Money, Financial Management, Business Organizations, and Management

Practice vocabulary flashcards for midterm review covering money and the financial system, working capital management, securities markets, business ownership structures, entrepreneurship, and core management functions.

Fiat Money

A paper currency or legal tender that is generally accepted in exchange for goods and services.

Medium of Exchange

A primary function of money that enables trade and transactions to take place efficiently without the need for a direct barter system.

Measure of Value

A function of money that serves as a common denominator or unit of account to establish prices and compare the worth of diverse goods and services.

Store of Value

A function of money that enables individuals and businesses to accumulate purchasing power and retain wealth over time.

Demand Deposits

Funds held in checking accounts that can be withdrawn or transferred on demand by check or debit card without prior notice.

Time Deposits

Bank accounts, such as savings accounts, that pay interest and cannot be withdrawn immediately by check without possible restrictions.

Money Market Accounts

Interest-bearing accounts offered by financial institutions that combine higher interest rates with limited check-writing privileges.

Certificates of Deposit (CDs)

Savings accounts guaranteeing a fixed rate of interest provided the deposited funds are held untouched until a specified maturity date.

The Federal Reserve Board

The independent central bank and guardian of the U.S. financial system, responsible for conducting monetary policy, regulating banks, and protecting consumers.

Monetary Policy

The deliberate actions taken by the central bank to regulate the nation's money supply and credit availability to balance inflation and promote growth.

Open Market Operations

The daily buying and selling of U.S. Treasury bills and government securities by the Fed to expand or contract the money supply.

Reserve Requirements

The statutory percentage of deposits that depository institutions are legally required to keep on hand as cash or on deposit with the Fed.

Discount Rate

The interest rate charged by the Federal Reserve to financial institutions borrowing money directly to meet reserve requirements or fund loans.

Controlling Credit

The regulatory authority of the Fed to set and enforce credit rules and margin requirements for lending institutions, investors, and stock purchases.

Fiscal Policy

Government decisions regarding public spending, tax collection, and debt management administered by the U.S. Treasury Department, independent of the Fed.

Commercial Banks

For-profit financial institutions that accept demand deposits, offer savings accounts, issue loans to individuals and businesses, and distribute profits to shareholders.

Savings and Loan Associations (S&Ls)

Financial institutions that primarily accept savings deposits and deploy funds into long-term residential mortgage lending.

Credit Unions

Not-for-profit financial cooperatives owned and controlled by their depositor-members, with net earnings returned to members and accounts insured up to $250{,}000$ by the NCUA.

Federal Deposit Insurance Corporation (FDIC)

The independent federal agency that supervises member commercial banks and insures depositor accounts up to $250{,}000$.

Investment Bank

A financial intermediary that underwrites new issuances of stocks and bonds to help corporate clients raise long-term capital.

Working Capital

A measure of short-term financial health and operational liquidity calculated as $\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$.

Transaction Balances

Cash reserves held by a firm to pay for expected everyday operational expenditures such as payroll, vendor bills, and utilities.

Lockbox

A post office box managed by a company's commercial bank to collect incoming customer checks directly and accelerate cash processing.

Commercial Paper

Short-term unsecured promissory notes issued by large, creditworthy corporations to finance short-term working capital needs.

2/10 Net 30

A credit term granting the buyer a $2\%$ cash discount if the invoice is settled within $10$ days, with full payment due in $30$ days.

Trade Credit

Short-term financing extended by suppliers allowing purchasers to obtain goods or services immediately while paying for them at a later date.

Capital Budget

The planned financial expenditure allocated for acquiring, maintaining, and upgrading long-term fixed assets and equipment.

Capital Expenditures (CAPEX)

High upfront investments to acquire physical long-term assets characterized by ownership, depreciation over time, and long-term commitments.

Operating Expenditures (OPEX)

Ongoing, pay-as-you-go day-to-day business operational costs characterized by lower upfront expenses, immediate deduction, and operational flexibility.

Initial Public Offering (IPO)

The first public offering and sale of a private corporation's shares on a public securities exchange to raise capital from general investors.

