BUS10 Final

agency

a business relationship in which one party, called the principal, appoints a second party, called the agent, to act on its behalf

automobile liability insurance

insurance that covers financial losses resulting from injuries or damage caused by the insured vehicle

automobile physical damage insurance

insurance that covers damage to an insured vehicle

bankruptcy

a legal procedure designed both to protect an individual or business that cannot meet its financial obligations and to protect the creditors involved

bond ratings

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

Long-term debt obligations (securities) issued by corporations and governments marketed to the public.

breach of contract

the failure of one party to fulfill the terms of a contract when there is no legal reason for that failure

business interruption insurance

insurance protection for a business whose operations are interrupted because of a fire, storm, or other natural disaster

capital budgeting

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

capital expenditures

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.

cash flows

The inflow and outflow of cash for a firm.

cash management

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.

commerce administrative law

the regulations created by government agencies established by legislative bodies

commercial paper

Unsecured short-term debt—an IOU—issued by a financially strong corporation.

common law

the body of law created by court decisions rendered by judges; also known as case law or judicial law

common stock

A marketable security that represents an ownership interest in a corporation.

contract

a legally enforceable agreement between two or more competent parties who voluntarily agree to do or not to do a particular thing

crime

a violation of a public law

damages

a monetary settlement awarded to a party injured through a breach of contract

deed

a written document by which the ownership of real property is transferred from one person or organization to another

dividends

Payments to stockholders from a corporation's profits.

exchange traded fund (ETF)

A security similar to a mutual fund; holds a broad basket of stocks with a common theme but trades on a stock exchange so that its price changes throughout the day.

extended coverage

insurance protection against damage caused by wind, hail, explosion, vandalism, riots or civil commotion, falling aircraft, and smoke

factoring

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

fidelity bond

an insurance policy that protects a business from theft, forgery, or embezzlement by its employees

financial management

The art and science of managing a firm's money so that it can meet its goals.

financial risk

The chance that a firm will be unable to make scheduled interest and principal payments on its debt.

fire insurance

insurance that covers losses due to fire

health care insurance

insurance that covers the cost of medical attention, including hospital care, physicians' and surgeons' fees, prescription medicines, and related services

health maintenance organization (HMO)

an insurance plan that directly employs or contracts with selected physicians and hospitals to provide health care services in exchange for a fixed, prepaid monthly premium. This form of health insurance is generally lower cost than PPOs.

inland marine insurance

insurance that protects against loss or damage to goods shipped by rail, truck, airplane, or inland barge

insider trading

The use of information that is not available to the general public to make profits on securities transactions.

institutional investors

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

insurance

the protection against loss that the purchase of an insurance policy affords

insurance policy

the contract between an insurer and the person or firm whose risk is assumed

insurer (or insurance company)

A firm that agrees, for a fee, to assume financial responsibility for losses that may result from a specific risk

interest

A fixed amount of money paid by borrowers to lenders. For a bondholder interest is typically paid every six months; stated as the coupon rate.

investment bankers

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

law

a rule developed by a society to govern the conduct of and relationships among its members

lease

an agreement by which the right to use real estate, equipment, or other assets is temporarily transferred from its owner to the user

life insurance

insurance that pays a stated amount of money on the death of the insured individual beneficiary person or organization named in a life insurance policy as a recipient of the proceeds of that policy on the death of the insured

line of credit

An agreement between a bank and a business that specifies the maximum amount of unsecured short-term borrowing the bank will allow the firm over a given period, typically one year.

marketable securities

Highly liquid Investments that can easily be bought, sold, or traded on public exchanges.

mortgage loan

A long-term loan made against real estate as collateral.

municipal bonds

Bonds issued by states, cities, counties, and other state and local government agencies.

mutual fund

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

negligence

a failure to exercise reasonable care, resulting in injury to another

no-fault auto insurance

a method of paying for losses suffered in an automobile accident; enacted by state law, that requires that those suffering injury or loss be reimbursed by their own insurance companies, without regard to who was at fault in the accident

ocean marine insurance

insurance that protects the policyholder against loss or damage to a ship or its cargo on the high seas

power of attorney

a legal document that serves as evidence that an agent has been appointed to act on behalf of a principal

preferred provider organization (PPO)

an insurance plan that offers the services of doctors and hospitals for predetermined fees. This type of health insurance is generally more expensive than HMOs.

