million

nano-cap stocks

used to designate those companies with market capitalization of less than $50 million

market capitalization

the value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price. if a company has 1 million shares and each share is worth $10, the market cap would be $10 million. Market cap helps investors assess a company's size and relative value in the market.

pump and dump

investment scam that takes place mostly online and typically involving scammers who buy a small stock and then hype it up through misleading or false statements to attract investors to other investors, causing its price to rise. The scammers sell when the price is high, leaving the victims to deal with the rapid price decrease afterwards

pyramid scheme

a fraudulent system of making money based on recruiting an ever-increasing number of "investors." The initial promoters recruit investors, who in turn recruit more investors, and so on. because at each level, the number of investors increases. is a scam where people make money mostly by recruiting new members instead of selling anything. Each new person pays to join, and that money goes to earlier members. It’s called a "scheme" because it tricks people and usually ends up losing money for most participants when it can’t find enough new recruits.

ponzi scheme

an investment scam that lures in new investors by promising high rates of return with little or no risk. Money from new investors is used to pay returns to earlier investors, not from any actual profit. It’s called a "scheme" because it tricks people and can’t last. Eventually, it falls apart when there aren’t enough new investors, and most people lose their money. Pyramid schemes, unlike Ponzi schemes, usually offer a victim the opportunity to “make” money by recruiting more people into the scam.

phishing

an online identity-theft scam that fools its victims into believing they are submitting sensitive, personal information to a legitimate website

Individual Retirement Account (IRA)

a type of savings account designed to help people save for retirement with tax advantages.

traditional IRA

allowing individuals to direct pretax income towards retirement investments that can grow tax-deferred; no gains are taxed until it is withdrawn

Roth IRA

an individual retirement account allowing a person to set aside after-tax income up to a specified amount each year; both earnings on the account and withdrawals after age 59.5 are tax-free

governance, risk, and compliance (GRC) software

It helps organizations manage their rules (governance), identify and handle risks, and ensure they follow laws and regulations. Essentially, it makes it easier for companies to stay organized and obey (compliance) while minimizing risks. It does four main things: (a) it finds and measures risks to the company, (b) it keeps an eye on how risks are managed, (c) it checks if employees are following company policies, and (d) it makes sure the company meets the reporting rules set by federal and state agencies and other regulators.

transmittal

a letter accompanying important business papers, such as contracts, that lets the recipient know exactly what should be contained in the package and if the recipient needs to take any action; should be used when sending copies of a contract to a vendor

acknowledgment

a letter acknowledging the receipt of business papers. Enables businesses to have an accurate record of what has been received. This helps prevent any confusion or disputes that may arise regarding the delivery and content of the documents. It also allows for easy reference and retrieval when needed, saving time and effort

claim

a letter requesting a solution to a problem

grapevine

an oral communication method in which information is passed through the company but not formally announced or verified; often used by coworkers to discuss company issues and pass on information between departments

touch points

all opportunities that businesses have to connect with customers and reinforce their brand value

marketing

a primary business activity that involves creating, communicating, and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders

risk management

the business activity that involves the planning, controlling, preventing, and procedures involved in limiting business losses

matrix organizational structure

uses a grid layout to display the roles of both functional and project managers. A company structure where teams report to multiple leaders

functional managers

oversee entire departments, such as human resources, marketing, operations and finance.

project managers

operate across the matrix by coordinating team members from different departments to work on a single project. For example, might bring together staff from marketing and finance to develop the budget and strategies for a new ad campaign. They can also assemble a team from various departments as needed for a project.

managerial roles

can vary based on the company's needs and specific projects. In some cases, a project manager might act primarily as a coordinator, while in others, they may have equal or even greater authority than a functional manager.

systems thinking

an organizational learning concept that focuses on the big picture rather than seeing smaller, individual parts. An approach to analysis that focuses on the way different parts of a system interact and how they influence one another within a whole

tentative agreement (TA)

the stage at which union and management have agreed on the terms of a contract but still need union members to approve or reject the contract

inflation

a gradual loss of purchasing power that is reflected in a broad rise in prices for goods and services over time

High inflation

prices are increasing quickly

low inflation

prices are growing more slowly

deflation

which occurs when prices decline and purchasing power increases

listening

the primary function of coaching

Prompt Payment Act

federal law provision ensuring that the federal government makes timely payments; bills are to be paid within 28 days after receipt and acceptance of materials and/or services, unless a notice of non-payment is issued within 14 days.

