Securities and investments 2
How to research stocks
1. Obtain corporate financial statements filed with the Securities & Exchange Commission. You can get such documents without charge via www.freeedgar.com 2. Analyze quarterly statements covering two or three years, noting trends in earnings per share and revenue. 3. Look for a trend of consistent growth in a share of stock's earnings per share ratio. 4. Calculate the company's or corporation's price-earnings (PE) ratio, a measure of a stock's value (divide the price of one share of stock by annual earnings-per share.) 5. Compare the stock's price-earnings ratio with the stock's industry's norms AND with the S&P 500's ratio. The lower the ratio, the less expensive the share of stock is relative to the stock's earnings. 6. Beware of debt. Check out the company's or corporation's balance sheet, looking for the extent of its long-term debt. 7. Check the company's or corporation's cash flow. You will want the company or corporation to have positive cash flow if you are interesting in purchasing a share(s) of stock from this company or corporation.
Stock exchanges
A marketplace that brings buyers and sellers of securities (such as stocks and bonds) together. The prices of securities are dictated by supply and demand. Each stock has two sides, a buyer and seller (each does the "bid" and "ask," respectively). To be listed on a major stock exchange, a company or corporation has to meet certain financial and legal requirements. Examples of ___ are the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), Philadelphia Stock Exchange (PHLX), Chicago Board of Options (CBOE), and Pacific Stock Exchange.
Average daily balance
A method of computing finance charges in which creditors add your balances for each day in a billing period, and then divide by the number of days in the period
Previous balance method
A method of computing finance charges in which creditors give you no credit for payments made during the billing period
Family of funds
A mutual fund account that allows you to choose more than one type of mutual fund and switch back and forth
Balanced fund
A mutual fund that invests in a mix of stocks and bonds to minimize risks
Bond fund
A mutual fund that invests in government, corporate, or tax-exempt bonds with different maturity dates
Global fund
A mutual fund that purchases international stocks and bonds as well as US securities
Income fund
A mutual fund that specializes in income-producing securities, which consistently pay good dividends
Back-end load
A mutual fund where you pay a commission when you sell your shares
Over-the-counter (OTC) market
A network of stockbrokers who buy and sell securities of corporations that are not listed on a securities exchange
Rate of Return
A percent that tells the investor the overall gain or loss on an asset (such as a share[s] of stock) based upon his purchase price to the current price of the asset. The formula for the ___ is: (Selling value of the asset + any dividends) / (Buying price of the asset + any fees and/or commissions of the asset). In other words: Gain / Cost.
Speculator
A person (an investor) who buys and sells a share(s) of stock for quick profits (playing the market). A ___ who plays the market is participating in a short-term investment strategy.
Debt collector
A person or company hired by a creditor to collect the balance due on overdue accounts
Accredited investor
A person or legal entity such as a company or trust fund, that meets certain net worth and income qualifications and is considered to be sufficiently sophisticated to make investment decisions in complex situations. Regulation D of the Securities Act of 1933 exempts accredited investors from protection under the Securities Act.
Broker
A person who buys and sells stock on an exchange, on behalf of a buyer or investor
Customer
A person who buys the goods or services produced by a business
Boat anchor
A person, project or activity that hinders the growth of company.
Certified check
A personal check that the bank guarantees to be good
Stock certificate
A piece of official paper that states the number of shares of stock a shareholder holds, the name of the company issuing the stock, the type of stock (common, preferred, or both), and the par value.
Short-Term Investment strategy
A plan for a relatively brief period of time (usually a couple of weeks or a couple of months) that balances returns available with risks that must be taken in order to enhance the investor's overall welfare.
Long-Term Investment Strategy
A plan for a relatively extended period of time (usually a couple of years of tens of years) that balances returns available with risks that must be taken in order to enhance the investor's overall welfare.
Investment strategy
A plan that examines potential returns and rates investments according to desirability
Debit card
A plastic card that consumers may use to make purchases, withdrawals, or other types of electronic fund transfers. Use of a debit card results in an immediate transfer of funds
Zero Sum Game
A situation in which an economic gain by one country results in an economic loss by another.
Monopoly
A situation where there is only one producer of a product or service
Treasury bonds
A type of bond (but NOT a type of corporate bond), specifically a type of government bond and/or debt security. They are issued in minimum units of $100, are sold in 30-year maturities, have interest rates that are generally higher than those of T-bills and T-notes, have bondholders pay their interest every 6 months (semiannually), can be either held until maturity OR sold before maturity, usually are sold in blocks of 10,000 bonds, and China issues a lot of them. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Long term capital gain
A type of ___. It is used when a share(s) of stock is held for more than a year, and ___ is taxed at a lower than average income tax rate with the current maximum being 15%.
Broad-based weighted average ratchet
A type of anti-dilution mechanism. A weighted average ratchet adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received.
Treasury Bills (T-Bills)
A type of bond (but NOT a type of corporate bond), specifically a type of government bond and/or debt security. They are all sold at a minimum price of $100, take 4, 13, 26, or 52 weeks to fully mature, and are sold at a discount. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Treasury Notes (T-Notes)
A type of bond (but NOT a type of corporate bond), specifically a type of government bond and/or debt security. They are sold in $100 units, are sold in either 2-, 3-, 5-, 7-, or 10-year terms, and bondholders pay interest on this type of bond every six months (semiannually). This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Treasury Inflation Protected Securities (TIPS)
A type of bond (but NOT a type of corporate bond), specifically a type of government bond and/or debt security. This type of bond is sold in minimum units of $100, are sold in either 5-, 10-, or 30-year terms, are valued based upon the consumer price index, have bondholders pay their interest every 6 months (semiannually, but it can vary), and can either be held until maturity OR sold before maturity. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Local municipality bond
A type of bond (but NOT a type of corporate bond), specifically a type of government bond. Most ___ communities and school districts across the U.S. issue this type of bond. An example of a ___ community and a school district that issue this kind of bond are the City of Madeira and Madeira City Schools. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Federal bond
A type of bond (but NOT a type of corporate bond), specifically a type of government bond. This type of bond has no state income tax on the interest, and is issued by the highest level of the U.S. government. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
State bond
A type of bond (but NOT a type of corporate bond), specifically a type of government bond. This type of bond is issued by all U.S. ___, and might not require the bondholder to pay taxes on them. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
General obligation bonds
A type of bond (but NOT a type of corporate bond), specifically a type of state and local government securities). This type of bond is backed by the state or local government that issues them. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Revenue bonds
A type of bond (but NOT a type of corporate bond), specifically a type of state and local government securities). This type of bond is repaid from money generated by the project the funds finance (such as a troll bridge. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Securities & Exchange Commission (SEC)
A U.S. Government agency that was established by Congress in 1934 for two reasons: to provide full disclosure to investors (annual reports), and to provide fraud in connections with the sale of securities. The ___ monitors illegal actions (it is the "Wall Street Police"), such as insider, manipulation of stock prices, falsification of corporate records, and other ill-gotten gains; caught perpetrators of these crimes may receive fines and/or jail time for illegal actions. The ___ also tracks the stock market for unexplained price moves. D-TIAR, PF
Reverse stock split
A ___ occurs when a company decreases outstanding shares, but increases the selling price for one share of stock in direct proportion. For example, if you have two shares of stock worth $40 total (each share of stock is worth $20), the company will increase the worth to $80 but for two shares of stock, making one share of stock worth $40.) A ___ can have positive effects on a company if the company has relatively few (tens, hundreds, or thousands) of shares in an economic recession or depression.
Stock split
A ___ occurs when a company increases its outstanding shares, but decreases the selling price on one share of stock in direct proportion. For example, if one share of stock is worth $80, the company will make a "2 for 1" deal by decreasing the worth to $40 but for two shares of stock, making one share of stock worth $40.) However, a ___ can have negative effects on a company if the company has relatively many (hundreds of thousands or millions) of shares in an economic recession or depression.
Money Market Account
A bank deposit that pays interest and that allows a saver to withdraw money at will, often by writing checks
Checking account
A banking service wherein money is deposited into an account and checks are written to withdraw money as needed
Ecu
A basket of EU currencies that serves as the unit of account for the EMS.
Bearer bond (coupon bond)
A bond not registered by an issuing company
Eurobonds
A bond placed in countries other than the one in whose currency the bond is denominated.
Convertible bond
A bond that can be be exchanged for common stock at maturity
General obligation bond
A bond that is backed by the full faith and credit of a governmental unit
Registered bond
A bond that is recorded in eh owner's name by the insuring corporation
Zero-coupon bond
A bond that is sold at a price far below its face value, makes no annual or semi-annual interest payments, and is redeemed for its face value at maturity
Change of control bonus
A bonus of cash or stock given by private equity investors to members of a management group if they successfully negotiate a sale of the company for a price greater than a specified amount.
Securities
A broad range of investment instruments, including stocks, bonds and mutual funds
Stockbroker
A broker who accepts orders to buy and sell stock and then transfers those orders to other people who complete them
Proprietorship
A business owned and managed by one individual who receives all profits and bears all loss
Investment banker
A business that gives corporations advice on how to raise money and also sells new issues of stocks or bonds
Corporation
A business that is owned by stockholders and has rights and responsibilities just like a person
Credit card
A card that allows you to buy items on credit and pay off your debt over time
Late payment fee
A charge added to an account if a required payment is not received by a specific date
Over-the-limit fee
A charge imposed on some credit accounts for spending more than your credit limit
Cashier's check
A check written by a bank on its own funds in exchange for payment by an individual
Overdraft (or NSF not-sufficient funds check)
A check written without sufficient money in an account to cover it
Alternative asset class
A class investments that includes private equity, real estate, and oil and gas, but excludes publicly traded securities. Pension plans, college endowments, and other relatively large institutional investors typically allocate a certain percentage of their investments to alternative assets with an objective to diversify their portfolios.
Common stock
A class of stock whereby the person who owns the stock shares directly in the success or failure of the business
Catch-up
A clause in the agreement between the general partner and the limited partners of a private equity fund.
Clawback
A clause in the agreement between the general partner and the limited partners of a private equity fund.The clawback gives limited partners the right to reclaim a portion of disbursements to a general partner for profitable investments based on significant losses from later investments in a portfolio.
Money market fund
A combination savings-investment plan in which the deposit holder (brokerage firm) invests your money in a variety of financial instruments
Mutual fund
A company that pools the money of many investors to buy a large selection of securities that meet the fund's state investment goals
Net income
A company's revenue minus its expenses. Net income is also called earnings or profits
Internal Forward Rate
A company-generated forecast of future spot rates.
Ticker tape (stock ticker)
A continuous thin ribbon of paper on which stock quotes are written. It was invented in 1867, *constantly* keeps up-to-date prices of securities (such as stocks and bonds), used to be on paper, but is now on screens, and is also called a stock ticker.
Anti-dilution
A contract clause that protects an investor from a substantial reduction in percentage ownership is a company due to the issuance by the company of additional shares to other entities. The mechanism for making adjustments is called a Ratchet.
Closed-end credit
A contract for the loan of a specified amount in which the contract issued tells the amount of purchase, the total finance charge, and the amount of each payment
Annuity
A contract or agreement whereby money is set aside for a specified period of time, at the end of which you begin receiving payments at regular intervals
Margin agreement
A contract that must be completed and signed by an investor (the client) and approved by the brokerage firm or stock broker in order to open a ___ account. This sets out the terms and conditions of the account, and the investor required to possess this if he or she wants to buy on ___ from his or her investor.
Debt security
A contract that promises to pay a given amount of money to the owner of the security at specific dates in the future. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Buy-sell agreement
A contract that sets forth the conditions under which a shareholder must first offer his or her shares for sale to the other shareholders before being allowed to sell to entities outside the company.
Freddie Mac
A federal agency debt issue. The term itself is a loose acronym for the Federal Home Loan Mortgage Corporation, and they recently went seriously bankrupt (but was bailed out by the U.S. Government). This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Fannie Mae
A federal agency debt issue. Their Web Site is http:/www.___.com, the term itself is a loose acronym for the Federal National Mortgage Association, and they recently went seriously bankrupt (but was bailed out by the U.S. Government). This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Ginnie Mae
A federal agency debt issue. They pay interest to their bondholders once per month, the term itself is a loose acronym for the government National Mortgage Association, and they recently went seriously bankrupt (but was bailed out by the U.S. Government). This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Commission
A fee that a stockholder has to pay when he or she buys or sells a share(s) of stock. It can be wither a straight fee for each (ex. $8 per trade) OR a flat percentage rate of the purchase of the purchase or selling price for a piece of stock (ex. 2& for each trade).
Trustee
A financially independent firm that acts as the bondholder's representative. This term is one of the characteristics of corporate bonds (Objective 1).
Cram down round
A financing event upon which new investors with substantial capital are able to demand and receive contractual terms that effectively cause the issuance of sufficient new shares by the startup company to significantly reduce the ownership percentage of previous investors.
"B" round
A financing event whereby professional investors such as venture capitalists are sufficiently interested in a company to provide additional funds after the "A" round of financing. subsequent rounds are called "C", "D", and so on.
Controlling Interest
A firm has a controlling interest in another business entity when it owns more than 50 percent of that entity's voting stock.
Transnational Corporation
A firm that tries to simultaneously realize gains from experience curve economies, location economies, and global learning, while remaining locally responsive.
Investment company
A firm that, for a management fee, invests pooled funds of small investors in different types of securities
Credit bureau
A for-profit company that is in the business of accumulating, storing, and distributing credit information
Personal Identification Number (PIN)
A four-digit code that allows you to make deposits and withdrawals with your ATM (Automated Teller Machine) card
Investment portfolio
A group of collection of investments, including cash, CDs, stocks and more
Customs Union
A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.
Common Market
A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other and (2) the pursuit of a common external trade policy.
Economic Union
A group of countries committed to (1) removing all barriers to the free flow of goods, services, and factors of production between each other, (2) the adoption of a common currency, (3) the harmonization of tax rates, and (4) the pursuit of a common external trade policy.
Free Trade Area
A group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies.
Board of directors
A group of individuals, typically composed of managers, investors, and experts, which have a fiduciary responsibility for the well being and proper guidance of a corporation. The board is elected by the shareholders.
Board of Directors
A group of people elected by the stockholders to manage a corporation. If the corporation makes a profit (net income), they decide whether or not to distribute earnings back to their stockholders in the form of a dividend. However, at the same time, the ___ does not have to declare a dividend at all; they could instead keep the earnings and reinvest them into the company in order to help maximize their company's profit.
Medicaid
A joint federal and state program that helps LOW-INCOME individuals or families pay for the costs associated with long-term medical and custodial care
Corporation
A legal entity separate from its shareholders. This means that an individual shareholder in a corporation is NOT directly responsible for the actions of the ___. In the event of bankruptcy, the financial loss to the shareholders is limited to their investment in the ___'s stock.
covenant
A legal promise to do or not do a certain thing.