preferred stock

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.

premium

the fee charged by an insurance company

primary market

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

principal

The amount borrowed by the issuer of a bond; also called par value.

principle of indemnity

in the event of a loss, an insured firm or individual cannot collect from the insurer an amount greater than the actual dollar amount of the loss

private law

the body of law that governs the relationships between two or more individuals or businesses

product liability

insurance insurance that protects the policyholder from financial losses due to injuries suffered by others as a result of using the policyholder's products

property

anything that can be owned

public law

the body of law that deals with the relationships between individuals or businesses and society

public liability insurance

insurance that protects the policyholder from financial losses due to injuries suffered by others as a result of negligence on the part of a business owner or employee

pure risk

a risk that involves only the possibility of loss, with no potential for gain

retained earnings

Profits that have been reinvested in a firm.

return

The opportunity for profit.

risk

The potential for loss or the chance that an investment will not achieve the expected level of return.

risk management

the process of evaluating the risks faced by a firm or an individual and then minimizing the costs involved with those risks

risk-return trade-off

A basic principle in finance that holds that the higher the risk, the greater the return that is required.

secondary market

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.

secured loans

Loans for which the borrower is required to pledge specific assets as collateral, or protection against default.

securities

Investment certificates issued by corporations or governments that represent either equity or debt.

self-insurance

the process of establishing a monetary fund that can be used to cover the cost of a loss

speculative risk

a risk that includes the possibility of earning a profit.

statutory law

All the laws that have been enacted by legislative bodies, such as the U.S. Congress, a state legislature, or a local government.

stock dividends

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

stockbroker

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

term loan

A business loan with a maturity of more than one year; can be unsecured or secured.

tort

a violation of a private law

trade credit

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.

underwriting

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

unsecured loans

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

workers' compensation insurance

insurance that covers medical expenses and provides salary continuation for employees who are injured while at work

B2B

A market in which businesses sell to other businesses (not consumers)

benefit segmentation

The differentiation of markets based on what a product will do rather than on customer characteristics.

bribe

A significant gift intended to bias the reciever to provide some type of preferential treatment

buyer behavior

The actions people take in buying and using goods and services.

code of ethics

A set of guidelines prepared by a firm to provide its employees with the knowledge of what the firm expects in terms of their responsibilities and behavior toward fellow employees, customers, and suppliers.

competitive advantage

A set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition; also called differential advantage.

conflicts of interest

When individuals must choose between taking actions that promote their personal interests over the interests of the firm

conflicts of loyalty

A conflict between loyalty to one's personal connections or the firm

corporate philanthropy

The practice of charitable giving by corporations; includes contributing cash, donating equipment and products, and supporting the volunteer efforts of company employees.

corporate social responsibility (CSR)

The concern of businesses for the welfare of society as a whole; consists of obligations to stakeholders beyond those required by law or contracts.

cost competitive advantage

A firm's ability to produce a product or service at a lower cost than all other competitors in an industry while maintaining satisfactory profit margins.

culture

The set of values, ideas, attitudes, and other symbols created to shape human behavior.

customer satisfaction

The customer's feeling that a product has met or exceeded expectations.

customer value

The ratio of benefits to the sacrifice necessary to obtain those benefits, as determined by the customer; reflects the willingness of customers to actually buy a product.

demographic segmentation

The differentiation of markets through the use of categories such as age, education, gender, income, and household size.

deontology

A philosophy in which a person will follow his or her obligations to an individual or society because upholding one's duty is what is ethically correct.

differential competitive advantage

A firm's ability to provide a unique product or service with a set of features that the target market perceives as important and better than the competitor's.

distribution strategy

Creating the means by which products flow from the producer to the consumer.

environmental scanning

The process in which a firm continually collects and evaluates information about its external environment.