commercial bank

a bank that offers services to the general public and to companies; example of a deposit-taking institution

deposit

a sum of money placed or kept in a bank account, usually to gain interest

credit union

a not-for-profit financial institution that accepts deposits, make loans, and provides a wide array of other financial services and products at low interest rates; example of a deposit-taking institution

savings and loan (S&L)/thrift association

a savings and loan institution specializes in mortgage and home loans and may provide the same kinds of checking and savings accounts as a bank

mutual savings bank

an institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund; profits after deductions are shared between the members; example of a deposit-taking institution

capital stock

the number of common and preferred shares that a company is authorized to issue, and is recorded in shareholders' equity. is issued by companies to raise capital. It is usually issued when companies are trying to fund their growth

brokerage

a company that buys or sells goods or assets for clients; a firm that charges a fee or commission for executing buy and sell orders submitted by investor

security

a financial assets that can be brought, sold, or traded giving the holders certain rights, such as, ownerships. written evidence of ownership conferring the right to receive property not currently in possession of the holder, in a publicly-traded corporation (stock), a creditor relationship with a governmental body or corporation (bond), or rights to ownership (option). relates to a financial instrument or financial asset that can be traded in the open market

derivative

a security that have value only because they are connected to something else, called the underlying asset, which could be stocks, bonds, currencies, interest rates, commodities, etc.

underlying

the security or asset that must be delivered when a contract or warrant is exercised

exercised

to put into effect the right to buy or sell the underlying financial instrument specified in an options contract

fiduciary

a person or organization that owes to another the duties of good faith and trust; often involves managing the assets of another person or group of people; may include money managers, bankers, accountants, and board members

capital market

markets for buying and selling equity and debt instruments; deal in shared, bonds, and other long-term investments like corporate bonds, common and preferred stock, and treasury bonds (NOT treasury bills or certificates of deposit)

debt instruments

an asset that individuals, companies, and governments use to raise capital or to generate investment income

shared deal

the act of buying and selling company shares, exchange traded funds (ETFs), and investment trusts, generally over the medium to long term. The aim is to make a profit by selling the asset at a higher price or by receiving dividend payments on shareholdings.

exchange traded funds (ETFs)

a basket of investments like stocks or bonds. let you invest in many securities all at once. They often have lower fees than other types of funds. are made up of multiple assets, and investors have no control over the individual securities within the fund. Some people want the flexibility to choose only stocks or bonds they believe in, rather than holding a broad, preset mix. Through out the day

investment trusts

public companies that seek to make money for their shareholders by buying and selling shares in other companies or assets

certificates of deposit (CD)

a type of savings account that pays a fixed interest rate on money held for an agreed-upon period of time

corporate bonds

debt issued by a company in order for it to raise capital. An investor who buys a is effectively lending money to the company in return for a series of interest payments

preferred stock

a different type of equity that represents ownership of a company and the right to claim income from the company's operations. Preferred stockholders have a higher claim on distributions (e.g., dividends) than common stockholders. Preferred stock has characteristics of both bonds and common stock

dividends

a type of payment used by companies to share profits with their shareholders

money market

trading in very short-term debt investments, such as treasury bills and CD; a network made up of banks, institutional vendors, and money dealers that work together to borrow and lend money for short periods, usually up to 90 days.

financial instruments

any type of asset that can be traded by investors, whether it's a tangible entity like property or a debt contract. Financial instruments can also involve packages of capital used in investment, rather than a single asset

treasury bill

a money market instrument, a short-dated government security yielding no interest but issued at a discount on its redemption price

yield no interest

refers to assets or investments that do not generate any returns or income

redemption

recovering an asset or taking possession of something of value in exchange for payment

financial instrument

a tradable or negotiable asset, security, or contract

common stocks

represent an ownership stake in a given company. you're actually buying a very very small part of a company

underwriting

the process through which an individual or institution takes on financial risk for a fee. This risk most typically involves loans, insurance, or investments. the act of signing and accepting liability under an insurance policy, thus guaranteeing payment in case of loss or damage; the process by which investment banks raise investment capital from investors on behalf of corporations and governments that are issuing securities. a process where a company or person (called the "underwriter") takes on some risk to help others make big financial moves, like getting insurance, taking out loans, or even selling shares in a company. Think of underwriters like “risk assessors.” Their job is to check whether something is too risky for a business to approve. For example, in insurance, they decide if it’s safe for the company to give someone health or car insurance based on the chance that person will need to make a claim. In finance, they help determine if someone can pay back a loan or if a company’s stock is worth investing in.

financial holding company

a financial institution engaged in non-banking activities that offers customers the opportunity to purchase insurance products and invest in securities, among other actions, a type of a bank holding company that can offer non-banking financial services

holding company

a business entity—usually a corporation or limited liability company (LLC)—that typically doesn't manufacture anything, sell any products or services, or conduct any other business operations. Rather, , hold the controlling stock in other companies

Gross Domestic Product, unemployment, and inflation

the three economic indicators that stock investors and traders should pay the closest attention to

Gross Domestic Product (GDP)

the total value of goods produced and services provided in a country during one year. Consequently, also measures the income earned from that production, or the total amount spent on final goods and services

Will the stock market decline or rise if inflation and interest rates both rises?