Quota
A limit on the quantity of a product that may be imported or exported within a given period, used to protect one from its industries from too much competition from abroad
Overdraft checking
A line of credit that allows you to write checks or withdraw funds totaling more than your actual balance
Stock quote
A list of representative prices bid and asked for a stock during a particular trading day. Stocks are ___ in points
Unsecured loan
A loan based on a consumer's promise to pay without savings or other collateral as a guarantee
Fronting Loans
A loan between a parent company and a foreign subsidiary that is channeled through a financial intermediary.
Closed-end credit
A loan for a specific amount that must be repaid in full, including finance charge, by a stated due date
Cash advance
A loan taken out by charging an amount of cash to a credit card
Installment loan
A loan to be repaid in fixed payments that include principle and interest
Convertible debt
A loan which allows the lender to exchange the security for common shares in a a company at a preset conversion ratio.
Bear market
A market characterized by falling prices of 15 percent or more; characterized by pessimism
Foreign Exchange Market
A market for converting the currency of one country into that of another country
New issues market
A market in which a corporation sells new stock to raise money for start-up or expansion. This market is often called the primary stock market
Efficient Market
A market where prices reflect all available information.
Pull Strategy
A marketing strategy emphasizing mass media advertising as opposed to personal selling.
Push Strategy
A marketing strategy emphasizing personal selling rather than mass media advertising
Floating a check
The practice of writing a check on insufficient funds and hoping to make a deposit to cover the check before it is cashed
Privatization
The sale of state-owned enterprises to private investors.
Commercial multiple-peril insurance
a package policy to include property, general liability, business income, and crime
consumer
a person who buys and uses goods and services
customer needs analysis
a study that pinpoints the features and benefits of goods or services that customers value
Ad Valorem Tariff
a tariff levied as a proportion of the value of an imported good
Expense loading
an amount added to the pure premium to cover insurance company overhead
digital certificate
an e-commerce security feature that establishes the certificate holder's identity and that proves companies are who they say they are
B2B community
an electronic marketplace where companies can bid on products and services or offer up their services for bid
parent leave
an employee benefit that a working parent would find most useful
direct writer
an employee of the insurer, and, therefore, only represents the insurer // ONLY REPRESENTS ONE INSURANCE COMPANY
nonadmitted insurer
an insurer who is not licensed to do business within the state
moral hazards
losses that results from dishonesty
high deductible
low premium
property insurance deductibles include
lump sum deductible; percentage deductible; straight or aggregate
mail that is electronically transmitted by a computer
large loss principle
main purpose of insurance is to cover large catastrophic losss
Risk of Unemployment
major threat to financial security, comes from business cycle downswings, structural changes in economy, seasonal factos, imperfections in labor market
bootstrapping
operating a business as frugally as possible and cutting all unnecessary expenses, such as borrowing, leasing, and partnering to acquire resources
pro rata reinsurance
proportionate sharing of premiums, losses, and expenses between the primary insurer and the reinsurer
Private passenger auto insurance
protects the insured against legal liability arising out of auto accidents that cause property damage or bodily injury to others, physical damage on resulting from a collision, theft or other perils.
group life insurance
provided to specific groups, such as employees at a firm, or members of an organization; usually paid by employer
Personal umbrella liability insurance
provides protection against a catastropic lawsuit or judgment
conditions
required actions by the insured after a loss
conditions
requirements of the insured
Statute of Frauds
requires that some contracts must be in writing to be enforceable
Imputed negligence + vicarious liability
responsible for the acts of his agents
primary care physician
responsible for your health care as well as for making referrals to specialists and approving further medical treatment
Operational Risk
results from firm's business operations EX: if hackers hack an online bank
Indirect (or Consequential) loss
results indirectly from the occurrence of a direct physical damage or theft loss.
collateral
security in the form of assets that a company promises(?) to a lender
Bp
see Basis point.
consolidation
see rollup
enterprise risk
set of all risks that affects a business enterprise
principal
the original amount of money on deposit
Intangible items
things that cannot be touched but are important to your well-being and happiness (Ex: personal relationships, health, education, time)
attained-age method
to determine how much pay to convert bases the insurance premiums on the age of the insured at the time of conversion
brainstorm
to think freely in order to generate ideas
Net Worth
when you subtract your liabilities from your assets
shared market
where high risk drivers buy insurance; a market in which all of the insurance companies that do business within a state must participate
single-premium whole life insurance
which provides lifetime protection for the payment of a single large premium
tax-deferred
will be taxed
Intentional torts
willful acts or the willful failure to act when required to do so that causes injury to someone else
Tax Evasion
willful failure to pay taxes
job
work mainly done to earn money
Telecommuting
work model that allows employees to work off-site & remain in contact with their employees through the use of technology
NAIC
written the coordination-of-benefits provision; 2 rules: 1. insurance received as part of employment is primary while coverage provided by being a dependent is excess
Property Rights
Bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource.
Pawnbroker
Business that makes high-interest loans based on the value of personal possessions pledged as collateral
Subscribers
Businesses that supply information to credit bureaus about the customers
CAPM
Capital Asset Pricing Model- a method of estimating the cost of equity capital of a company.The cost of equity capital is equal to the return of a risk-free investment plus a premium that reflects the risk of the company's equity.
Tangible assets
Cash, equipment, machinery, plant, property-- anything that has long-term physical existence or is acquired for use in the operations of the business and not for sale to customers.
Basic Research Centers
Centers for fundamental research located in regions where valuable scientific knowledge is being created; they develop the basic technologies that become new products.
general ledger
Central repository of the accounting information of an organization in which the summaries of all financial transactions (culled from subsidiary ledgers) during an accounting period are recorded. Also called the book of final entry, it provides the entire data for preparing financial statements for the organization.
Mixed Economy
Certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant government ownership and government planning
Traveler's checks
Checks issued by a bank or other institution for a specified amount and signed by the buyer, who may use it as cash by signing it again in the presence of a witness, such as a clerk in a store
Canceled check
Checks the bank has processed
Drafts
Checks used to withdraw money from an account
Lead Strategy
Collecting foreign currency receivables early when a foreign currency is expected to depreciate, and paying foreign currency payables before they are due when a currency is expected to appreciate.
Broker's fee
Commission charged to the buyer of the share(s) stock. This is NOT charged when an investor participates in the ___ short-term investment strategy.
Blue Chip companies
Companies that are large, well-established, and financially solid. They maintain a fairly stable price during the ups and downs of the stock market, and they usually pay small but regular dividends. An example of this type of company is General Electric.
Investor services
Companies that provide investors with financial information about companies
Time Based Competition
Competing on the basis of speed in responding to customer demands and developing new products
Credit history
Complete record of your borrowing and repayment performance
Foreign exchange market
Consists of banks that buy and sell different currencies
Fair Credit Reporting Act
Consumers' rights are protected when collecting and reporting information when applying for credit, insurance, and employment
Early withdrawal penalties
Fees charged to depositors who take money from their account before a minimum time period has expired
Capacity
Financial ability to repay a loan with present income
Capital
Financial assets or the financial value of assets, such as cash.
Quarterly statements
Financial reports that summarize the financial condition and financial performance (such as revenue, spending, and profit) and the operations of a business that are published four times per year. Obtaining these is one of the proper steps that should be taken when someone researches stocks.
Financial statements
Financial reports that summarize the financial condition and operations of a business. Obtaining these is one of the proper steps that should be taken when someone researches stocks.
Core Competence
Firm skills that competitors cannot easily match or imitate.
Export Import Bank
Agency of the US government whose mission is to provide aid in financing and facilitate exports and imports.
Experience Curve Pricing
Aggressive pricing designed to increase volume and help the firm realize experience curve economies.
Tax Treaty
Agreement between two countries specifying what items of income will be taxed by the authorities of the country where the income is earned.
Regional Economic Integration
Agreements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other
Par value
An assigned dollar value that is used for preferred stock. Its value is usually $25. The reason they assign a ___ is to compare various ratios (such as the price per earnings [PEG] ratio), to determine dividends paid, and to use it as a benchmark for trading. Most people buy preferred stock because of the dividend income, which is based on the percentage of the ___.
CARICOM
An association of English-speaking Caribbean states that are attempting to establish a customs union.
Group
An association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behavior.
Human Development Index
An attempt by the United Nations to assess the impact of a number of factors on the quality of human life in a country
Personal risk
Hazardous risks such as dangerous trips may be too high to be worth the money
Social Strata
Hierarchical social categories
Diversification
Holding a variety of securities so an occasional loss in one can be offset by gains in others
Global Matrix Structure
Horizontal differentiation proceeds along two dimensions: product divisions and areas
Lean Production Systems
Flexible manufacturing technologies pioneered at Toyota and now used in much of the automobile industry.
Flexible Machine Cells
Flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products.
Inflows of FDI
Flow of foreign direct investment into a country
Outflows of FDI
Flow of foreign direct investment out of a country
International Fisher Effect
For any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between countries
primary and excess insurance
For instance, if you drive someone's car, and have an accident, then the car owner's insurance is considered primary, and your auto insurance is considered excess. If the owner's insurance was capped at $300,000, and the liability for the accident was $40,000, then the owner's insurance would pay the entire bill. However, if the liability was $350,000, then the owner's insurance would pay the policy limit of $300,000 and your insurance would pay the remaining $50,000.
Equal Credit Opportunity Act (ECOA)
Forbids discrimination in granting credit because of age, sex, marital status, religion, race, color, national origin, or receiving public assistance
Vertical Foreign Direct Investment
Foreign direct investment in an industry abroad that provides input into a firm's domestic operations, or foreign direct investment into an industry abroad that sells the outputs of a firm's domestic operations.
Horizontal Foreign Direct Investment
Foreign direct investment in the same industry abroad as a firm operates in at home.
Amortization
Gradual repayment of a loan in equal (or nearly equal) installments which include portions of interest and principal amounts.
Patent
Grants the inventor of a new product or process exclusive rights to the manufacture, use, or sale of that invention.
Gross Fixed Capital Formation
Summarizes the total amount of capital invested in factories, stores, office buildings, and the like.
Cash flow statement
Summary of the actual or anticipated incomings and outgoings of cash in a firm over an accounting period. It answers the questions Where the money came from? Where it went (will go)?
Legal System
System of rules that regulate behavior and the processes by which the laws of a country are enforced and through which redress of grievances is obtained.
Managed Float System
System under which some currencies are allowed to float freely, but the majority are either managed by government intervention or pegged to another currency.
Short-term goal
Takes one year or less to achieve
Intermediate goal
Takes two to five years to achieve
Specific Tariff
Tariff levied as a fixed charge for each unit of good imported
Tariff
Tax that a government places on certain imported products, intends to protect from foreign competition
breach of contract
If the insured fails to perform these duties or satisfy these conditions, then the insurance company may be relieved of its obligation to pay the claim
betterment
If the insured insists on original manufacturer's equipment (OEM) for an older vehicle, then he will have to pay for the betterment by paying the difference between the price of the OEM part and the after-market part
Hedge Fund
Investment fund that not only buys financial assets (stocks, bonds, currencies) but also sells them short.
Foreign Portfolio Investment
Investments by individuals, firms, or public bodies (e.g., national and local governments) in foreign financial instruments (e.g., government bonds, foreign stocks).
Currency Speculation
Involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates.
Letter of Credit
Issued by a bank, indicating that the bank will make payments under specific circumstances
Paper gain
Not a true loss or gain (i.e., as a shareholder, you can never lose more than what you invest into a company or corporation).
Disadvantage to reading a stock table/stock quote from a newspaper
It is far more convenient for most investors to get stock quotes off the Internet. This method is superior because most Web Sites update stock prices and other information associated with stocks (such as yield and dividends) throughout the day, and gives you more information, news, charting, and research, etc. associated with stocks.
Sogo Shosha
Japanese trading companies; a key part of the keiretsu, the large Japanese industrial groups
Usury laws
Laws setting maximum interest rates that lenders may charge
Bankruptcy
Legally insolvent; not capable of paying bills
Just In Time
Logistics systems designed to deliver parts to a production process as they are needed, not before.
Depreciation
Loss in value of a consumer good during its lifetime often associated with appliances and vehicles
losses for insurance
Losses must be accidental and unintentional. the loss must be determinable and measurable.
Total Quality Management
Management philosophy that takes as its central focus the need to improve the quality of a company's products and services
Flexible Manufacturing Technologies
Manufacturing technologies designed to improve job scheduling, reduce setup time, and improve quality control.
Secondary market
Market in which existing (not new) stocks and bonds are sold to the public. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Lead Market
Market where products are first introduced.
Internalization Theory
Marketing imperfection approach to foreign direct investment
Financial markets
Markets that direct savings into money-type assets (such as stocks, bonds, and bank accounts) that pay households for the use of their savings. Commercial banks, savings and loans, credit unions, insurance companies, brokerage houses, pension funds, and investment bankers are some of the businesses that are found in financial markets
Income risk
May lose job due to unexpected incidents
Currency Board
Means of controlling a country's currency
Credit rating
Measure of creditworthiness based on an analysis of your credit and financial history
Exchange Rate Mechanism
Mechanism for aligning the exchange rates of EU currencies against each other.
Integrating Mechanisms
Mechanisms for achieving coordination between subunits within an organization
Common market
Members do away with duties and other trade barriers, allows companies to work freely across borders, also called an economic community
Current Cost Accounting
Method that adjusts all items in a financial statement to factor out the effects of inflation.
Financial Structure
Mix of debt and equity used to finance a business
Debt
Money owed
Interest
Money paid for the use of money; earnings on a savings account
Income
Money that comes in from property, business or work
Discretionary income
Money that is left over when the bills have been paid
Systemic Risk
Movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy, rather than factors specific to an individual firm (unsystematic risk).
Globalization of Markets
Moving away from an economic system in which national markets are distinct entities, isolated by trade barriers and barriers of distance, time, and culture, and toward a system in which national markets are merging into one global market.
Favorable balance of payments
Occurs when a nation receives more money in a year than it pays out, also called positive balance of payments
Multipoint Pricing
Occurs when a pricing strategy in one market may have an impact on a rival's pricing strategy in another market.
Currency Crisis
Occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate.
Short Selling
Occurs when an investor places a speculative bet that the value of a financial asset will decline, and profits from that decline
Performance Ambiguity
Occurs when the causes of good or bad performance are not clearly identifiable.
Fixed Rate Bond
Offers a fixed set of cash payoffs each year until maturity, when the investor also receives the face value of the bond in cash.
Column 10 of a stock table
One of the columns of a stock table in a newspaper. Together with Column 9, these columns show the price range at which a stock has traded at throughout the day. This column by itself lists the minimum (lowest) price that investors have paid for a share(s) of the stock during the day.
