Essential Business and Economic Terminology

Market Fundamentals

Price: the amount of money required to buy something.

Sale: an exchange of money for goods.

Consumer: a person who makes a purchase.

Spending: the act of using money for purchases.

Trend: a general course of action that repeats.

Elasticity: the effect of a change in one variable on another.

Supply: to provide something.

Determine: to have an effect on an outcome.

Supply and Demand Dynamics

Supply: The available amount of steel is low this year.

Quantity: What amount did the factory produce?

Goods: These products for sale are too expensive.

Surplus: Low sales created an extra amount of wheat.

Downturn: Many jobs were lost during the decrease in economic activity.

Demand: The amount wanted by customers for coats increases in the winter.

Corporate Finance and Accounting

Plant: The physical location of a business.

Default: to fail to make payments on a loan.

Depreciation: a decline in the value of an asset.

Current liabilities: debts that must be paid within a year.

Retained profit: profit that is earned but not spent.

Working capital: assets that are more than current liabilities that are used to finance operations.

Fixed assets cannot be liquidated quickly.

Current assets can be turned into cash within a year.

A company’s long-term liabilities are debts that must be paid in over a year’s time.

Companies save capital reserves in order to pay bills when business is slow.

A quick ratio is a measure of liquidity.

A CPA advises businesses and individuals on financial matters.

Profitability and Operational Costs

Depreciation: a loss of assets’ value through use or loss.

Overhead: costs of business operation unrelated to the products themselves.

Gross profit: total gains before taking out taxes and finance costs.

Cost of goods sold: total expenses for inventory sold in a period.

Profit and loss account: a statement of revenue and expenses.

Margin: the difference between net sales and cost of sales.

Strategic Analysis and Forecasting

Competition: a person or business that is trying to reach the same goals or customers as another.

Estimate: to guess a quantity.

Factor: a thing that has an effect on something else.

Predict: to state what one expects to happen.

Existing: already occurring or present.

Volume: a total quantity.

Pricing policy: rules controlling how much to charge for products.