bus 101

absolute advantage

The ability of one country to produce a good more efficiently than another country, focusing only on raw productivity rather than opportunity cost.

balance of trade

The difference between a country's exports and imports; if exports exceed imports, it has a surplus; if imports exceed exports, it has a deficit.

comparative advantage

The idea that countries and businesses should specialize in producing goods where they have the lowest opportunity cost, allowing global welfare to increase through specialization.

contract manufacturing

When a firm allows a foreign company to produce its products, giving the company more control while avoiding start-up factory costs.

exports

Goods or services produced domestically but sold in a foreign country.

foreign direct investment (FDI)

The purchase of permanent capital goods, such as a factory or business, in another country.

foreign subsidiary

A company purchased by a parent company in another country that operates as a domestic business under local management.

imports

Goods or services produced in a foreign country but purchased domestically.

international franchise

A specialized type of international licensing where a franchisee uses the parent company's name, brand, and products under strict operational guidelines.

international joint ventures

A partnership between companies from different countries sharing technology, costs, profits, and risks to access new markets.

international strategic alliance

A less formal partnership between firms from different countries for mutual benefit on a specific project, without sharing profits or risks.

licensing

When a firm allows a foreign company to produce its products and use its trademarks for a royalty fee.

multinational corporation

A business that owns a physical presence in one or more foreign countries, not just exporting goods.

non-tariff barriers

Technically based trade barriers, such as safety standards or regulations, that make it difficult for foreign firms to compete but favor domestic producers.

non-tradable goods and services

Products or services that cannot be easily traded internationally due to weight, perishability, or the need for producer and consumer proximity.

opportunity cost

The value of the next best alternative that must be given up when making a choice, applied in trade to what else could be produced.

pollution haven

A term for countries with lower environmental standards that may attract more polluting industries seeking to reduce compliance costs.

quota

A restriction on the total quantity of a specific good that can be imported into a country.

tariff

A tax placed on imported goods to make them less price-competitive with domestic products.

trade deficit

A negative balance of trade in which a country imports more than it exports.

trade protection

Government-imposed barriers, such as tariffs or quotas, designed to protect domestic industries and jobs from foreign competition.

trade surplus

A positive balance of trade in which a country exports more than it imports.

World Trade Organization (WTO)

An international body established in 1995 to negotiate trade rules and settle disputes, promoting the smooth flow of global trade.

360-degree performance appraisals

Performance reviews that include feedback from multiple raters—supervisors, peers, subordinates, and sometimes customers—to provide a more comprehensive and legally defensible evaluation.

development, phase of training

The phase ensuring that the training environment is conducive to learning and aligns with organizational goals, often involving real-world problem-solving and application of new knowledge.

employer attractiveness

The envisioned benefits a potential employee perceives in working for an organization, such as reputation, compensation, culture, and career opportunities.

employment contracts

Agreements between businesses and employees specifying compensation and expectations in exchange for services, ensuring alignment of incentives with organizational goals.

evaluation, phase of training

The phase in which the effectiveness of training is assessed, determining if objectives were met and whether a return on investment occurred.

high-performance work systems (HPWS)

Integrated sets of human resource practices designed to enhance organizational performance through employee engagement, training, and development.

incentives

Methods to motivate employees, including financial and non-financial rewards, aimed at aligning employee actions with organizational goals.

intelligence test

A validated selection tool that measures cognitive ability and predicts job performance, though best used alongside other tools to avoid bias.

job application

A standardized form used to collect information about a candidate's experience, education, and references during the hiring process.

legally defensible performance appraisals

Appraisal systems that are objective, unbiased, reliable, valid, and include clear rating anchors, multiple raters, and documentation to withstand legal scrutiny.

leniency

A performance appraisal bias where managers inflate ratings to avoid giving negative feedback, leading to demotivation among high performers.

lump sum payment

A fixed amount of compensation that does not vary with hours worked or output, such as an annual salary.

needs, phase of training

The phase identifying specific organizational or skill-based needs that the training must address to improve performance.

personality tests

Assessments measuring traits like conscientiousness, openness, and emotional stability to predict work performance and cultural fit.

piece-rate payment

Compensation based on units of output produced, aligning employee effort with measurable productivity.

qualifications

The knowledge, skills, abilities, and personal attributes that determine an applicant's suitability for a job.

realistic job previews

Honest descriptions of job roles that include both positive and negative aspects to help candidates assess fit before hiring.

semi-structured interviews

Interviews that mix structured job-related questions with unstructured ones, offering both consistency and flexibility.

structured interviews

Interviews in which all candidates are asked the same standardized, job-related questions to ensure fairness and validity.

unstructured interviews

Interviews where questions vary across candidates; less valid but can provide richer, individualized insights.

validated selection tools

Screening methods—like tests and interviews—that have been statistically shown to predict future job performance.

acquisition

When one company purchases another, either within its industry (horizontal) or in a different industry (vertical), by buying it from its owners.