Pacific Stock Exchange
One of the main stock exchanges. It has two trading floors, which is rare quality; most stock exchanges have two or more trading floors.
Chicago Board of Options (CBOE)
One of the main stock exchanges. It revolutionized trading options by creating standardized, listed options in 1973. Before 1973, options were individually tailored and traded "over-the-counter" by a few put/call dealers. It is the world's largest options exchange.
Mid Market Capitalization (Mid Cap)
One of the market cap categories. A company or corporation belongs to this category when its market cap is between $2 billion to $10 billion, and includes the companies and corporation with a medium market cap.
Small Market Capitalization (Small Cap)
One of the market cap categories. A company or corporation belongs to this category when its market cap is less than $2 billion, and includes the companies and corporation with the tiniest market cap.
Large Market Capitalization (Large Cap)
One of the market cap categories. A company or corporation belongs to this category when its market cap is more than $10 billion dollars, and includes the companies and corporation with the biggest market cap.
Stock exchange
One of the organized stock markets with a centralized trading floor. Auction-type trading allows traders to sell stocks to the highest bidder or buy stocks from the lowest supplier
Capped participating preferred stock
Preferred stock whose participating feature is limited so that an investor cannot receive more than a specified amount.
Universal Needs
Needs that are the same all over the world, such as steel, bulk chemicals, and industrial electronics.
NOW account
Negotiable Order of Withdrawal. Another name for the first checking accounts offered by savings and loans
Infant Industry Agreement
New industries in developing countries must be temporarily protected from international competition to help them reach a position where they can compete on world markets with the firms of developed nations.
Fisher Effect
Nominal interest rates (i) in each country equal the required real rate of interest (r) and the expected rate of inflation over the period of time for which the funds are to be lent (I). That is, i = r + I.
Intellectual Property
Products of the mind, ideas (e.g., books, music, computer software, designs, technological know-how). Intellectual property can be protected by patents, copyrights, and trademarks.
Capital gains
Profits from sale of assets, such as stocks, bonds or real estate that are not taxed until the asset is sold
Service Credit
Providing a service for which you will pay later
Buying on margin
Purchasing an asset by making a down payment (called the margin) and financing the balance amount through a loan by using the asset as the collateral.
Risk Categories
Pure and Speculative Fundamental Risk and Partial Risk Enterprise Risk
Folkways
Routine conventions of everyday life
Rationalization
Selling off or closing down some plants or units to reorganize a firm's operations to be more in line with its core competencies, in the interest of efficiency or as a cost cutting measure. Often used as a euphemism for firing employees.
Unlisted stock
Stock that is not listed and traded on an organized exchange (such as the New York Stock Exchange). Over-the-counter markets handle this type of stock.
Listed stock
Stocks that have been approved and listed for trading by one of the organized stock exchanges
Penny stock
Stocks that sell for less than $5 per share
Embargo
Stops the export or import of a product completely, used by government to express its disapproval of the actions or policies of another country
Retail stores
Stores that purchase goods from wholesalers and sell directly to customers
Staffing Policy
Strategy concerned with selecting employees for particular jobs
Global Strategy
Strategy focusing on increasing profitability by reaping cost reductions from experience curve and location economies
Billing cycle
The number of days between your last bill and your current bill
Channel Length
The number of intermediaries that a product has to go through before it reaches the final consumer.
loss settlement
actual cash value, or repair cost-->cost to repair vehicle > its worth, then loss will be declared a total loss, and actual cash value for the vehicle will be paid.
Tillinghast Towers-Perrin and the Casualty Actuarial Society
actuarial companies that found credit scores low means high claims = credit based scores
municipal bond
additional benefit of being not rated
other provisions
additional info, like how to cancel insurance
Adjusted Gross Income
adjustments subtracted from gross income
Administrative Trade Policies
administrative policies that can be used to restrict imports or boost exports
New Trade Theory
The observed pattern of trade in the world economy may be due in part to the ability of firms in a given market to capture first-mover advantages.
Product Life Cycle Theory
The optimal location in the world to produce a product changes as the market for the product matures.
World Trade Organization
The organization that succeeded the General Agreement on Tariffs and Trade (GATT) as a result of the successful completion of the Uruguay round of GATT negotiations.
Drawee
The party to whom a bill of lading is presented.
Commission
The payment made by insurers to agents or brokers for the sale and service of policies. This term is one of the reasons why investors purchase corporate bonds (Objective 3)
Annual interest rate/comparable interest rate
The percent of the principal you pay or earn per year. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Finance charge
The percentage charge applied to the daily or monthly balances as described in the credit agreement
Grace period
The period of time from the billing date of your last credit card bill to the due date of your current bill, when you can pay in full without being charged interest
Borrower
The person who borrows money or uses another form of credit
Moore's Law
The power of microprocessor technology doubles and its costs of production fall in half every 18 months.
Centralized Depository
The practice of centralizing corporate cash balances in a single depository.
Price Discrimination
The practice of charging different prices for the same product in different markets
Gold Standard
The practice of pegging currencies to gold and guaranteeing convertibility.
Expatriate Failure
The premature return of an expatriate manager to the home country.
Call premium
The premium above par value that an issuer is willing to pay as part o the redemption of a bond issue prior to maturity.
Call price
The price an issuer agrees to pay to bondholders to redeem all or part of a bond issuance.
Transfer Price
The price at which goods and services are transferred between subsidiary companies of a corporation.
Credit
The privilege of borrowing something now, with the agreement to pay for it later
Dollar-cost averaging
The process of making regular payments or investing the same amount periodically
Risk Management
The process that identifies loss exposures faced by an organization
Market
The process through which buyers and sellers exchange with one another
Logistics
The procurement and physical transmission of material through the supply chain, from suppliers to customers.
Mass Customization
The production of a wide variety of end products at a unit cost that could once be achieved only through mass production of a standardized output.
Exchange Rate
The rate at which one currency is converted into another.
Yield
The rate of return earned by an investor who holds a security, such as a bond or stock, for a stated period of time
Bond yield (yield)
The rate of return that is earned by an investor who holds a bond for a stated period. The formula for this term is: (Annual income amount from bond) / (Current market value of bond(s). This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
current ratio
The ratio of current assets to current liabilities.
Sourcing Decisions
Whether a firm should make or buy component parts
Annual percentage yield (APY)
The true or effective rate of interest when compounding is taken into effect.
Preferred stock
The type of corporate stock in which dividends are fixed, regardless of the earnings of a company
Constant Returns to Specialization
The units of resources required to produce a good are assumed to remain constant no matter where one is on a country's production possibility frontier.
Available credit
The unused portion of the credit for which one is eligible
Credit
The use of someone else's money, borrowed now with the agreement to pay it back later
Exchange rate
The value of a currency in one country compared with the value of another
Taxable equivalent yield
The yield a particular investor must earn on a taxable bond to have the same after-tax return they would receive from a particular tax-exempt issue. Formula for this term: (Tax-exempt yield) / (1.0 - your tax rate). This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Individualism versus Collectivism
Theory focusing on the relationship between the individual and his or her fellows. In individualistic societies, the ties between individuals are loose and individual achievement is highly valued. In societies where collectivism is emphasized, ties between individuals are tight, people are born into collectives, such as extended families, and everyone is supposed to look after the interests of his or her collective.
business concept
a clear and concise description of a business opportunity. It contains four elements: the product or service, the customer, the benefit, and the distribution
Best efforts offering
a commitment by a syndicate of investment banks to use best efforts to ensurethe sale to investors of a company's offering of cecurities. In a best efforts offering, the syndicate avoids any firm commitment for a specific number of shares or bonds.
defined benefit plan
a company retirement plan in which both the employee and the employer contribute to the plan. based on the employee's salary and the number of years worked.
Defined contribution plan
a company retirement plan in which the employee elects to contribute some portion of his or her salary into a retirement plan, such as a 401k or 403b
advertising agency
a company that acts as an intermediary between a business and the media to communicate a message to the target market
e-business
a company that does business over an electronic network, such as making sales calls on the telephone or providing electronic bill payment services
default
a company's failure to comply with the terms and conditions of a financing arrangement.
customer profile
a complete picture of a venture's prospective customers, including geographic, demographic, and psychographic data
barriers to entry
a condition or circumstance that makes it difficult or costly for outside firms to enter a market to compete with established firm or firms
condition subsequent
a condition that must be fulfilled after an event that required an act by the insurer
Focus group
a controlled group interview of a target audience demographic, often led by a facilitator. A set series of questions or topics are covered and the results are used to guide marketing efforts
stock insurance company
a corporation with stockholders that participate in the gains and losses of the corporation// charter determines insurance given
bait and switch
a deceptive and illegal method of selling in which a customer, attracted to a store by an advertised sale, is told that either the advertised item is unavailable or is inferior to a higher-priced item that is available
business model
a description of how entrepreneurs plan to make money with their business concepts
Capital stock
a description of stock that applies when there is only one class of shares. This class is known as common stock.
conglomerate diversification
a diversification growth strategy in which a business seeks products or businesses that are totally unrelated to its own products or businesses
business plan
a document that describes a new business and a strategy to launch that business
business plan
a document that describes a new concept for a business opportunity. A business plan typically includes the following sections: executive summary, market need, solution, technology, competition, marketing, management, operations and financials.
emotional buying motive
a feeling a buyer associates with a product, such as recognition or prestige
cookie
a file sent to a Web browser that is used to record and store information for later use
comparative financial statement
a financial statement with financial information from two accounting periods used as an analysis tool by a business owner
Blow-out round/Cram-down round
a financing event upon which new investors with substantial capital are able to demand and receive contractual terms that effectively cause the issuance of sufficient new shares by the startup company to significantly reduce ("dilute") the ownership percentage of previous investors.
"A" round
a financing event whereby venture capitalists become involved in a fast-growth company that was previously financed by founders and/or angels.
___ carrier
a firm that ___ transportation services at uniform rates to the general public
banner swapping
a form of exchanging online advertising in which sites post banner ads for each other
employee complaint procedure
a formal procedure for handling employee complaints, usually in writing and distributed to employees
budget
a formal, written statement of expected revenue and expenses for a future period of time
Power Distance
Theory of how a society deals with the fact that people are unequal in physical and intellectual capabilities. High power distance cultures are found in countries that let inequalities grow over time into inequalities of power and wealth. Low power distance cultures are found in societies that try to play down such inequalities as much as possible.
Masculinity versus Femininity
Theory of the relationship between gender and work roles. In masculine cultures, sex roles are sharply differentiated and traditional "masculine values" such as achievement and the effective exercise of power determine cultural ideals. In feminine cultures, sex roles are less sharply distinguished, and little differentiation is made between men and women in the same job.
code of ethics
a group of behavior guidelines that govern the day-to day activities of a profession or organization
diversification growth strategy
a growth strategy that involves investing in products or businesses that are different from a company's own products, using synergistic, horizontal, or conglomerate diversification
Lloyd's of London
a large insurance marketplace, where underwriters meet with buyers of insurance or their brokers to create an insurance agreement
copyright
a legal device that protects original works of authors, including books, movies, musical compositions, and computer software, for the life of the author plus 70 years
"best prospect" list
a list complied by the government of products that other countries are looking to purchase
airball
a loan whose value exceeds the value of the collateral
capital expenditure
a long-term commitment of a large sum of money to buy new equipment or to replace old equipment
Banking Crisis
a loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits
electronic credit authorizee
a machine that verifies whether a credit card is good, that is, not stolen or invalid
shared market (residual market)
a market in which all of the insurance companies that do business within a state must participate; where high risk drivers must get their insurance
standard of living
a measure of quality of life based on the amounts and kinds of goods and services a person can buy
Deal flow
a measure of the number of potential investments that a fund reviews in any given period.
e-meeting
a meeting that takes place online or via a telephone conference call
informational interview
a meeting with someone who works in your area of interest who can provide you with practical information about the career or company you are considering
digital signature
a method of authenticating digital information
corporate venture
a new venture started inside a larger corporation
automobile medical payments coverage
a no-fault payment for injuries or funeral expenses caused by vehicles designed for the road to the insured to prevent the need for litigation
bribe
a payment made to secure special services for a business or special consideration for it's products; illegal in the US
Bullet payment
a payment of all principal due at a time specified by a bank or a bond issuer.
Acceptance
a person accepts the terms of the offer
achiever
a person with a record of success
Physical Hazard
a physical condition that increases the chance of loss EX: icy roads, chance of fire, defective lock on a door
budget
a plan to match expected income with expected outflow
whole life insurance
a policy that covers the insured's whole life// level premiums, accumulates a cash value that insured can surrender, if they wish to terminate the policy, or borrow against, usually at lower interest rates
bundle pricing
a pricing technique in which several complementary products are sold at a single price, which is lower than the price would be if each item was purchased separately
discount pricing
a pricing technique that offers customers reductions from the regular price, some reductions are basic percentage-off discounts and others are specialized discounts
angel
a private, nonprofessional investor, such as a friend, relative, or a business associate, who funds start-up companies
consumer pretest
a procedure in which a panel of consumers evaluate an ad before its release
crawler
a program used to compile information about web sites
Bond ratings
These provide a system on "grading" the quality and risk associated with bond issues. Examples of independent corporation that provide ___ ___ are Moody's Investor Service, Inc., Standard & Poor's Corporation, and Fitch. ___ ___ generally range from a grade of "AAA" (the best and highest rating) to "D" (the worst and lowest rating). This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Intangible assets
They derive their value from intellectual or legal rights, and from the value they add to the other assets. (Limited-life intangible assets, such as patents, copyrights, and goodwill. /Unlimited-life intangible assets, such as trademarks.)
Reading a stock table/stock quote
This consists of 12 columns. • Columns 1 & 2 are the 52-Week High and Low • Column 3 is the Company Name & Type of Stock • Column 4 is the Ticker Symbol • Column 5 is the Dividend Per Share Ratio • Column 6 is the Dividend Yield • Column 7 is the Price-Earnings Ratio • Column 8 is the Trading Volume • Columns 9 & 10 are the Day High and Low • Column 11 is the Close • Column 12 is the Net Change
warranty
a promise by the insurance applicant to do certain things or to satisfy certain requirements, or, it is a statement of fact that is attested by the insurance applicant
business development company
a publicly traded company that invests in private companies and is required by law to provide meaningful support and assistance to its portfolio companies.
Interest income
This is computed by multiplying the interest rate by the face value of a given bond. Investors receive this every six months. Registered bonds, registered coupon bonds, bearer, bonds, and zero-coupon bonds are all have this feature. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Trade Diversion
Trade diverted due to regional economic integration; occurs when low-cost foreign suppliers outside a free trade area are replaced by higher-cost foreign suppliers in a free trade area.
