16.
Business cycle - The natural fluctuation of
1. Absorption costing - A method of
accounting that includes all production
costs, such as direct materials, direct labor,
and overhead, in the cost of a product.
2. Accounting rate of return - A measure of
the profitability of an investment based on
its average annual profit divided by its
initial investment.
3. Adverse selection - A situation in which
one party has more information about a
transaction than the other party, leading to
a potential imbalance of power.
4. Amortization - The process of gradually
paying off a debt over a set period of time
through regular payments.
5. Annualized cost - The total cost of a
project or investment, spread out over its
expected lifespan and divided by the
number of years.
6. Asset - Any item or resource that has
value and can be used to generate income.
7. Asset turnover - A financial ratio that
measures the efficiency of a company's
use of its assets to generate revenue.
8. Auction - A method of selling goods or
services to the highest bidder.
9. Average rate of return - The total profit
earned from an investment over its
lifespan, divided by the initial investment.
10. Balance sheet - A financial statement that
shows a company's assets, liabilities, and
equity at a specific point in time.
11. Benchmark - A standard of measurement
used to compare the performance of
different investments or projects.
12. Break-even analysis - A method for
determining the level of sales at which
total revenue equals total costs.
13. Break-even point - The point at which
total revenue equals total costs, resulting
in neither profit nor loss.
14. Budget - A financial plan that outlines a
company's expected income and expenses
for a specific period of time.
15. Business plan - A written document that
outlines a company's goals, strategies, and
tactics for achieving success.
1
economic activity over time, consisting of
periods of growth and recession.
17. Benefit-cost ratio - A measure of the
expected benefits relative to the costs of a
project or investment.
18. Bond - A debt security in which an
investor loans money to an entity
(typically a corporation or government) for
a defined period of time at a fixed interest
rate.
19. Capacity - The maximum amount of
output that a system or process can
produce.
20. Capital - The resources that a company
uses to finance its operations and
investments.
21. Capital budgeting - The process of
analyzing and selecting investments that
will provide the greatest return on
investment.
22. Capital expenditure - The money spent
on assets that will provide long-term
benefits to a company, such as property,
equipment, and machinery.
23. Capital investment - An investment in
assets that will generate income or value
for a company over a long period of time.
24. Capital investment - The money spent on
acquiring or improving long-term assets
such as buildings, machinery, and
equipment.
25. Capital structure - The mix of debt and
equity financing used by a company to
fund its operations and investments.
26. Cash flow - The amount of cash that flows
in and out of a business over a specific
period of time.
27. Cash flow statement - A financial
statement that shows the inflow and
outflow of cash from a business over a
specific period of time.
28. Certainty equivalent - The amount of
certain income that would be equivalent to
the expected income from a risky
investment.
29. Coefficient of variation - A measure of
the relative risk of an investment,
calculated as the standard deviation of the
investment's returns divided by its
expected return.
 30. Collateral - An asset that is pledged as
security for a loan.
31. Commercial paper - Short-term
unsecured promissory notes issued by
corporations to finance their short-term
credit needs.
32. Competitive bidding - A process in which
suppliers compete for a contract by
submitting bids.
33. Competitive market - A market in which
many suppliers compete for customers.
34. Compound interest - Interest that is
earned on both the principal and the
accumulated interest of an investment.
35. Constrained optimization - The process
of optimizing a function subject to certain
constraints.
36. Consumer surplus - The difference
between the maximum amount that a
consumer is willing to pay for a good or
service and the actual price paid.
37. Contingency plan - A plan for dealing
with unexpected events that could affect
the success of a project or investment.
38. Contribution margin - The amount of
revenue that is left over after variable costs
are subtracted from sales revenue.
39. Conversion cost - The cost of converting
raw materials into finished goods.
40. Corporate social responsibility - The
responsibility of a company to act in the
best interests of society as a whole, not
just its shareholders.
41. Cost - The amount of money that is spent
to produce a good or service.
42. Cost accounting - The process of tracking
and analyzing the costs of producing
goods or services.
43. Cost benefit analysis - A method of
evaluating the costs and benefits of a
project or investment to determine its
overall value.
44. Cost of capital - The cost of obtaining
financing for a project or investment.