C corporation

A corporation that pays corporate income taxes on its profits; shareholders also pay taxes on dividends, resulting in double taxation.

conglomerate

A merger or acquisition involving companies in unrelated industries or markets, such as Disney owning theme parks, studios, and TV networks.

corporation

A legal entity, separate from its owners (shareholders), with assets and liabilities distinct from theirs and limited liability protection.

dividend

A portion of a corporation's profits distributed to shareholders, which is taxed again as personal income.

double taxation

The process in which corporate profits are taxed at both the corporate level and again when distributed as dividends to shareholders.

franchise

A business arrangement where a franchisor licenses a franchisee to use its name, trademark, and processes in exchange for payments.

franchise agreement

A contract outlining the terms, fees, royalties, and responsibilities between a franchisor and franchisee.

franchisee

The person or business purchasing the right to operate under a franchisor's name and system.

franchisor

The company granting the rights to others to operate using its brand, name, and business model.

general partnership

A business owned by two or more people who share profits, losses, and management responsibilities, with unlimited liability.

limited liability

The condition where an owner's financial responsibility for business debts is limited to the amount invested.

limited liability company (LLC)

A hybrid business structure combining limited liability protection with the tax benefits of a partnership.

limited partnership

A partnership in which at least one partner manages the business and has unlimited liability, while others (limited partners) contribute capital and have liability limited to their investment.

merger

The joining of two companies to form a single new entity, often to pool resources, improve efficiency, or expand markets.

negative halo effect

The risk that one franchisee's poor performance can harm the brand image of all other franchisees.

partnership

A business owned by two or more individuals sharing profits, losses, and management duties.

royalty

An ongoing payment by a franchisee to a franchisor, typically a percentage of revenue.

S corporation

A type of corporation that avoids double taxation by allowing profits to be passed directly to shareholders' personal income.

shareholder

An individual or entity owning shares in a corporation and therefore part ownership of that company.

sole proprietorship

The simplest business form where the owner is the business and bears all liabilities and profits.

unlimited liability

The condition where the owner's personal assets can be used to satisfy business debts or legal claims.

accounting

The process of gathering, organizing, analyzing, and reporting financial information to provide relevant and reliable data for decision-making.

accounting cycle

The procedure to prepare major financial statements, including bookkeeping, journaling, ledgers, and trial balances.

accounting equation

The core relationship showing a firm's financial position: Assets = Liabilities + Owner's Equity.

assets

Anything of value owned by a firm, tangible or intangible, that can be used to generate revenue.

auditing

The evaluation of a company's financial statements to ensure accuracy, reliability, and compliance with accounting standards.

balance sheet

A financial statement summarizing a firm's assets, liabilities, and owner's equity at a specific point in time.

budgeting

The process of planning how a business will acquire and use resources to achieve its goals.

capital budgets

Budgets projecting long-term investments in assets like equipment, facilities, and land.

cash flow budgets

Budgets showing when cash inflows and outflows occur throughout the year to help manage liquidity.

Certified Public Accountants (CPA)

Public accountants who pass the AICPA exam and are licensed to perform audits and provide accounting services.

cost accounting

The process of determining all costs involved in producing goods or services to support pricing and management decisions.

cost of goods sold (COGS)

The direct costs of producing or purchasing the goods sold by a company.

direct costs

Explicit financial expenditures for producing goods or services, such as raw materials or supplier payments.

financial accounting

The branch of accounting focused on providing information for external stakeholders such as investors or regulators.

Financial Accounting Standards Board (FASB)

The U.S. organization responsible for establishing and improving Generally Accepted Accounting Principles (GAAP).

financial budgets

Budgets projecting cash flow and planning for capital expenditures, often expressed as pro-forma financial statements.

financing activities

Cash transactions related to borrowing, repaying loans, issuing stock, or paying dividends.

fixed costs

Costs that do not change with the level of output, such as rent or long-term contracts.

Generally Accepted Accounting Principles (GAAP)

The rules and standards that govern accounting practices for U.S. companies.

gross profit

Revenue minus the cost of goods sold.

income statement

A financial statement showing revenues, expenses, and net income over a specific period.

independent audit

A review of a company's financial statements by an external auditor to ensure compliance and accuracy.

indirect costs

Costs not directly tied to production, such as salaries, rent, and utilities.

International Accounting Standards Board (IASB)

The international body that develops and enforces International Financial Reporting Standards (IFRS).

International Financial Reporting Standards (IFRS)

Global accounting standards designed to create consistency and transparency across countries.

investing activities

Cash transactions involving the purchase or sale of long-term assets like equipment or buildings.

leverage ratios

Ratios measuring a company's reliance on borrowed funds relative to owner's equity.

liabilities

Obligations a firm owes to non-owners, such as loans, wages, or accounts payable.

liquidity ratios

Ratios measuring a company's ability to meet short-term obligations using current assets.

managerial accounting

The branch of accounting that focuses on providing internal stakeholders with financial and non-financial information for decision-making.

master budget

The comprehensive plan combining all individual budgets into one overall financial plan.

net income

The difference between total revenue and total expenses over a specific period ("the bottom line").

net operating income

Profit remaining after operating expenses are deducted but before taxes and interest.

non-operating costs

Expenses not related to core business operations, such as taxes or interest.