Comparable
a publicly traded company with similar characteristics to a private company that is being valued. E.g. a telecommunications equipment manufacturuer whose market value is 2 times revenues can be used to estimate the value of a similar and relatively new company with a new product in the same industry.
Balloon payment
a relatively large principal payment due at a specific time as required by a lender.
balance sheet
a report of the final balances of all asset, liability, and owner's equity accounts at the end of an accounting period
pension plan
a retirement plan that is funded at least in part by an employer
Self-insurance
a risk management method in which a calculated amount of money is set aside to compensate for the potential future loss
approach
a salesperson's first contact with a customer
buyout
a sector of the private equity industry. Also, the purchase of a controlling interest of a company by an outside investor or a management team.
annuity
a series of equal regular deposits
campaign
a series of related promotional activities with a similar theme
buying process
a series of steps a customer goes through when making a purchase
contract carrier
a shipping company that transports freight under contract with one or more ____
economy of scale
a situate where the cost of producing one unit of a good or service decreases as the volume of production increases; the decrease of production costs relative to the price of goods and services
contextual(?) skill
a skill that enables a manager to understand concepts, ideas, and principles
convenience store
a small food retailer the stocks popular items at higher prices and emphasizes an accessible location and long operating hours
census tract
a small geographic area into which a state or country is divided for the purpose of gathering and reporting census data
co-payment
a small, set fee that is independent of the total amount of the bill, but must usually be paid when the service is rendered
employee stock option plan (ESOP)
a source of financing in which a company gives its employees the opportunity to buy a portion of the business; to raise money with and ESOP, a business must have at least 25 employees and revenues of $5 million
itemized deduction
a specific expense, such as a medical expense, that can be deducted from adjusted gross income for tax purposes
data room
a specific location where potential buyers/investors can review confidential information about a target company. This information may include detailed financial statements, client contracts, intellectual property, property leases, and compensation agreements.
confidentiality notice
a statement sent along with an electronic message that says that the message is only for the eyes of the intended recipient
Alpha
a term derived from statistics and finance theory that is used to describe the return.
competitive grid
a tool for organizing important information about a business's competition
competitive advantage
a trait that makes a product more desirable than its competitors
networking
a way of making and using contacts to get job information and advice
Downsizing
a way to hold down labor costs, reducing # of workers
bulletin board service (BBS)
a web-based service that allows users to leave and access messages and access other electronic files
Crime
a wrong in which a person intentionally inflicts injury, or takes something from another
C corporation
US business organization structure that provides several non-tax benefits (such as limited liability for the owners) and is popular as a staging base for raising large amount of investment capital by going public. Unlike in a S corporation, however, the entity's income is taxed twice-- first as a corporate income, then as a shareholder income.
Foreign Corrupt Practices Act
US law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions
Subjective Risk
Uncertainty based on a person's mental condition or state of mind
Cross Cultural Literacy
Understanding how the culture of a country affects the way business is practiced.
Market confidence
Understanding value and quality of a product or service in the planning of purchases. Using decision-making skills in purchasing products or services
Loan sharks
Unlicensed lender who charge illegally high interest rates
Technical Analysis
Uses price and volume data to determine past trends, which are expected to continue into the future
Global strategy
Uses the same product and marketing worldwide, same product is sold essentially in the same manner throughout the world
Current Rate Method
Using the exchange rate at the balance sheet date to translate the financial statements of a foreign subsidiary into the home currency.
Capital
Value of property you possess(Bank accounts, investments, real-estate, assets)
Capital
Wealth available to produce more wealth; assets of a person or business after liabilities are deducted
Online trading Web Sites
Web Sites on the Internet that coordinate the purchasing and selling of shares of stocks for multiple trading securities. Examples of ___ are www.Vanguard.com, TD www.TDAmeritrade.com, and www.Etrade.com
Dealer network
What an over-the-counter market operates as, in contrast of a stock exchange. Although the NASDAQ operates as a ___, NASDAQ stocks are generally not classified as a ___ because the NASDAQ is considered to be a stock exchange.
Opportunity cost
What is given up when making one choice instead of another
Dividend income
When a company does well, its stockholders receive ___. ___ are the part of the profits of a company that are distributed back to each of its shareholders. The Board of Directors decide if a ___ will be distributed at all and if so, how much and when. When a company cancels or reduces its ___, its share price may decline as the stock becomes less appealing to investors. However, if a ___'s value increases, the stock becomes mores attractive to investors who want to earn a dividend. Money from the profits of a company that is paid to the stockholders. This payment can be either in cash or shares of stocks, and is usually paid quarterly (four times per year). If the corporation makes a profit (net income), they decide whether or not to distribute earnings back to their stockholders in the form of a ___. However, at the same time, the company does not have to declare a ___; they could instead keep the earnings and reinvest them into the company in order to help maximize their company's profit.
Going public
When a company issues shares for the first time. This term is called this because the company ___ is making part of the company available to the public in the form of shares. When a company ___, it creates an IPO (initial public offering).
Capital call
When a private equity fund manager requests than an investor in the fund provide additional capital. Usually a limited partner will agree to a maximum investment amount and the general partner will make a series of capital calls over time to the limited partner as opportunities arise to finance startups and buyouts
Role of a shareholder
When a shareholder buys a share of stock, he or she is buying a piece of a company; he or she becomes part owner, along with other individuals and institutions that hold shares of the same company. As a shareholder, you can never lose more than you invest.
Proxy
When a shareholder has a say in the company's decisions (in the form of either in person or through a ___), such as whether or not the company issues additional stock, whether or not the company should be sold to additional buyers, or whether or not the board of directors should be changed. The shareholder gets one vote for each share he owns. If the shareholder cannot vote in person, he or she can vote by ___, which is giving his or her voting rights to someone else. A ___ is valid until the shareholder revokes it.
Global Web
When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized
Amount due
When referring to credit, the minimum monthly payment you must make, not the total amount you owe
Over-the-counter (OTC) markets
When securities (such as stocks and bonds) are bought and sold through brokers, but not through an exchange, it is called an electronic ___. ___ stocks are bought and sold through negotiation via telephone or a computer contract between a network of brokers who buy and sell securities not listed on a securities exchange. It does not have a trading floor. In general, the reason for which a stock is traded ___ is usually because the company or corporation that sells the shares of stock is relatively small, making it unable to meet the exchange listing requirements. Also known as "unlisted stock," these securities are traded by broker-dealers who negotiate directly with one another ___ and by telephone. Although the NASDAQ operates as a dealer network, NASDAQ stocks are generally not classified as ___ because the NASDAQ is considered to be a stock exchange. As such, ___ stocks are generally unlisted stocks which trade on the ___ Bulletin Board (OTCBB) or on the pink sheets. Be very wary of some ___ stocks. Moreover, the OTCBB stocks are either penny stocks or are offered by companies or corporations with bad credit records, so be wary of those kinds of stocks, also.
Zero balance
When the outstanding balance is paid and there are no new charges during a billing cycle
Premium
When the par value of a bond is higher than the bond's face value. This term is one of the characteristics of corporate bonds (Objective 1).
Discount
When the par value of a bond is lower than the face value. This term is one of the characteristics of corporate bonds (Objective 1).
Forward Exchange
When two parties agree to exchange currency and execute a deal at some specific date in the future.
Percentage yield
The amount of dividends received per share of stock divided by the stock's price. The yield is always stated as a percentage
Flow of Foreign Direct Investment
The amount of foreign direct investment undertaken over a given time period (normally one year)
Foreign debt
The amount of money a country owes to other countries
Debt load
The amount of outstanding debt at a particular point in time
Rate of return
The annual growth or increase in value of an investment expressed as a percentage of the amount of money that is invested. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Annual fee
The annual membership fee, if any, to have a credit card
Control
The authority of an individual or entity that owns more than half of equity in a company or owns the largest block of shares compared to other shareholders.
Social Structure
The basic social organization of a society
Maturity date
The date on which you must renew a certificate, cash it in, or purchase a new certificate; the date on which a bond's principal amount must be repaid in full
Due date
The date payment is due to a creditor
Posting date
The date that a purchase, cash advance, fee, service charge or payment is recorded on your charge or credit account
Balance of trade
The difference between a country's total exports and total imports
Balance of payments
The difference between the amount of money that comes into a country and the amount that goes out of it
Capital gains
The difference in value (profit) between what you originally paid for an investment and the price at which it was sold, assuming the investment gained value. This term is one of the reasons why investors purchase corporate bonds (Objective 3)
Stock split
The division of a stock into a larger number of lower-priced shares
Horizontal Differentiation
The division of the firm into subunits
Approximate Market Value
The dollar amount of a given bond's annual interest/comparable interest rate. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Face value
The dollar amount that the bondholder will receive at the bond's maturity date; it is usually $1,000. This term is one of the characteristics of corporate bonds (Objective 1).
Liquidity
The ease with which an asset (such as a share of stock) can be converted into an economy's medium of exchange (such as U.S. dollars).
Gains from Trade
The economic gains to a country from engaging in international trade.
Recession
The economy slows down and manufacturers slow production (there are layoffs); an economic downturn of two or more quarters
Leontief Paradox
The empirical finding that, in contrast to the predictions of the Heckscher-Ohlin theory, US exports are less capital intensive than US imports.
Maturity date
The exact date the issuer of a bond must pay the principal to the bondholder. This term is one of the characteristics of corporate bonds (Objective 1).
Cash flow (positive)
The excess of income over and above expenses
Spot Exchange Rate
The exchange rate at which a foreign exchange dealer will convert one currency into another that particular day
Forward Exchange Rate
The exchange rates governing forward exchange transactions
principal
The money originally invested or loaned, on which basis interest and returns are calculated
Disposable income
The money you have to spend or save as you wish after taxes, social security, and other required and optional deductions have been withheld from your gross pay
Cash flow
The movement of money through a company or corporation. Analyzing this is one of the proper steps that should be taken when someone researches stocks.
Taxable Income
income on which you will pay tax
Revenue
incoming taxes which are treated as income by the gov't
Property insurance
indemnifies property owners against the loss or damage of real or personal property caused by various perils
Loss adjustor
independant claims specialists who investigate complex or contentious claims on behalf of insurance companies
Active Retntion
individual is consciously aware of the risk and plans to retain all or part of it, it can save money
Stock broker
individual or organization that receives and executes buy and sell orders on behalf of outside customers in return for commissions.
specialty auto insurers
insurance companies that specialize in insuring high-risk drivers by charging high premiums for usually the minimum amount of coverage required by the state
if company finds material information was false when a loss occurs
insurance company can deny coverage
indemnity contracts
insurance company is only required to compensate for actual losses, up to the policy limits
business interruption insurance
insurance coverage against the potential losses that result from having to close a business for insurable reasons; insurance pays net profits and expenses while a business is shut down for repairs or rebuilding
casualty insurance
insurance coverage for loss or liability arising from a sudden, unexpected event such as an accident and for the cost of defending a business in the court against claims of property damage.
Indemnification
insured is restored to his or her approximate financial position
reentry term insurance
insured must periodically provide evidence of good health and insurability to qualify for the lower premiums
time deductible
insured must wait specific amount of time after disability to collect any insurance
domestic insurer
insurer is one formed under the laws of this state
hedging
insuring themselves against a negative event. (buying home insurance is hedging because it compensates for any loss..)
absorption
integration of an account (called absorption account) into related accounts in preparation of a financial statement. INtegration of change and innovation into an organization's culture and operations.
downsizing
intentional reduction in the size of a workforce at all staffing levels, to survive a downturn, improve efficiencies.
Claims adjusters
investigate insurance claims by interviewing the claimant and witnesses, consulting police and hospital records, and inspecting property damage to determine the extent of the company's liability.
treaty reinsurance
involves a standing agreement with a particular reinsurer; services provided by both parties are specified by contract
Assets
items of value that a person owns
Job Sharing
job design in which 2 people share one full-time position
Job Rotation
job design in which employees are trained to do more than one specialized task
Torts
legal or civil wrongs committed against people or organizations
Torts
legal or civil wrongs committed against people or organizations, causing them a loss
legal hazard
legal system to increase frequency of loss
Contract
legally enforceable agreement between 2 or more people
legal liability
liability for party imposed by the court for its actions/inactions w/ money as compensation
Directors and Officers (D&O)
liability insurance that provides financial protection for the directors
primary difference between the personal auto policy and motorcycle coverage
liability not covered on non-owned motorcycle, unless temporary substitute. insurance of the owner of the motorcycle would apply
conditional premium receipt
like a binder, but differs from it because coverage is conditional upon the health of the applicant, occupation, and other factors; (premium paid first)
major medical insurance plan
limits apply to the entire treatment rather than for specific services
definitions
lists key terms + phrases to minimize ambiguity
express powers
lists what agents can and cannot do in representing the principal
consequential loss/indirect loss
loss created by the direct loss
Consequential Loss
loss of profits EX: loss of rents, loss of use of building, loss of a local market
direct loss
loss or damage to the property itself
loss control
loss prevention-- reducing the probability of risk loss reduction-- minimizes the loss
morale hazards
loss that results from the insured worrying less about losses// sub: legal hazard -- American legal system moral hazard motivates people to sue for financial profit
general damages
losses that cannot be known with certainty or cannot really be compensated with money (pain suffering loss of consortium)
Risk of Insufficient Income During Retirement
major risk associated with old age is not enough money during retirement, US citizens retire before 65 usually money goes down when someone retires unless people save enough money for retirement
asset rationalization
matching a firm's investment in various types of assets to its projected requirements, for achieving optimum returns on the sums invested.
endowment insurance policy
matures by certain date, when the owner of the contract receives the proceeds of the policy. If the insured dies any time before the end of the term, then the designated beneficiary receives the face value of the policy.
The HO-4
modified HO-2 policy for RENTERS of rooms, apartments, or houses.
The HO-6
modified HO-2 policy specifically designed for owners of CONDOMINIUMS OR COOPERATIVES
active risk retention
money is set aside to pay for an expected amount of loss
debt capital
money raised by taking out loans, which must be repaid with interest
Major medical insurance plan
more comprehensive and have higher limits than hospital-surgical plans; limits 500,000 to 5,000,000+; there is a deductible and coinsurance requirement
HO-3
most commonly purchased policy // open perils policy that covers any DIRECT DAMAGE TO HOUSE OR OTHER STRUCTURES ON PROPERTY unless it is specifically excluded. INCLUDES PEOPLE INJURIES
declarations
name and age of insured + issued date; 1st part of contract that contains info derived from insurance application; premium amount, deductible amount etc
Balance of Payment Accounts
national accounts that track both payments to and from foreigners
ISO and AAIS
national insurance advisory organization that develops policy forms, rules etc
catastrophic insurance
natural disasters(flood, hurricane etc) and man made (terrorist attacks) not usually covered by regular insurance bc it's hard to calculate when it'll happen, so people need catastrophic insurance.
insurable interest
need in order to buy insurance. insured thing must affect you (loss for you)= insurable interest // the insurable interest must exist at the time of the loss.