decline

Will the stock market rise or decline if inflation rises but interest rates fall

rise

bottom line

the term describing a company's net earnings, net income, or earnings per share

foreign exchange derivative

a type of financial contract whose value depends on the price of another asset in the foreign exchange (currency) market. These assets can be currencies or even other foreign investments, and the derivative’s price “derives” from the price movements of these underlying assets. Investors and companies use foreign market derivatives to protect themselves against fluctuations in exchange rates. For example, if a U.S. company expects to receive payment in euros in the future, it might use a derivative to lock in a favorable exchange rate, reducing the risk of losing money if the euro’s value falls.

no-load mutual funds

a mutual fund in which shares are sold without a commission or sales charge

price-earnings ratio

measures a company's current share price relative to its per-share earnings. dividing the current price of a common share by the earnings per common share (EPS) for the latest reporting period; typically found on a stock table

Earnings per Share (EPS)

a measure of a company's profitability, calculated by dividing quarterly or annual income (minus dividends) by the number of outstanding stock shares. The higher a company's EPS, the greater the profit and value perceived by investors. Net profit / Weighted Average Shares Outstanding

stock table/chart

a set of information on a particular company's stock that generally shows information about price changes, current trading price, historical highs and lows, dividends, trading volume, and other company financial information.

managerial accounting

the style of accounting that primarily focuses on capturing, maintaining, and interpreting the business' accounting information for internal use and decision making; makes forecasts and communicates long-term information regarding company goals

financial accounting

the style of accounting that focuses on capturing, maintaining, preparing, and reporting financial information to external audiences

debt financing

method of acquiring capital whereby a firm sells bonds, bills, or notes to individuals with the goal of receiving additional capital through accrued interest. occurs when a company raises money by selling debt instruments to investors

accrued interest

the interest that an investment is earning, but you haven't received it yet,

vertical analysis

type of financial statement analysis whereby an individual calculates each individual item on a financial statement as a percentage of the total (creating common-size financial documents); may include comparison of performance across several years for a company or across several companies. typically focuses on one reporting period. focuses on the relationship between individual items in a financial statement For instance, in an income statement, each expense may be shown as a percentage of total sales, allowing you to see how much each expense contributes to revenue in that period.

common-size financial documents

commonly include the income statement, balance sheet, and cash flow statement. reduce all figures to a comparable figure, such as a percentage of sales or assets.

horizontal analysis

type of financial statement analysis whereby dollar amounts on financial statements are analyzed across several years; does not involve the creation of common-size financial documents. usually examines many reporting periods. to identify trends and patterns over time. For example, you might compare a company’s revenue or expenses from one year to the next to see if they are increasing or decreasing

ratio analysis

type of financial statement analysis whereby ratios are calculated based on a compny's financial data. a quantitative procedure of obtaining a look into a firm's functional efficiency, liquidity, revenues, and profitability by analysing its financial records and statements.

principle of least authority/privilege (PoLP)

an information security concept which maintains that a user or entity should only have access to the specific data, resources and applications needed to complete a required task

debt modeling

aspect of budgeting software that allows the user to assess the potential impact of loans and lines of credit; involves inputting the terms of the loan or line of credit. to forecast the balances of outstanding debt securities and the amount of interest expense coming due in each period

Loan terms

the terms and conditions involved when borrowing money

line of credit

a type of loan that lets you borrow money up to a pre-set limit. You don't need to use the funds for a specific purpose. You may use as little or as much of the funds as you like, up to a specified maximum. You may pay back the money you owe at any time

decision tree

which is used for making decisions in business or computer programming and in which the branches represent choices with associated risks, costs, results, or probabilities.

environmental scanning

the gathering of information about the environment surrounding a business, analyzing that information, and determining the future impact of that information on the business

zero-based budgeting

a method of budgeting that requires a manager to demonstrate the need for every expense instead of relying on figures from a previous period

The process follows the same basic steps:

• Identify business goals.

• Develop and analyze new ways to achieve goals.

• Discover new ways to fund business processes.

• Prioritize funds.

corporate governance

is the system of rules, practices and processes by which a company is directed and controlled. refers to the way in which companies are governed and to what purpose. It identifies who has power and accountability, and who makes decisions; revolves around balancing the desires of the stakeholders in a company

contingency plan

an alternative course of action stating specific guidelines that a business uses when responding to undesirable circumstances

captive insurance company

a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies). The main job is to protect the owners from financial risks. It helps lower the taxes they need to pay on the money they put into the insurance, allows them to use their money for other things, and provides coverage for risks that regular insurance companies might not cover.

enterprise risk management (ERM)

the process of planning, organizing, leading, and controlling the activities of an organization in order to minimize the effects of risk on an organization's capital and earnings

tax shelter

any kind of legal investment that reduces your taxable income, and therefore the amount you owe the Canada Revenue Agency (CRA); examples include retirement accounts and real estate