45. Cost of goods sold - The direct costs of
producing and selling a product, such as
raw materials and labor.
46. Cost of living - The amount of money
needed to maintain a certain standard of
living.
2
47. Cost of quality - The cost of ensuring that
a product or service meets quality
standards.
48. Cost-volume-profit analysis - A method
of analyzing the relationship between a
company's sales volume, costs, and profits.
49. Coupon rate - The interest rate paid on a
bond.
50. Debt - Money that is borrowed and must
be repaid with interest.
51. Debt financing - The process of obtaining
funds by borrowing money.
52. Debt service - The amount of money
required to pay off debt, including
principal and interest.
53. Decision analysis - A systematic approach
to making decisions based on their
potential outcomes.
54. Depreciation - The decrease in value of an
asset over time due to wear and tear or
obsolescence.
55. Direct cost - A cost that can be directly
attributed to a specific product or service.
56. Discount factor - A number used to
convert future cash flows into their present
value equivalents.
57. Discount rate - The rate at which future
cash flows are discounted to their present
value.
58. Dividend - A distribution of a portion of a
company's profits to its shareholders.
59. DuPont analysis - A method of analyzing
a company's return on equity by breaking
it down into its components.
60. Economic life - The period of time during
which an asset is expected to provide
economic benefits.
61. Economic order quantity - The optimal
quantity of inventory to order at one time
to minimize costs.
62. Economic value added - A measure of a
company's financial performance that
takes into account the cost of capital.
63. Efficiency - The ability to produce output
with a minimum amount of inputs.
64. Elasticity - The responsiveness of demand
or supply to changes in price.
65. Equity - The ownership interest in a
company, represented by its stock.
66. Escalation clause - A provision in a
contract that allows for the adjustment of
 prices based on changes in certain
variables.
67. Expected value - The weighted average of
the possible outcomes of an event, based
on their probabilities.
68. Factor cost - The cost of the factors of
production, such as labor, capital, and raw
materials.
69. Feasibility study - A study that evaluates
the potential success of a project or
investment.
70. Financial analysis - The process of
analyzing the financial statements of a
company to evaluate its financial health.
71. Financial leverage - The use of debt to
finance a project or investment.
72. Financial statement - A document that
summarizes a company's financial
transactions and condition.
73. Fixed cost - A cost that does not vary with
the level of production or sales.
74. Forecasting - The process of predicting
future events or trends.
75. Forward contract - A contract to buy or
sell an asset at a specified price and date in
the future.
76. Future value - The value of an investment
at a specified future date, based on the
assumption of compound interest.
77. Gross domestic product - The total value
of goods and services produced within a
country in a given period of time.
78. Gross margin - The amount of revenue
that is left over after cost of goods sold is
subtracted from sales revenue.
79. Growth rate - The rate at which a
quantity is increasing over time.
80. Hedging - The process of reducing risk by
taking a position in a financial instrument
that offsets the risk of another position.
81. Holding cost - The cost of holding
inventory, such as storage, insurance, and
depreciation.
82. Income statement - A financial statement
that shows a company's revenues,
expenses, and profits over a period of
time.
83. Incremental analysis - The process of
analyzing the costs and benefits of a
decision by comparing the expected
outcomes of each alternative.
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84. Inflation - The rate at which the general
level of prices for goods and services is
rising over time.
85. Interest - The cost of borrowing money,
or the compensation for lending money.
86. Internal rate of return - The discount
rate that makes the net present value of an
investment equal to zero.
87. Inventory - The stock of goods or
materials that a company has on hand.
88. Investment - The purchase of assets with
the goal of generating income or
appreciation.
89. Learning curve - A graphical
representation of the relationship between
unit production time and the cumulative
number of units produced.
90. Leverage - The use of borrowed funds to
increase the potential return on an
investment.
91. Life cycle cost - The total cost of owning
and operating an asset over its entire life.
92. Liquidation value - The value of an asset
if it were sold quickly, typically at a
discount.
93. Liquidity - The ability to convert an asset
into cash quickly and easily.
94. Loan amortization - The process of
paying off a loan in regular installments
over a set period of time.