Contributory negligence
negligence that is caused by both plaintiff and defendant --> in some states: no awards to plaintiff
Female Dress Interview
neutral colored clothes/dress, opaque stockings, dress shoes, no bright colors, no short dresses or low cut blouses, low key jewelry
Counteroffer
new offer because it changes the original offer
passive risk retention
no money is set aside // retaining risk because the risk is unknown or because the risk taker either does not know the risk or considers it a lesser risk
mutual insurance companies
nonprofit corporations owned by the policyowners
Probability has both ___ and ___ aspects
objective and subjective
catastrophic losses
occurs erratically, w/ great destruction
waiting period
of 1 or more months, which requires the insured to be disabled for a time greater than the waiting period, and for which payments will be paid only for the time after the waiting period when the insured is disabled // The time between the filing of an insurance claim and the payments made on the claim // TIME DEDUCTIBLE -where the insured must wait a specific amount of time after a disability to collect any insurance.
assumption of risk
one assumes risk by engaging in an activity that is inherently risky, and, therefore, should not be allowed to collect damages if an injury results; Ex: not wearing goggles in racketball game
alien insurer
one formed under the laws of any country other than a state of the United States.
foreign insurer
one formed under the laws of any state, other than this state
Basis point
one one-hundredth of a percentage unit. For example, 50 basis points equals one half of one percent. Banks quote variable loan rates in terms of an index plus a margin and the margin is often described in basis points, such as LIBOR plus 400 basis points.
implied warranty
one that is presumed
competitor
one who competes, especially one buying or selling in the same market
exclusive/captive agent
only one company (like direct writer but not an employee -- an independent contractor )
Speculative Risk
only profit or loss possible
unilateral contracts (insurance)
only the insurer makes a legally enforceable promise to pay for covered losses
FICO + ChoicePoint
organizations w/ formula to calculate insurance score
corporeal ownership
ownership of tangible assets such as land, buildings, and money
legal loss (liability loss)
particular type of personal risk that you will be sued because of neglect, malpractice, or causing willful injury either to another person or to someone else's property
New developments: percentage deductible
pay percentage
Cashout
paying-off an existing loan on a property by taking another (usually larger) loan against it.
valued policy
pays face amount for items that are hard to put a price for, like antiques, heirlooms etc; price determined before policy put in place
automobile liability coverage
pays for any damages and liabilities that you are legally obligated to pay for, and also pays defense costs. The cost of defense is over and above the limit of liability. However, no defense is provided if the liability is not covered. When the liability is covered, the insurer has the right to investigate and settle any claims independently of the insured
replacement cost insurance
pays for the replacement value of the loss, without any deduction for depreciation; often has stipulations designed to lessen moral hazard ex: might make insured rebuild own house; if old house, more cost to repair than rebuild, so company pays for functional replacement (replace old with new and safer)
percentage deductible
percentage of the value of the insured property
Cosigner
person who promises to pay the debt of another person
consumer
person who purchases and uses goods or services
life insurance -- beneficiary
person, business, trust, or estate paid a specified amount after insured dies
demographics
personal characteristics that describe a population by age, gender, income, ethnic background, education, and occupation, among others
Major Types of Pure Risk
personal risks, property risks, liability risks
insurable risks include:
personal, property, and legal risks
3 risks that can be covered by insurance
personal, property, libaility
Physical hazard
physical condition frequent of loss
physical hazard
physical condition that increases the possibility of a loss (smoking)
4 types of Hazard
physical hazard moral hazard morale hazard legal hazard
Four Types of Hazards
physical, legal, moral, morale
Profit Sharing
plan that allows employees to share a portion of the company's profits at the end of the corporate year
HO-2
policy is a NAMED PERILS POLICY that specifically covers perils enumerated in the policy, and no others (ex: windstorm, lightning, or hail, and fire or explosion)
HO-5
policy is also an open perils policy, but also includes direct damage or loss to PERSONAL PROPERTY.
The HO-8
policy is for OLDER HOMES that have a replacement cost that is much higher than its market value
at 100
policy matures, and the death benefit is paid to the owner of the policy
implied powers (incidental authority)
powers implied by agent's express powers that allow agent to fulfill requirements of the agency agreement
4 underwriting classes for life insurance
preferred--healthier than average+have lower risk occupations, charged lower premium than standard rate standard--charged the standard premium substandard--those whose health, occupation, personal habits, or other variables predict a shorter lifespan, so they are charged a higher rate uninsurable--hose people in poor health, with unhealthy habits, or who work in hazardous occupations; insufficient amount of info (rare disease)
joint underwriting association
premiums paid by high-risk drivers goes into a common pool and each company must pay its pro rata share of losses and expenses of the pool
clauses in insurance contact where company doesn't need to pay
presence of pre-existing conditions for a health insurance applicant suicide after buying life insurance
Life Value
present value of the family's share of deceased breadwinner's future earnings
anti-rebating laws
prevent the agent or broker from sharing part of their commission with the customer
estoppel
prevention of exercise of one's rights because of inconsistent acts or statements that caused someone else to rely on those acts of statements to their detriment; Ex: if insurance agent tells client that he can mail premium later than due date, then insurance company cannot deny payment of claim for loss that occurs between due date + receipt of premium
incontestable clause
prevents an insurer from canceling a life insurance policy after a 1 or 2 year period
anti-staking provision
prevents the insured from collecting from more than 1 insurance policy for the same loss
interest
price that is paid for the use of another person's money
chief risk officer (cro)
primary responsibility of reducing risk throughout the enterprise (creating depts hiring ppl)
Chance of Loss
probability that an event will occur
Bargaining
process of negotiating an employment contract for union members
Underwriting
process of selecting and classifying applicants for insurance.
cafeteria-style employee benefits
programs that allow workers to choose the benefits that best meet their personal needs
promissory warranty
promise to do something or that something will be done in a specific way
endorsements are for riders are for
property + liability insurance life + health insurance
personal umbrella insurance (excess liability insurance)
provides protection against legal liability that is over and above that provided by auto, home, and boat insurance -- covers direct + consequential losses
Professional liability insurance
provides protection against malpractice lawsuits
term life insurance
provides protection for only a limited time, and has no cash value; can be bought for 1, 5, 10, or 20 years, and is renewable without providing evidence of insurability it cannot easily be changed to accommodate new needs, such as a new child. It also does not develop any cash value. cheapest life insurance
capital
the buildings, equipment, tools, and other goods needed to produce a product or the money used to buy these items or the net worth of a business
accessible
the capability of a web site that allows all types of people to access and use the site's content
Federal Reserve System (FED)
the central banking organization of the United States that controls money supply by determining interest rates and by buying or selling
desc____ research
the collection of information to determine the ___ of something, such as developing a customer profile. The information may include age, gender, occupation, income, and buying habits and can be collected through questionnaires, interviews, or observations
current ratio
the comparison of current assets (cash or other items that can be quickly converted to cash quickly) and current liabilities (debts due within a year), used to indicate the ability of a business to pay its bills
Barter
the direct exchange of goods or services between two parties without a cash transaction
diminishing marginal utility
the effect or law that establishes that price alone does not determine demand, and other factors, such as income, taste, and the amount of product already owned, play a role as well
cost of revenue
the expenses generated by the core operations of the company.
Negligence
the failure to exercise the required amount of care to prevent injury to others.
Medicare
the federal HEALTH INSURANCE program for people who are 65 or older
set goals
the first step in the financial planning process
appointments
the furniture, equipment, and accessories contained in a building
business cycle
the general pattern of expansion and contraction that the economy goes through
time value of money
the increase of an amount of money due to earned interest or dividends
exempt transferees
the insured partners of the insured partnerships where the insured was a partner corporations where the insured was a shareholder or officer
Accelerated death benefits are fully excludable from income if
the insured is a terminally ill individual, which is a person who has been certified by a physician as having an illness or physical condition that can be expected to result in death within 24 months from the date of the certification.
due diligence
the investigation and analysis a prudent investor does before making business decisions
Breach of contract
the lack of performance by a party to another to satisfy a contract that the parties agreed to
domain name extension
the letters contained in each URL that tells the user what type of organization uses the address, such as commercial (.com), education (.edu), or governmental (.gov)
chart of accounts
the list of accounts a business uses in its operation
actual cash value
the loss at the time of the loss (replacement cost or current price - depreciation(decrease in market bc of wear and tear)) . Depreciation is calculated as the age of the item divided by its useful life; doesnt depend on purchase price of item
economic base
the major industries that provide employment in an area
distribution channel
the means by which a product or service is delivered to the customer
direct channel
the means of delivering a service or product directly to the customer, such as via a Web site
debt ratio
the measurement of the percentage of total dollars in a business that is provided by creditors
domain name
the name that identifies the numeric IP address
brand
the name, symbol, or design used to identify a product
aptitudes
the natural abilities that people possess (Ex: beautiful voice, math expertise, etc)
complexity
the number and diversity of contacts with which you must deal. In business firms that operate in complex industries have more suppliers, customers, and competitors than firms in other industries
cumulative dividends
the owners of preferred stock with cumulative dividends has the right to receive accrued (previously unpaid) dividends are paid to any other classes of stock.
advertising
the paid nonpersonal presentation of ideas, goods, or services directed at a mass audience by an identified sponsor by means of print and broadcast
channel of distribution
the path a product takes from producer or manufacturer to final user or consumer
Indemnity
the payment of a loss by the insurer to the insured, but for no more than the actual amount of the loss; provides protection against legal liability that is over and above that provided by auto, home, and boat insurance
owner of the policy
the person or organization who pays the premiums and has ownership rights-- the right to name the beneficiary; the right to receive dividends and to surrender the policy for cash; the right to change ownership; and the right to assign a policy as collateral for a loan
break-even point
the point at which the gain from an economic activity equals the costs involved in pursuing it
climate
the prevailing atmosphere or attitude in a business
Fair market value
the price that a property would fetch in an open market (price that seller + buyer agree on)
Imputed negligence + vicarious liability
the principal is responsible for the acts of his agents
encryption
the process of converting a text message into code
decryption
the process of converting from code into readable text
communication
the process of exchanging information
directing
the process of guiding and supervising employments often one-on-one, while they work
diversification
the process of investing in products or businesses with which an existing business is not currently involved
bilateral contracts
the promises that each party makes are enforceable by the other party through legal proceedings
Arbitrage
the purchase of securities in one market for immediate resale in another to profit from a price discrepancy
demand
the quantity of goods or services that consumers are willing and able to buy at various prices
burn rate
the rate at which a startup with little or no revenue uses cash savings to cover expenses. Usually expressed on a monthly or weekly basis.
debt service
the ratio of a loan payment amount to available cash flow earned during a specific period. Typically lenders insist that a company maintain a certain debt service ratio or else risk penalties such as having to pay off the loan immediately.
disintermediation
the removal of intermediaries, such as wholesalers or retailers, from business transactions between producers and consumers
Subrogation
the right for an insurer to pursue a third party that caused an insurance loss to the insured
conversion
the right of an investor or lender to force a company to replace the investor's preferred shares or the lender's debt with common shares at a preset conversion ratio.
inflation
the rise in the level of prices for goods and services
competition
the rivalry between businesses for consumers' dollars
underwriting
the selection and classification of insurance applicants according to the probable payout for that class.
business ethics
the study of behavior and morals in a business situation
economics
the study of how people allocate scarce resources to fulfill their unlimited wants
Economics
the study of the decisions that go into making, distributing, and using goods and services
income tax
the tax on wages, salaries, and self-employed earnings
brand loyalty
the tendency to buy a particular brand of product
Reinsurance
the term that describes this distribution of policies and the attendant risk among insurers. // where an insurance company (the insurer) transfers a portion of its risks to another (the reinsurer)
content
the text and graphic information contained in a Web site
automation
the use of machines to do the work of people
consideration
the value that the parties to a contract give to each other
Book/private placement memorandum
they are the same thing
Gross Pay
total amount you earn before deductions are subtracted
aggregate deductible
total deductible for a given policy period (adds up)
Gross Domestic Product (GDP)
total dollar value of all goods and services produced in a country in one year
horizontal
type of communication that takes place among employees
stocks
type of investment that has the highest risk and the highest potential rate of return
Flextime
type of work schedule that allows employees to choose their working hours within a defined time limit
Strategic Risk
uncertainty regarding the firm's financial goals and objectives
Medical Information Bureau (MIB) database
underwriting for health and life insurance draws information from here
loss
unexpected reduction in the economic value of one's possessions
deposit slip
used to add funds to a bank account
broad evidence rule
uses all relevant factors in determining the cash value for the loss, which can include, appraisals, income generated by the property, and anything else that could potentially affect the value of the property
Actuary
uses statistics and the law of large numbers to determine expected losses and the probability of how much actual losses can deviate from expected losses
coinsurance
usually 20% of the bill remaining after the deductible is paid; percentage of the bill insured has to pay
cash value life insurance
usually covers much longer terms, up to a lifetime, and builds a cash value for the policy owner
B2B e-commerce
ventures that sell products and services to other businesses
B2C e-commerce
ventures where businesses sell directly to consumers
consideration
what is exchanged for the promise to do something or refrain from doing something and causes a contract to be binding
saving
what people usually do to meet short-term goals
Short Term Goal
what you plan on achieving in the next few months
Long Term Goal
what you plan on achieving over the next several years
Call date
when a bond issuer has the right to retire part or all of a bond issuance at a specific price.