Over-the-Counter Market

An electronic network of financial dealers trading securities directly with one another rather than through a physical floor exchange.

Sole Proprietorship

An unincorporated business owned and operated by one individual, featuring unlimited personal liability, direct operational control, and single taxation.

Partnership

A business organization defined as an association of two or more individuals who act as co-owners for profit under the Uniform Partnership Act.

Corporation

A separate legal entity created under state charter that possesses rights to enter contracts, own property, sue, and be sued, providing limited liability to owners.

Articles of Incorporation

The formal legal documents submitted to state authorities by corporate founders to establish the company and secure a corporate charter.

Board of Directors

An elected governing body chosen by corporate shareholders to set overarching strategic policy, hire the CEO, monitor risk, and declare dividends.

Preferred Stock

An equity class that pays fixed dividends and holds prior claims over assets during liquidation, but generally forfeits shareholder voting rights.

Common Stock

The foundational equity ownership class in a corporation that conveys voting rights and residual claims to profits, paid after preferred shares.

S Corporation

A corporate structure taxed as a partnership that restricts ownership to no more than $100$ shareholders while exempting earnings from self-employment tax.

Limited Liability Company (LLC)

A flexible business form offering limited personal liability, partnership-style pass-through taxation, an unlimited number of members, and self-employment tax obligations.

Horizontal Merger

The combination of two or more direct competitors operating in the same industry at the same production stage, aimed at reducing competition and realizing cost synergies.

Vertical Merger

The combination of companies operating at different sequential stages of the supply chain to secure inputs, control distribution, and enhance revenue synergy.

Conglomerate Merger

The merger of two or more operating companies in completely unrelated markets to achieve portfolio diversification and mitigate overall business risk.

Poison Pill

An anti-takeover defense that permits existing target company shareholders to buy shares at a steep discount to dilute the hostile bidder's stake.

Shark Repellent

A corporate charter provision designed to deter hostile acquirers by requiring a large supermajority vote of shareholders or directors to approve a takeover.

White Knight

A friendly individual, company, or investor sought out by a target firm to execute an acquisition and prevent a hostile corporate takeover.

Proxy Battle

A contest in which competing groups of shareholders campaign to solicit voting proxies from other shareholders to gain control of board elections.

Entrepreneur

A person who identifies a commercial opportunity and assumes the financial, operational, and managerial risks of starting and operating a business.

Angel Investor

An affluent private individual who supplies early-stage seed funding to startups prior to Series A financing based on confidence in the founders and idea.

Venture Capital

Pooled funds from institutional investors and high-net-worth individuals deployed into early-stage, high-growth startups in exchange for equity ownership.

Private Equity

An investment firm model that uses pooled partner capital and debt to acquire established companies, take public firms private, restructure them, and exit profitably.

Exit Strategy

A predetermined plan executed by entrepreneurs and investors to liquidate an equity stake in a venture through an IPO, buyout, or acquisition.

Small Business Administration (SBA)

A federal government agency dedicated to aiding, counseling, and protecting small businesses through management, training, and loan guarantee programs.

Franchise

A commercial agreement where a franchisee pays fees and royalties for the license to sell products and adopt the business model of an established franchisor.

Planning

The foundational management function of determining appropriate organizational goals, courses of action, and resource allocations in advance.

Organizing

The management function of arranging structural relationships, dividing work into specific jobs, establishing lines of authority, and assigning resources.

Directing

The active management process of motivating, leading, guiding, and instructing employees toward achieving organizational objectives.

Controlling

The management activity of monitoring performance, measuring progress against benchmarks, and initiating corrective actions to stay on course.

Plan-Do-Check-Act (PDCA) Cycle

A four-stage continuous improvement cycle involving problem identification, pilot testing of solutions, result assessment, and full solution implementation.

Autocratic Leadership

A centralized leadership style characterized by top-down decision-making where managers make choices unilaterally and issue directives to staff.

Democratic Leadership

A participative management style where leaders actively involve subordinates and seek team input during the decision-making process.

Free-Rein Leadership

A hands-off leadership style where managers establish broad objectives and grant employees full autonomy to determine daily execution.