95. Marginal cost - The cost of producing one
additional unit of a good or service.
96. Marginal revenue - The additional
revenue generated by selling one
additional unit of a good or service.
97. Market demand - The total demand for a
good or service in a given market.
98. Market price - The price at which a good
or service is sold in a given market.
99. Market segmentation - The process of
dividing a market into smaller groups with
similar needs or characteristics.
100. Market share - The percentage of
total market sales held by a company or
product.
101. Markup - The difference between
the cost of a good or service and its selling
price.
102. Net present value - The
difference between the present value of the
 cash inflows and outflows associated with
an investment.
103. Nominal interest rate - The
stated interest rate on a loan or investment.
104. Non-recurring cost - A cost that
is not expected to recur in the future.
105. Operating cost - The cost of
operating a business, including salaries,
rent, utilities, and supplies.
106. Opportunity cost - The value of
the best alternative forgone when a
decision is made.
107. Option - The right, but not the
obligation, to buy or sell an asset at a
specified price and date in the future.
108. Payback period - The length of
time required for the cash inflows from an
investment to equal its initial cost.
109. Perfect competition - A market
structure in which many small firms
compete to sell an identical product.
110. Price discrimination - The
practice of charging different prices to
different customers for the same product.
111. Price elasticity of demand - The
responsiveness of demand to changes in
price.
112. Price floor - The minimum price
at which a good or service
113. Price leadership - A pricing
strategy in which a dominant firm sets the
price for an entire industry.
114. Price skimming - A pricing
strategy in which a firm charges a high
price for a new product or service, with the
intention of reducing the price over time.
115. Price-taker - A firm that must
accept the market price for its product or
service.
116. Principal - The amount of money
borrowed or invested, on which interest is
paid or earned.
117. Private goods - Goods that are
both excludable and rival in consumption.
118. Production function - A
mathematical relationship between inputs
and outputs in a production process.
119. Profit - The difference between
revenues and costs.
4
120. Profit margin - The difference
between the selling price of a product or
service and its cost of production.
121. Profit-maximizing output - The
level of output at which a firm's profit is
maximized.
122. Project management - The
process of planning, organizing, and
controlling resources to achieve specific
goals.
123. Public goods - Goods that are
non-excludable and non-rival in
consumption.
124. Purchase order - A document that
authorizes a purchase transaction.
125. Purchasing power parity - The
theory that exchange rates between
currencies should adjust to equalize the
purchasing power of each currency.
126. Pure competition - A market
structure in which many small firms
compete to sell an identical product.
127. Pure monopoly - A market
structure in which there is only one
supplier of a good or service.
128. Quality control - The process of
ensuring that a product or service meets
certain standards of quality.
129. Quantity demanded - The
amount of a good or service that buyers
are willing and able to purchase at a given
price.
130. Quantity supplied - The amount
of a good or service that sellers are willing
and able to offer for sale at a given price.
131. Quasi-rent - The economic rent
that arises from a short-term imbalance
between the supply and demand for a
factor of production.
132. Rate of return - The ratio of
profit or loss to the amount of investment.
133. Real interest rate - The nominal
interest rate adjusted for inflation.
134. Real interest rate - The nominal
interest rate adjusted for inflation.
135. Recurring cost - A cost that is
expected to occur regularly in the future.
136. Regression analysis - A statistical
technique for analyzing the relationship
between two or more variables.
 137. Regression equation - A
mathematical formula that represents the
relationship between two or more
variables.
138. Relative price - The price of a
good or service in terms of another good
or service.
139. Rent - The payment for the use of
a factor of production.
140. Replacement cost - The cost of
replacing an asset with a similar asset at
current prices.
141. Residual value - The value of an
asset at the end of its useful life.
142. Return on investment (ROI) - A
measure of the profitability of an
investment, calculated as the ratio of the
net income generated by the investment to
the amount of the investment.
143. Return on investment - The ratio
of profit or loss to the amount of
investment.
144. Revenue - The total amount of
money earned from sales of goods or
services.
145. Salvage value - The value of an
asset at the end of its useful life.
146. Satisficing - A decision-making
strategy in which the decision maker seeks
a satisfactory solution rather than the
optimal solution.