Absolute Advantage
when a country is more effective than any other at producing a specific product
Net Pay
when all deductions are taken from your gross pay
simple interest
when you multiply principal times rate of interest times length of repayment time
Compressed Workweek
work schedule that fits the normal 40-hour workweek into less than 5 days
hours clause
would limit the time that the insured could file a claim for damages. (now 96 hours)
parole evidence rule
written policy determinative where there is any conflict between the oral and written agreement
primrary insurer
wrote the policy for the insured (reinsurance)
Comprehensive coverage (auto insurance)
your insurance company pays for damage to your auto caused by an event other than a collision
The mechanics of a bond transaction
• Bonds can be held until maturity or sold in the secondary market • Most bonds are sold through full-service brokerage firms, discount brokerage firms, or the Internet • Generally, a minimum commission of $5-$35 is charged on a $1,000 bond • Interest and capital gains from selling bonds are both taxable for the bondholder. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Things that affect the price of stock
• The financial condition of the company or corporation (their earnings) • Current interest rates of the company or corporation • The market for a company's or corporation's product or services (ex. the newspaper industry's popularity has been consistently going down every year since the 2000s or so, but the biotechnology industry is currently booming) • The market value of the company or corporation (this reflects the price investors are willing for a share of stock; if investors are paying more than what the stock is "worth," it is considered "overvalued," and likewise, if a stock is trading at an amount less than what is what it is worth, it is considered to be "undervalued.") • Earnings per share ratio • Price-earnings ratio • PEG Ratio (Price / Price-earnings ratio / Earnings per share ratio)
Reasons why corporations issue bonds (Objective 2)
• To get funds for a corporation's major *P*urchases • To get ongoing *B*usiness *A*ctivities • When it is *D*ifficult or impossible for a corporation to Sell Stock • To improve a corporation's financial *L*everage • Interest paid to bondholders is a *T*ax *D*eductible business expense that can be used to reduce the federal and state taxes corporations must pay (Note: a bondholder purchasing bonds is NOT a tax deductible activity) P BA DSS, L TD
individual life insurance
purchased by individuals; usually greater face value
Consumable goods
purchases that you make often and use up quickly
Risk transfer
pure risk is transferred from the insured to the insurer
Loss Control
reduces frequency and severity of losses
Tax Credit
reduction of taxes owed
Commercial Lines
refer to property and casualty coverages for business firms
Legal Hazard
refers to the characteristics of the legal system or regulatory environment that increase the frequency or severity of losses EX: large jury verdicts, large damage awards in liability lawsuits, coverage for alcoholism, etc.
Seniority
refers to the length of time a person has held a job
Objective Probability
refers to the long-run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in underlying conditions
Financial Risk
refers to unceratinty of loss because of adverse changes in commoditity prices, interest rates, foreign exhance rates, value of money EX: if food prices raise, school can lose money in lunch department
Antidumping Regulations
regulations designed to restrict the sale of goods for less than their fair market price
Blue sky
regulations in individual states regarding the sale of securities and mutual funds. These laws are intended to protect investors from purposely fraudulent transactions.
footprint rationalization
removal of redundant and inefficient operation
independent agent
represent multiple companies and will shop your policy to find the best coverage at the best premium
insurance broker
represents the insurance applicant // must be licensed by the state in which they conduct business.
Graham Leach Bliley Act (GLB)
required more uniform laws so that agents + brokers could work in different states
elimination period deductible (waiting period)
requires insured to be disabled for time greater than waiting period and when payments will be paid only for the time after the waiting period
principle of reasonable expectations
requires that any exclusion or other qualification be conspicuous (clear to see); otherwise, the insured is entitled to coverage that he reasonably expects
financial underwriting
requires that the company determine that the beneficiary would suffer a loss if the insured died, if the beneficiary is also the owner of the policy
medical underwriting
requires that the insurance applicant receive a physical exam to determine the health of the applicant as well as supply medical information on the insurance application
coinsurance
requires the insured to pay a certain percentage of his losses or expenses
limited-payment life insurance
requires the payment of premiums for a limited time for a lifetime protection// at the end of the term does not pay any more premiums, but has lifetime protection
self insurance
retaining risk; set aside money for unexpected losses
Surplus-share treaty
retention limit for each policy; the reinsurer pays anything above the line, up to a specified maximum amount
pension plan
retirement plan that is funded at least in part by an employer
pure risk
risk in which there is only a possibility of loss or no loss
Property Risks
risk of having property damaged or lost from numerous cases EX: tornadoes, windstorms, theft
particular risk
risk that affects particular individuals (robbery, vandalism)
Nondiversifiable risk
risk that affects the entire economy or large numbers of people
financial risk
risk that an investment will result in losses
fundamental risk
risk that can affect many people at once (earthquake, terrorism)
personal risk
risks that affect someone directly, such as illness, disability, or death
After-tax operating income
see Net operating income after taxes
inherent vice
self-destruction of something just of is nature. EX: rotting fruit
Financial Plan
set of goals for spending, saving, & investing the $ you receive
Actuaries
set the insurance rates; use statistics and the law of large numbers to determine expected losses and the probability of how much actual losses can deviate from expected losses.
property risk
affects either personal or real property
Fundamental Risk
affects entire economy or large numbers of people EX: war, inflation, terrorist attack
Particular Risk
affects only individuals and not entire community EX: car theft, bank robbery, house fire
Diversifiable risk
affects only individuals or small groups
Loss Prevention
aims to reduce probability of loss EX: not smoking, safe driving
Proportional Tax
aka flat tax, tax for which the rate stays the same regardless of one's income
calendar year deductible
amount that must be paid by insured in a calendar year before insurance company pays anything (similar to aggregate)
Exemption
amount you may subtract from your income for each person who depends on your income to live
future value
amount your original deposit will be worth in the future based on earning a specific interest rate over a specific period of time
accrual basis
an accounting system in which income is recorded when it is earned, and expenses are recorded when they are paid
cash basis
an accounting system in which income is recorded when it is received, and expenses are recorded when they are paid
educational activity
an action, such as a human relations workshop, that prepares employees for advancing in the organization
development activity
an action, such as an industry conference, that prepares managers to lead the company into the future
debit
an addition to the left side of an account that increases the balance of all assets and expense accounts and decreases the balance of all liability and revenue accounts
customer benefit
an advantage of personal satisfaction that a customer will get from a product
credit bureau
an agency that collects information for a fee on how promptly people and businesses pay their bills
Futures Contract
an agreement traded on an organized exchange to buy or sell assets, especially commodities or shares, at a fixed price but to be delivered and paid for later.
endorsement (rider)
an amendment or addition to the basic policy that allows the policy to be tailored in acceptable ways for individual situations
cash discount
an amount deducted from the selling price for payment within a specified time period
credit
an arrangement for deferred payment for goods and services; credit allows a business or individual to obtain products in exchange for a promise to pay later. An addition to the right side of an account that decreases the balance for all assets and expense accounts and increases the balance for all liability and revenue accounts
cooperative advertising
an arrangement in which advertising costs are divided between two or more parties
excess of lose reinsurance
an arrangement where the reinsurer only covers losses that are greater than the primary insurer's retained limit
Most term insurance policies are convertible
an be converted to a cash-value policy
C-cooperation
an entity that pays taxes on earnings; its shareholders pay taxes as well
contingency fund
an extra amount of money that is saved and used only when absolutely necessary
entrepreneur
an individual who undertakes the creation, organization, and ownership of a business
direct insurance writer
an insurance agent who works for one particular insurance company, such as life and automobile companies
Offer
an invitation to enter into a contract that's made with serious intent by 1 person to another person
affiliate program
an online marketing agreement in which member web sites drive targeted traffic to an e-commerce merchant in return for a commission on the sales generated at the merchant site
double opt-in list
an online opt-in mailing list with a two-step confirmation process subscribers must confirm their registration by responding to an email message
underinsured motorist coverage
any deficiency of compensation for injuries caused by someone with inadequate insurance to cover your losses can be collected from your own insurance company, up to the policy limits
benefits
any extra compensation that workers receive on a job, such as paid vacation and sick days, flextime, and child care
covered auto
any listed in the declarations section of the insurance contract, a newly acquired vehicle, a trailer owned by a named insured, or a temporary substitute vehicle, any personal vehicle leased for at least 6 months
surplus lines
any type of insurance not offered by an insurer licensed to do business within the state; must be given to a nonadmitted insurer
temporary substitue vehicle
any vehicle that you are driving because you are unable to use your insured vehicle, and you do not own the temporary vehicle
asset
anything of value that a business owns, such as cash, equipment, or a building
hazard
anything that causes/increases likelihood of loss (skydiving)
straight deductible
applies to each separate loss
life insurance process
apply; pay 1st premium; receive conditional premium receipt
Mutual insurers
are corporations owned by the policyowners, who elects the board of director
Interview
arrive 10-15 min. early, offer your hand for a hand shake, no gum, come prepared
punitive damages
assessed to deter the tortfeasor from committing the act again (for intentional torts)
factors for underwriting
auto insurance: number of points + car accidents insurance scores (based on credit score because correlation low credit score high claims)
Exempt Status
available to those who know they will not earn enough in one year to owe income tax
5 major ways of handling risk
avoidance, loss control, retention, noninsurance transfers, insurance.
Methods of Handling Risk
avoidance, loss control, retention, non insurance transfers, insurance
Avoidance
avoiding the risk ex: stay out of high crime areas, avoid driving, etc.
special damages
awarded for losses where the financial impact is quantifiable and can be itemized (medical expenses + loss of income)
original-age method
bases the premiums on the age of the insured when the term insurance was first acquired
Casualty insurance
broad field of insurance that covers whatever is not covered by fire, marine, and life insurance include auto, liability, burglary and theft
newly acquired vehicle
broadest coverage of any vehicle shown in the declarations, except collision coverage. Coverage begins when you are the new owner. For coverage for collision and other-than-collision damage, you must notify the insurer within 14 days if any of the vehicles in the declarations section has such coverage. If not, then notice must be given within 4 days. However, if it is an additional vehicle, the insurer must be notified with 14 days.
service industries
businesses that provide services for a fee
recission
can be ended by mutual agreement
Morale Hazard
carelessness or indifference to a loss because of the existence of insurance EX: leaving doors unlocked, leaving car keys in unlocked car
current asset
cash or any other item that can be converted to cash quickly and used by a business within a year
Peril
cause of loss.
Passive Retention
certain risks are unkowningly retained because of ignorance, indifference, laziness, very dangerous
risk
chance of loss
Financial risk
changes in commodity prices, interest rates, foreign exchange rates, and the value of money.
aleatory contracts
characterized by unequal consideration // insurance company only has to pay if certain events occur // (noninsurance is equal consideration)
perpetual mutuals
charged a single premium or a lump sum that covered a long time// if cancel insurance, part of premium returned
combination whole life insurance
combines a whole life policy with initial term insurance; term life insurance up, then cheaper than initial whole life insurance// premium is invested to increase the cash value of the policy as the term insurance decreases// greater protection in the beginning for a growing family
Notarized
signature verified by a notary
3 general classes of legal wrongs
crime: a person intentionally inflicts injury, or takes something from another tort: legal or civil wrongs committed against people or organizations, causing them a loss; ex: causing an auto accident, or failure to make a safe product breach of contract: lack of performance by a party to another to satisfy a contract that the parties agreed to.
replacement cost
current price of a NEW item
cost of the premium is determined by
death rate of each age group smoker gender not family history of disease or genetics bc not easy to segment the population in this way, and there may not be a large enough difference in mortality rates to justify the expense of segmentation; also privacy + discrimination
Insurance underwriters
decide if applications for insurance cover (risks) should be accepted and, if so, what the terms of that acceptance are. (selection + categorization)
Underwriter
decides which class the insurance applicant belongs
corridor deductible
deductible that only applies to the major medical plan that only pays when the basic plan does not plus a specific dollar amount
Tax
defined as a payment imposed on a taxpayer by a governmental unit
Subjective Risk
defined as uncertainty based on a person's mental condition or state of mind
Coverage ratio
describes a company's ability to pay debt from cash flow or profits.
Filing Status
describes your tax-filing group which is based on your marital status as of the last day of the tax year
Antidumping Policies
designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition
underwriting income
difference between premiums collected on insurance policies by the insurer, and expenses and claims paid
speculative risk
differs from pure risk because there is the possibility of profit or loss
peril
direct cause of loss// something that may cause loss (fire, hurricane)
split limit
divides the limit of liability into 3 parts: the limit for each person, the total limit, and limit for property damage ex: 100/300/50 would have a limit of liability of $100,000 for each person, a total limit of $300,000, and a limit of $50,000 for property damage
Soliciting agents (aka special agents)
do not have the legal authority to bind the company to a contract; the insurance company must approve of the application before the insurance becomes effective.
deductibles in health insurance
dollar deductible, time, calendar year, corridor, elimination period deductible
Male Dress Interview
dress shirt, dress shoes, pants, tie, khakis, no earrings/body piercings, cover tattoos
twisting
duping the insured by false information or comparisons to change already owned policies to those that the agent or broker is selling
cost effective
economically worthwhile in terms of what is achieved for the amount of money spent
condition precedent
either a condition that must be satisfied or something that the insured must do before or when a loss occurs and before the insurer will perform, which, in most cases, is by paying the claim
speculative risk
either profit of loss can happen
B2B exchanges
electronic forums where businesses trade goods and services
avoidance
elimination of risk (not participating in stock market)
1
employment is primary while coverage provided by being a dependent is excess
Enterprise Risk
encompasses all major risks faced by business firms EX: pure risk, speculative risk, strategic risk, operation risk, financial risk
family deductible
single deductible that applies to all members of a family; if the deductible is $100 per month, 2 members were treated within a month, and the $100 deductible paid for the 1st member, then no deductible for the 2nd member
Enterprise Risk Management
single treatment program that has all major risks faced by firm
elastic demand
situation in which a change in price creates a change in demand
Pure Risk
situation where there are only possiblities of loss or no loss EX: premature death, job accidents, medical expenses, damage to property from fire, lightning, flood, or earthquake
Venture Business
small business that grows to become a corporation
binder
temporary contract that can be oral or written that binds the insurance company to the contract immediately until it has a chance to examine the application, and issue a formal policy.
Bridge financing
temporary funding that will eventually be replaced by permanent capital from equity investors or debt lenders.
demographic trends
tendencies of people grouped by age, gender, ethnicity, education, or income that change over time
geographic trends
tendencies of people moving from one area of the country to another as financial centers shift location
Adverse selection
tendency of persons with a higher-than- average chance of loss to seek insurance at standard (avg) rates,
interest inventories
tests that help you identify the activities you enjoy the most
conditions
the ___ at the time of the loan request, including potential for growth, amount of competition, location, form of ownership, and insurance
Culture
the accepted behaviors, customs, and values of a society
calendar year
the accounting period of time from January 1 to December 31
burglary
the act of breaking into and entering a building with the intent to commit a felony
twisting
the act of replacing insurance coverage of one insurer with that of another based on misrepresentations (coverage with Carrier A is replaced with coverage from Carrier B)
e-commerce
the act of selling products and services over the Internet
accounts payable
the amount a business owner owes to creditors
net worth
the amount by which assets exceed liabilities
accounts receivable
the amount customers owe a business
cash flow
the amount of cash available to a business at any given time
commutatie contacts
the amount of consideration given by both parties are usually fairly equal; (most non-insurance contracts are this)
Supply
the amount of goods and services available for sale
Demand
the amount of goods and services people are willing to buy
gross income
the amount of income from wages or salary before payroll deductions
potential earning power
the amount of money you may earn over time
present value
the amount of money you would need to deposit now in order to have a desired amount in the future
lump sum deductible
equal to a specific amount
reinsurance facility
established that receives contributions from all of the insurance companies operating within the state; insurance company decides whether to place it in the reinsurance pool or accept the driver as a regular customer, but insurance company that issued the policy also services the policy
Cash Deficit
estimated expenses are greater than estimated income
binder
evidence of insurance until the policy is actually issued
Audit
examination of income tax returns
Reward Cards
example of data mining
expense
expected payment for a good or service
Itemized Deductions
expenses you can subtract from adjusted gross income to determine your taxable income
after death of insured
face amount of the policy is paid to the named beneficiary
face value vs cash value
face value is amount paid to beneficiary after you die cash value is taken out of premium and is for the insurance company, you can loan from the cash value. if you die and you did not pay your loan, the beneficiary receives face value - the loan that you owe
2 basic reinsurance
facultative + treaty
concealment
failure to disclose material information; to deny insurance bc of concealment to prove: 1. the insured knew that the fact was important in regard to the insurance being applied for; 2. there was an intention to defraud insurer
Negligence
failure to exercise the required amount of care to prevent injury
misrepresentation
false or incomplete comparisons of different policies sold by competitors
Human Life Value
family's share of the deceased breadwinner's future earnings.
