Business Terms

Entrepreneaur

A business person who accepts both the risks and the opportunities involved in creating and operating a new business venture

Small Business

A business independently owned and operated and not dominant in the field

Business plan

A document in which the entrepreneur summarizes his or her business strategy for the proposed new venture and how that strategy will be implemented

Board of Directors

A governing body of a corporation that reports to its shareholders and delegates power to run its day to day operations while remaining responsible for sustaining its assets. (Ex. GFU Board oversees all large-scale decisions, but the day to day operating decisions are made by the President, Vice Presidents, etc.)

Chief Executive Officer (CEO)

The top manager who is responsible for the overall performance of a corporation

Chief Financial Officer (CFO) 

The top manager who is responsible for the company finances 

Chief Operations Officer (COO)

Top manager who is responsible for primary organizational operations

Shareholder

one who owns at least one share of a company

Proxy

Authority to vote for someone in their absence

Net Worth

Difference between one’s assets and liabilities

Merger

Two or more business enterprises combining into a single legal entity

Acquisition

One business buys the assets and assumes the obligations of another company

Joint Venture 

Two companies collaborate together on a project yet remaining legally separate 

Limited liability

Investor liable only for loss of investment and not personal assets

Unlimited liability

Investor can be liable for their investment and all personal assets

Exclusive handling

Franchisee must buy products from franchiser

General partnership

all general partners have unlimited liability

Limited Partnership

One general partner and several limited partners

Franchise 

A business that has signed an agreement with a franchiser to use the name, operating plan, and overall procedures used in the firm to sell its products or services

Sole proprietorship

A business owned and controlled by an individual. The person pays personal taxes.

Partnership

A business owned by two or more people. Taxes on personal earnings.

Corporation

A business that is a legal entity separate from its owners, state chartered and pays taxes

S Corporation

A form of ownership. A hybrid of corporation and partnership. It is organized like a corporation, but treated like a partnership for tax purposes 

Limited liability Corporation (LLC)

Hybrid of a publicly held corporation and a partnership in which owners are taxed as partners, but enjoy the benefits of limited liability 

Non Profit Corporation

An enterprise not driven by profit-seeking motives. Holds tax exempt status

Economic system

A nations system for allocating its resources among citizens

Planned economy

An economy in which the government owns the productive resources, financial enterprises, retail stores and banks. Government controlled (Communism, socialism) 

Market economy

an economy where individuals control production and allocation through supply and demand (Capitalism) 

Mixed economy

An economy in which both the government and private enterprise distribute goods and services. Characteristics of planned and market economies. (Most countries are moving towards a mixed market) 

Capitalism

A market economy characterized by private ownership of capital among business seeking a profit and consumer’s choice of freedom. Adam smith is associated with this form of government. 

Socialism

A planned economy in which the government owns and operates only selected major sources of production such as utilities, oil, healthcare, etc. 

Communism

A government owns and operates all major sources of production. Karl Marx is associated with this form of economy 

Law of demand

The principle that buyers will purchase more of a product for sale as its price drops and less as its price increases (I want..)

Law of supply

Principle that producers will offer more of a product for sale as its price rises and less as its price drops (I can give you..) 

Market price (Equilibrium Price)

Profit maximizing price at which the quantity of goods demanded and the quantity of good supplies are equal (Where demand and supply meet) 

Cost benefit analysis (CBA)

The process of comparing the projected costs to the potential benefits/opportunities with a business decision to determine if the project is worth the time and effort 

Balance sheet

A financial statement of a company’s liabilities, asses, and an owners equity 

Asset

Anything of value owned by an individual or business

Liability

debts owed by an individual or business

Income statement

A financial statement listing a firm’s annual revenues and expenses so that the bottom line shows annual profit or loss 

Statement of cash flows

A financial statement describing a firm’s yearly cash receipts and cash payments

Business

an organization that provides goods or services to earn profits

consumer

a person who purchases a good or service for personal use

Revenue 

money realized from the sale of goods and services 

Expenditure

costs incurred from developing a product, providing a service and/or distribution

Gross profit

Total money realized BEFORE subtracting expenditures and expenses

Net profit

The difference between expenditures and revenue (surplus)

balanced budget

when expenditures do not exceed revenues

Liquidity

the measure of how quickly an item can be converted into money (Cash, check, money market, stock, bonds, land, house, etc.)

Gross Domestic Product (GDP) 

The total market value of all goods and services produced in one year within the boundaries of a nation. GCP is used to measure the health and strength of the economy  

Gross National Product (GNP) 

The total market value of all goods and services produced by a national economy within a year, regardless of where the factors of production are located.

Consumer price index (CPI)

A measure of the prices of typical products purchased by consumers living in urban areas (The % change in price index sets the inflation rate)

Standard of living

Describes the amount of goods and services and quality of life an individual or family can achieve with its economy

Inflation

Period of widespread price increase in an economic system (Typically 2-4%)

Stagflation

Consistent inflation combined with stagnant consumer demand and high unemployment

Recession 

Period of time characterized by decrease in employment, income, and production. 

Depression

A severe recession (1920’s-1930’s)

Free Enterprise

A system in which private businesses are able to start and do business competitively to earn a profit with minimal degree of government regulation