147. Scale economies - The cost
advantages that arise from producing a
larger volume of output.
148. Scarcity - The condition in which
there are not enough resources to satisfy
all human wants and needs.
149. Sensitivity analysis - The process
of analyzing how changes in key variables
affect the outcomes of a decision.
150. Sinking fund - A fund set up to
accumulate money over time for a specific
purpose.
151. Social benefit - The total benefit
of consuming a good or service, including
external benefits.
152. Social cost - The total cost of
producing a good or service, including
external costs.
153. Special order - A one-time order
for
5
154. Speculative motive - The demand
for money based on the expectation that its
value will increase in the future.
155. Standard deviation - A measure
of the dispersion of a set of data from its
mean.
156. Stationary costs - Costs that do
not change with changes in output.
157. Stock - A share in the ownership
of a company.
158. Strategic planning - The process
of developing and implementing long-term
plans to achieve organizational goals.
159. Substitutes - Goods or services
that can be used in place of one another.
160. Supply - The amount of a good or
service that sellers are willing and able to
offer for sale at a given price.
161. Supply curve - A graph that
shows the relationship between the price
of a good or service and the quantity
supplied.
162. Supply elasticity - A measure of
the responsiveness of the quantity supplied
to changes in price.
163. Supply schedule - A table that
shows the relationship between the price
of a good or service and the quantity
supplied.
164. Surplus - The amount by which
the quantity supplied exceeds the quantity
demanded at a given price.
165. Tangible assets - Assets that have
physical form, such as buildings,
machinery, and inventory.
166. Tariff - A tax on imported goods.
167. Taxable income - Income that is
subject to taxation.
168. Time preference - The preference
for present consumption over future
consumption.
169. Time series analysis - A statistical
technique for analyzing time series data.
170. Total cost - The sum of fixed
costs and variable costs.
171. Total revenue - The total amount
of money earned from sales of goods or
services.
172. Trade deficit - The amount by
which a country's imports exceed its
exports.
 173. Trade surplus - The amount by
which a country's exports exceed its
imports.
174. Transfer payment - A payment
made by the government that does not
involve the production of a good or
service.
175. Transmission line - A structure
that transmits electricity over long
distances.
176. Transportation problem - A
problem in which goods must be
transported from several sources to several
destinations, subject to certain constraints.
177. Truncation error - An error that
arises from rounding off numbers during a
calculation.
178. Uncertainty - The state of not
knowing the outcome of a decision.
179. Unit cost - The cost per unit of
output.
180. Unit elastic demand - A situation
in which a given percentage change in
price leads to an equal percentage change
in quantity demanded.
181. Unit elastic supply - A situation
in which a given percentage change in
price leads to an equal percentage change
in quantity supplied.
182. Utility - The satisfaction or
happiness that a person derives from
consuming a good or service.
183. Value engineering - The process
of improving the value of a product or
service by reducing its cost or improving
its performance.
184. Variable cost - A cost that varies
with changes in output.
185. Variable interest rate - An
interest rate that fluctuates over time.
186. Variable pay - Compensation that
is based on performance or productivity.
187. Vertical integration - The
integration of firms at different stages of
the production process.
188. Volatility - The degree of
variation of a financial instrument's price
over time.
189. Wage rate - The rate at which
workers are paid for their labor.
190. Wealth - The total value of a
person's assets, including property,
investments, and other possessions.
191. Weighted average - An average
that takes into account the relative
importance of different values.
192. Whole life cost - The total cost of
owning and operating an asset over its
entire life.
193. Windfall gain - An unexpected
gain or profit.
194. X-efficiency - The degree to
which a firm is able to minimize its costs.
195. Yield - The annual rate of return
on an investment.
196. Yield strength - The stress at
which a material begins to deform
plastically.
197. Yield to maturity - The rate of
return earned on a bond if it is held to
maturity.
198. Zero-based budgeting - A
budgeting approach that requires every
expense to be justified from scratch every
year, regardless of past budgets.
199. Zero-sum game - A situation in
which one person's gain is exactly
balanced by another person's loss.
200. Zone of indifference - The range
of prices for which a buyer or seller is
indifferent to making a transaction.