Indirect Loss
financial loss from the occurrence of direct physical damage or theft loss
Direct Loss
financial loss from the physical damage, destruction, theft of property
copayment
fixed amount you have to pay health insurance
Salary
fixed annual amount of gross pay
Wage
fixed hourly rate earned by employees
Professional liability insurance
for doctors, attorneys, lawyers etc
survivor (second to die) life insurance
for estate planning; benefits given after both spouses die
Increasing term life insurance
for people who wish to provide a hedge against inflation, especially for parents with children who will be attending college// increasing premium, increasing face value
Incentive Pay
form of compensation that encourages employees to strive for higher levels of performance
dollar deductible
form of dollars
Social Media
form of electronic communication through which users create online communities to share information
Business Plan
formal document that outlines the path a business intends to take to earn and grow revenues
reinsurance pool
formed by a group of insurers that combines their financial assets to underwrite insurance jointly; for catastrophic losses
catastrophic losses
frequency of occurrence and the severity of losses cannot be accurately forecasted, and, thus, catastrophic losses are usually not insured by private companies.
strategic risk
from goal-oriented behavior (company buys machine for efficiency, but ends up with more losses than before)
operational risk
from the operation of the enterprise Ex: risk of injury to employees, risk that customers' data leaked bc of bad security
economic risk
fundamental risks because they affect many people (unemployment)
Other things that need tended to after premature death
funeral expenses, medical bills, estate settlement costs, taxes on large estates
The law of large numbers
greater the number of exposures, the more closely will the actual results approach the probable results
Non-Monetary Things that come with Premature Death
grief, loss of role model, counseling and guidance for children
Union
group of people who work in the same or similar occupations, organized for the benefit of the employees in those occupations
risk retention (active retention, risk assumption)
handling the unavoidable or unavoided risk internally// retained risks occur with greater frequency, but have a lower severity// accepting risk// deductible we pay small losses, but once over deductible, insurance pays big losses
assessment mutual
has the right to charge more premiums if losses and expenses have been greater than expected
calendar year deductible
has to be paid only once per year; carry-over provision allows the payment of any deductible during the last 3 months of the year to be carried over into the next year
General agents
have the authority to bind the insurance company, and can issue a policy immediately as a binder
Property risks
having property damaged or lost
Equipment breakdown insurance (AKA Boiler and Machinery insurance)
highly specialized line that covers losses due to the accidental breakdown of covered equipment
family purpose doctrine
holds parents responsible for the negligent acts of their children
dram shop law
holds the seller of alcoholic beverages liable for drunken patrons
insurability premium receipt
if applicant is insurable according to company's underwriting standards, then life insurance becomes effective from date of the application or from date of medical examination
last clear chance rule
if defendant had a choice to prevent injury, regardless of negligence, then plaintiff will be able to collect money ignoring comparative negligence
assigned risk plan
if insurance company writes 10% of the automobile insurance plans within the state, then it is assigned 10% of the high-risk drivers
conditional contracts (insurance)
if the insured fails to pay the premium, or fails to abide by the contract, then the insurer is not obligated to pay for any of the insured's losses
Case law to benefit insured(insurance contracts not negotiable) 1
if the terms of a contract are not specific, then the terms are interpreted in a way that would most benefit the insured
married filing jointly
if you and your spouse are living together, you may choose this as your filing status
transferred for value
immediate cash from selling life insurance policy to an exempt transferee, the life insurance proceeds remains tax-free
appraisal
impartial assessment of an item's worth
Liability Risks
important type of pure risk that most people face, there is no limit of $ that can be asked for, can be very costly EX: vehicle accidents
implied warranty
imposed by law and is understood to apply even though it has not been stated
Absolute liability
imposed on some parties without regard to fault
Absolute liability (strict liability)
imposed on some parties without regard to fault (refers to legal liability)
named insured
includes any others who are included for coverage even if not named specifically
Risk of Poor Health
includes both payment of medical bills and loss of earned income, major surgery, etc. Health insurance helps, planning for future
Cash Surplus
income exceeds expenses
insurance score
# of claims made; corresponds to credit score
Liabilities
$ or debts owed to others
Disposable Income
$ you have left to spend/save after taxes or other deductions are taken
5 major methods for managing risks
* Avoidance * Loss control * Retention * Noninsurance transfers * Insurance
Basic Characteristics of Insurance
* Pooling of losses * Payment of fortuitous losses * Risk transfer * Indemnification
Commercial Risks
* Property risks * Liability risks * Loss of business income
Organization for Economic Cooperation and Development
A Paris-based intergovernmental organization of "wealthy" nations whose purpose is to provide its 29 member states with a forum in which governments can compare their experiences, discuss the problems they share, and seek solutions that can then be applied within their own national contexts.
4 requirements for valid contract
1.offer and acceptance, 2.consideration, 3.competent parties, and 4.legal purpose.
__
??? performance
Consumer price index
A ___ ___ ___ that is determined by measuring the price of a standard group of goods meant to represent the market basket of a typical urban consumer. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
European Free Trade Association
A free trade association including Norway, Iceland, and Switzerland.
Down payment
A good faith deposit made by a buyer to underline his or her commitment to complete the deal.
Counterpurchase
A reciprocal buying agreement.
Stop payment order
A request that the bank not cash or process a specific check
Wholly Owned Subsidiary
A subsidiary in which the firm owns 100 percent of the stock
Fixed Exchange Rates
A system under which the exchange rate for converting one currency into another is fixed.
Bond ladder
A type of investing strategy. It consists of investors dividing their investment dollars among bonds that mature at regular intervals in order to balance risk and return. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Electronic Fund Transfer systems
A variety of systems and technologies for transferring funds electronically rather than by check
Market Power
Ability of a firm to exercise control over industry prices or output.
Liquidity
Ability to easily convert financial assetsinto cash without lose in value
Historic Cost Principle
Accounting principle founded on the assumption that the currency unit used to report financial results is not losing its value due to inflation.
Taxable income
Adjusted gross income minus deductions
Grace Period
Allows you to avoid finance charge if you pay in full before the due date
Mercantilism
An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.
Dow Jones Industrial Average
An indicator of 30 industrial stock prices used to measure the general level of stock prices
Oligopoly
An industry composed of a limited number of large firms
Fixed interest rate
An interest rate that does not change
At The Market
An order to buy or sell a stock at the best price currently available
Municipal bonds
Bond issued by state and local government units. Earnings are tax-free
Stated interest rate
Bondholders receive ___ payments every six months. This term is one of the characteristics of corporate bonds (Objective 1).
Worldwide Product Division Structure
Business organizational structure based on product divisions that have worldwide responsibility
Worldwide Area Structure
Business organizational structure under which the world is divided into areas.
Credit bureau
Business that gathers, stores and sells credit information to other businesses
E-Commerce
Conducting business on-line through the Internet.
Currency Translation
Converting the financial statements of foreign subsidiaries into the currency of the home country.
Strategic Alliances
Cooperative agreements between two or more firms
Open-end credit
Credit whereby you can add purchases up to a set credit limit
Bonds
Debt obligations of corporations or the government
International Division
Division responsible for a firm's international activities
Timing of Entry
Entry is early when a firm enters a foreign market before other foreign firms and late when a firm enters after other international businesses have established themselves.
Export Management Company
Export specialists who act as an export marketing department for client firms
Market Makers
Financial service companies that connect investors and borrowers, either directly or indirectly.
North American Free Trade Agreement
Free trade area between Canada, Mexico, and the United States
Investment grade
High-quality bonds
after market parts
If the vehicle can be repaired, the insurer will usually use cheaper after-market parts
Fair credit reporting act
If you are denied credit based on a credit report, inaccurate information may be the cause
Market Imperfections
Imperfections in the operation of the market mechanism.
Direct investments
Investments in which the investor holds legal title to a property
Imports
Items bought from other countries
MITI
Japan's Ministry of International Trade and Industry.
Money Management
Managing a firm's global cash resources efficiently
High-yield fund
Mutual fund that invests primarily in lower-rated bonds
Mores
Norms seen as central to the functioning of a society and to its social life.
Relatively Efficient Market
One in which few impediments to international trade and investment exist.
Debtor
One who owes money to another
Commission
Pay based on a percentage of sales
Investors
People who hold a share(s) of stock for a long period of time. They participate in long-term investment strategies.
Inflation risk
Prices may increase
Assets
Property that can be used to repay debt, such as stocks and bonds or a car
Host Country
Recipient country of inward investment by a foreign firm.
Exporting
Sale of products produced in one country to residents of another country.
Foreign Debt Crisis
Situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt
Types of Insurance - Government
Social insurance
Political System
System of government in a nation.
Experience Curve
Systematic production cost reductions that occur over the life of a product.
Treaty of Rome
The 1957 treaty that established the European Community.
Financial Accounting Standards Board
The body that writes the generally accepted accounting principles by which the financial statements of US firms must be prepared.
NYSE
The New York Stock Exchange, which is one of the organized stock markets in the US
Bootstrapping
The actions of a startup to minimize expenses and build cash flow, thereby reducing or eliminating the need for outside investors.
Current market value
The amount the owner can sell the securities (such as stocks and bonds) for. Trading investments are the ___.
Global Learning
The flow of skills and product offerings from foreign subsidiary to home country and from foreign subsidiary to foreign subsidiary
Transnational Financial Reporting
The need for a firm headquartered in one country to report its results to citizens of another country.
Liquidity
The quality of being easily converted to cash
Call option
The right to buy stock or futures contracts at a fixed price until the expiration date
Licensing
The selling rights to use some intangible property (production process, trademark, or brand name) for a fee or royalty, involves a manufacturing process
Past due
The status of a bill when the minimum payment has not been received by the due date
Political Economy
The study of how political factors influence the functioning of an economic system.
Maturity
The time when a corporation repays borrowed money
Equal credit opportunity act
To prevent discrimination in the evaluation of creditworthiness
Goals
Things you want to accomplish
Balance
To reconcile the sums of the debits and credits of an account
Finance charge
Total dollar amount of all interest and fees you pay for the use of credit
Positive cash flow
When income exceeds the amount needed to cover expenses
cascading style sheets (CSS)
a feature of HTML that gives users more control over how web pages are displayed
Durable goods
expensive items that you do not purchase often
mentor
experienced employee who serves as teacher & counselor for a less-experienced person
Wealth
accumulation of assets
3 ways of determining amount of indemnity
actual cash value fair market value broad evidence rule
Goal
desired end that you work towards
trends
developments that mark changes in a particular area
amount of indemnity
based on actual cash value
facultative reinsurance
based on individual agreements to cover specific losses; for a particular coverage
the payment of a life insurance policy to a beneficiary is not taxable unless
beneficiary takes the proceeds as an annuity, and the money not paid continues to earn interest, then the interest is taxable// If the transferee was non-exempt, then, for the buyer, the difference between the cash value of the policy and the purchase amount is taxable when the policy is finally paid.
agency agreement
binds principal(person or company) and agent; source of agent's authority
field underwriting
broker matches applicant to insurer
advance premium mutuals
company is owned by the policy owners, but the advance premium mutual cannot charge assessments if losses were greater than expected, pays for excessive losses out of its surplus// charges a greater premium than is necessary to cover its losse
adverse selection
company more loss than expected because provide false information for a lower premium
Enterprise risk management
combining of all major risks faced by a firm into a single unified treatment program.
apparent authority
if agent actually does represent company then insurance applicant can accept this
depreciation
decrease in market value because of wear and tear
Peril
defined as the cause of loss
collision coverage
damage to the insured's motor vehicle because of a collision
Data Warehousing
data storage & retrieval
Premature death
death of a family head
Premature Death
death of a family head with unfulfilled financial obligations, surviving members have to deal with
Moral Hazard
dishonesty or character defects in an individual that increases severity of loss EX: faking an accident to collect money from insurer, fraudulent claims, murdering insured to collect life insurance
moral hazard
dishonesty to loss
tax-exempted
not taxable
exposure units
people or things that are subjected to loss and are insured
Fortuitous loss
A loss that is unforeseen and unexpected by the insured
Stock market
A market in which the people trade stocks they already own
Standard of living
A measure of an individual's or a family's quality of life
Price Elasticity of Demand
A measure of how responsive demand for a product is to changes in price.
Beta
A measure of volatility of a public stock relative to an index or a composite of all stocks in a market geographical region. A beta of more than one indicates the stock has higher volatility than the index and a beta of one indicates volatility equivalent to the index (or composite). For example, the price of a stock with a beta of 1.5 will change by 1.5% if the index value changes by 1%. Typically, the S&P500 index is used in calculating the beta of a stock.
Expatriate Manager
A national of one country appointed to a management position in another country.
Management Networks
A network of informal contact between individual managers.
Good
A physical item that is produced and can be weighed or measured
Socialism
A political philosophy advocating substantial public involvement, through government ownership, in the means of production and distribution
Tribal Totalitarianism
A political system in which a party, group, or individual that represents the interests of a particular tribe (ethnic group) monopolizes political power.
Representative Democracy
A political system in which citizens periodically elect individuals to represent them in government
Right Wing Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that generally permits individual economic freedom but restricts individual political freedom, including free speech, often on the grounds that it would lead to the rise of communism.
Theocratic Totalitarianism
A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles
Appraiser
A practitioner who has the knowledge and expertise necessary to estimate the value of an asset, or the likelihood of an event occurring, and the cost of such an occurrence.
Line of credit
A pre-established amount that can be borrowed on demand
Subjective Probability
A probability derived from an individual's personal judgment about whether a specific outcome is likely to occur. Subjective probabilities contain no formal calculations and only reflect the subject's opinions and past experience.
Beta Product
A product that is being tested by potential customers prior to being formally launched into the marketplace.
Turnkey Project
A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational.
Time Draft
A promise to pay by the accepting party at some future date
Call protection
A provision in the terms of a bond specifying the period of time during which the bond cannot be called by the issuer.
Voluntary Expert Restraint
A quota on trade imposed from the exporting country's side, instead of the importer's; usually imposed at the request of the importing country's government.
Checkbook register
A record of deposits to and withdrawals from a checking account.
Balance sheet
A record of the financial situation of an institution on a particular date by listing its assets and the claims against those assets. Analyzing this is one of the proper steps that should be taken when someone researches stocks.
Credit history
A record of your credit performance
Local Content Requirement
A requirement that some specific fraction of a good be produced domestically.
403(b) plan
A retirement account for employees of schools, tax-exempt organizations, and government units
Individual Retirement Account (IRA)
A retirement plan that allows workers to set aside money each year in tax-deferred savings
Bull market
A rising stock market (in both volume and prices), which is characterized by optimism
Share account
A savings account at a credit union; the shares are ownership interest in the credit union
National Association of Securities Dealers Automated Quotation (NASDAQ)
A securities exchange (and not dealer network that sells over-the-counter stocks) that is owned and operated by the National Association of Securities Dealers (NASD). The ___ is the world's first electronic stock market, and is still, to this day, all electronic. It trades with other brokers, and trades are completed by either telephone or computer. To be listed in the ___, companies or corporations must have issued at least 100,000 shares of stock worth at least $1 million. It has several regional locations, was created in 1971, is home to many high tech stocks (such as Microsoft, Intel, and Dell) which usually have 4- or 5-letter ticker symbols unless the stock was previously traded on the NYSE, has no trading floor (is all electronic), is relatively cheaper to join as a company or corporation than other stock exchanges (such as the NYSE), and companies and corporations can only join ONE stock exchange (i.e., a company cannot be both on the ___ and the NYSE).
Free trade zone
A selected area where products can be imported duty-free and the stored, assembled, and/or used in manufacturing
Carried interest
A share in the profits of a private equity fund. Typically, a fund must return the capital given to it by limited partners plus any preferential rate of return before the gneral partner can share in the profits of the fund.
Ticker symbol
A short abbreviation that is used to uniquely identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers or a combination of both, and usually has 3, 4, or 5 characters in the stock's abbreviation.
Comparative Advantage
A situation in which a country specializes in the production of a good or a service at which it is relatively more efficient
Positive Sum Game
A situation in which all countries can benefit even if some benefit more than others
Caste System
A system of social stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.
Service
A task that a person or a machine performs for
Values
Abstract ideas about what a society believes to be good, right, and desirable
Personal Controls
Achieving control by personal contact with subordinates.
First Mover Advantages
Advantages accruing to the first to enter a market
Location Specific Advantages
Advantages that arise from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets (such as the firm's technological, marketing, or management know-how).
Check card
Also called a debit card it works like a check. It is used to access funds from your checking account
Liabilities
Amounts of money that are owed to others
Reinsurance
An arrangement by which the primary insurer transfers all or part of the potential losses to another insurer.
Cross Licensing Agreement
An arrangement in which a company licenses valuable intangible property to a foreign partner and receives a license for the partner's valuable knowledge; reduces risk of licensing.
Security
An asset an investor can invest in to be financially safe if that asset makes a relatively noticeable and beneficial profit. Examples of a ___ are shares of stock, bonds, and mutual funds.
Specialized Asset
An asset designed to perform a specific task, whose value is significantly reduced in its next-best use
Index
An average of the prices of single shares of various stocks to see how all stocks in a particular securities exchange are performing overall. It helps investors gauge the stock market. Examples of an ___ are the Dow Jones Industrial Average and the Standard & Poor's 500.
Supply and demand
An economic concept that states that the price of a good rises and falls depending on how many people want it (demand) and depending on how much of the good is available (supply). The prices of securities (such as stocks and bonds) depend on this.
European Union
An economic group of 15 European nations: Austria, Belgium, Great Britain, Denmark, Finland, France, Germany, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain, and Sweden. Established as a customs union, it is now moving toward economic union. (Formerly the European Community.)
Command Economy
An economic system where the allocation of resources, including determination of what goods and services should be produced, and in what quantity, is planned by the government.
Market economy
An economic system whereby both producers and consumers play an active role in determining what is produced and sold and at what price
State Directed Economy
An economy in which the state plays a proactive role in influencing the direction and magnitude of private sector investments
Collectivism
An emphasis on collective goals as opposed to individual goals.
Individualism
An emphasis on the importance of guaranteeing individual freedom and self-expression
401(k) plan
An employer-based plan whereby employees set aside money for retirement that is sometimes matched by employers
Restrictive endorsement
An endorsement that restricts the use of a check
Creditor
An entity (a bank, finance company, credit union, business, or individual) to which money is owed. It agrees to advance an individual, company, or corporation the money, goods, or services.
Transaction fee
An extra charge for various credit activities such as using an ATM or receiving a cash advance
Bear Market
An important term. It occurs when stocks are on a general downward trend (less investors are buying shares of stock than before the ___ occurred).
Bull Market
An important term. It occurs when stocks are on a general upward trend (more investors are buying shares of stock than before the ___ occurred).
Gross National Product
An important term. It represents the total value of the both the goods and services produced all over the world by a nation (such as the United States of America) during a specific period of time (usually a year).
Recession
An important term. This happens when there is a general decline in spending from a nation (a general downturn in economic activity), is considered to occur when there are two consecutive quarters of general economic decline in the Gross National Product (GNP), and an occurrence of this causes the Federal reserve Bank to decrease the prime rate of United States, to increase the general spending of United States, and to decrease the savings of United States.
Inflation
An important term. This happens when there is a general rise in spending from a nation (a general upward rise in economic activity), is considered to occur when there is too much money chasing too few goods, and an occurrence of this causes the Federal Reserve Bank to the increase prime rate rates of United States, to decrease the general spending of United States, and to the increase general savings of United States.
Inflation
An increase in the general level of prices you pay for goods and services. A popular measure of inflation is the consumer price index
Variable interest rate
An interest rate that changes up or down on a set schedule based on an economic index such as the prime rate
Savings bond
An interest-bearing certificate purchased at a bank. The face value includes interest and the full amount is paid upon maturity
Commitment
An obligation, typically the maximum amount that a limited partner agrees to invest in a fund.
Call feature
An option for a corporation that involves the corporation to call in or buy back outstanding bonds from their current shareholders before the maturity date. Most agree not to participate in this option for the first 5 to 10 years after bonds are issued from a corporation. Bonds are typically bought back if their interest rate is much higher than the going rate. Most bonds have this buying back option. This term is one of the reasons why corporations issue bonds (Objective 2).
Dollar Appreciation of Bond Value
An option for most bonds. It involves the bondholder possibly being able to sell his or her bond(s) to another bondholder at a higher price, but only if the interest rate on the bond(s) is higher than the market rate. The dollar amount in bold face will be repaid at the bond's maturity? This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Money order
An order purchased at a post office or financial institution directing another office to pay a specified sum of money to a person or fund named on it
Bill of Exchange
An order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time.
Multinational company
An organization that does business in several countries
Federal agency debt issues
An organization that manages government bonds. Examples of these are Fannie Mae, Ginnie Mae, and Freddie Mac. They have a slightly higher risk than Treasury securities (and thus slightly higher interest rates), are issued for 1-30-year terms (with a 12-year term being the average), have their minimum denominations possibly being as high as $10,000-$25,000, and their agency debt is callable before maturity. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Business
An organization that produces goods and services. Most businesses try to earn a profit
Budget
An organized plan whereby you match your expected income to your expected outflow
Stockholder
An owner of a share of stock
C corporation
An ownership structure that allows any number of individuals or companies to own shares. A C corporation is a stand-alone legal entity, so it offers some protection to its owners, managers and investors from liability resulting from its actions.
Eurocurrency
Any currency banked outside its country of origin.
International Business
Any firm that engages in international trade or investment.
Billing error
Any mistake in your monthly statement as defined by the Fair Credit Billing Act
Creditor
Any person to whom one owes money or goods
Loss exposure
Any situation or circumstance in which a loss is possible, regardless of whether a loss occurs.
Platform product
Appliance or equipment whose basic design and some components are used in several products of a product family.
Diminishing Returns to Specialization
Applied to international trade theory, the more of a good that a country produces, the greater the units of resources required to produce each additional item.
Eclectic Paradigm
Argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.
Moral Hazard
Arises when people behave recklessly because they know they will be saved if things go wrong.
Multipoint Competition
Arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.
Personal finance planning
Arranging to spend, save, and invest money to live confortably, have financial security, and achieve goals
Automatic deductions
Authorized deductions from your checking account, such as for insurance premiums, safe deposit box fees, or other payments
res ipsa loquitur
"the thing speaks for itself" -- some actions so obviously negligent that the law presumes negligence
Single European Act
A 1997 act, adopted by members of the European Community, that committed member countries to establishing an economic union
Federal Reserve Bank
A U.S. Government Agency (NOT the U.S. Treasury) that has four basic functions: to influence the supply of money and credit, to regulate and supervise financial institutions, to serve as a banker for the government, and to supply payment services to the public through depository institutions. It responsible for keeping the U.S. economy in balance by controlling interest rates and money supply, and its current chairman is Dr. Ben Bernanke. BPIC
Public corporation
A company (specifically a corporation) whose stock is traded openly on stock markets.
Secured credit card
A consumer uses savings or other collateral to guarantee the credit card; the limit of credit is based on the amount of collateral available
co-sale right
A contractual right of an investor to sell some of the investor's stock along with the founder's or majority shareholder's stock if either the founder or majority shareholder elects to sell stock to a third-party.
Joint Venture
A cooperative undertaking between two or more firms
Initial public offering (IPO)
A corporation's first offer to sell stock to the public.
Bank
A financial institutions that accumulates deposits and channels money into lending activities
Multinational Enterprise
A firm that owns business operations in more than one country
Direct cash flow statement
Begins with cash provided by the sales from which cash paid for operating expenses is deducted to arrive at the net cash flow from operating activities.
Indirect cash flow statement
Begins with the net income figure taken from the income statement and then makes several adjustments which fall under three main headings (expenses not involving cash outflows, cash outflows not recorded as expenses, revenues not involving cash inflows.)
Foreign Bonds
Bonds sold outside the borrower's country and denominated in the currency of the country in which they are issued
Callable bond
Bonds that can be recalled, or paid off, before their maturity date
Capital goods
Buildings, tools, machinery and other manufactured items used to produce goods and services
Long-term investing
Buying stock and then keeping it for many years in an effort to have one's money grow in step with stock prices generally
ISO 9000
Certification process that requires certain quality standards that must be met
Marketing Mix
Choices about product attributes, distribution strategy, communication strategy, and pricing strategy that a firm offers its targeted markets.
Balance Sheet
Condensed statement that shows the financial position of an entity on a specified date. (It states what assets the entity owns, how it paid for them, what it owes, and what is the amount left after satisfying the liabilities.
Economies of Scale
Cost advantages associated with large-scale production.
Location Economies
Cost advantages from performing a value creation activity at the optimal location for that activity.
Learning Effects
Cost savings from learning by doing.
marginal cost
Cost to produce an extra unit.
A-rating
Customer pays bills before the due dates
B-rating
Customers pays bills on due date or within 10-day grace period
Objective Risk
Defined as relative variation of actual loss from expected loss
Trademark
Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.
Prospectus
Detailed financial information about a mutual fund company or a company issuing stock
Innovation
Development of new products, processes, organizations, management practices, and strategies
Co-investment/Club deal
Either a.)the right of a limited partner to invest with a general partner in portfolio companies b.)the act of investing by two or more entities in the same target company
birthday rule
Ex: if children injured: stipulates that whichever parent has the earlier birthday is the insurance that is considered primary
Rate of return
Exactly how much money that investor made from selling his or her investment; it is expressed as a percent.
Copyright
Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.
Fixed expenses
Expenses that remain constant
Exports
Goods an services sold to other countries
Subsidy
Government financial assistance to a domestic producer
Society
Group of people who share a common set of values and norms
Financial guaranty insurance
Guarantees the payment of principal and interest on debt instruments
Current Account
In the balance of payments, records transactions involving the export or import of goods and services.
Externalities
Knowledge spillovers
Types of Insurance - Personal
Life and Health insurance Property and liability insurance
Free trade agreement
Members to agree to remove duties, also called import taxes, and trade barriers on products traded among them
Loan
Money loaned out at interest
No-load mutual funds
Mutual funds that do not charge commissions. However, there are annual maintenance charges and service fees
Growth funds
Mutual funds that invest in the common stock of established companies as well as in new companies and industries
Externally Convertible Currency
Nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way.
Equity option
One of the main types of stock options. It (a contract) gives the purchaser the right to buy or sell a stock at a given price before a certain date.
Risk refers to ___ and ___ being injured
Property & Life
Trade barriers
Restrictions to free trade
Dumping
Selling goods in a foreign market for less than their cost of production or below their "fair" market value.
Saving
Setting aside income or money for future spending
Usury law
State law sets maximum interest rate that may be charged for consumer loans
Blue chip stocks
Stocks in the biggest, most established, and consistently profitable companies in the United States
Growth stocks
Stocks issued by a corporation that will provide future returns rather than income in the short term
Income stocks
Stocks that have a consistent history of paying high dividends
Long-term goals
Takes more than five years to achieve
NASDAQ
The National Association of Securities Dealers Automated Quotation system is an important part of the over-the-counter market. NASDAQ is an electronic marketplace listing prices of more than 5,000 stocks
Purchasing power
The ability to buy goods and services
Capacity
The ability to repay a loan from present income
Objective Risk
The relative variation of actual loss from expected loss
Unfavorable balance of payments
The result of a country sending more money out than it brings in, also called negative balance if payments
Option
The right to buy or sell stock at a predetermined price
Put option
The right to sell stock or futures contracts at a fixed price until the expiration date
Franchise
The right to use a company name or business process in a specific way, involves selling a product or service
Communists
Those who believe socialism can be achieved only through revolution and totalitarian dictatorship.
Risk
Uncertainty of something, concerns a loss
career
a commitment to work in a field that you find interesting and fulfilling
e-cash
a legal form of electronic money transfer used in e-commerce and transacted via the Internet, such as Paypal
Voluntary Compliance
all citizens prepare & file tax returns on their own
Tax Bracket
applied to income range
Retention
business firm or individual retains all or part of a given risk
morale hazard
carelessness to loss
Augmented product
core product to which additional products and services may be added to generate multiple revenue streams.
named perils coverage policy
covers ONLY what is specifically stated in the policy
Crime insurance
covers the loss of money, securities, and other property by burglary
pure risk
either loss or no loss
Barriers to Entry
factors that make it difficult or costly for firms to enter an industry or market
legal wrong
failure to do something to perform a legal duty
Direct Loss
financial loss that results from the physical damage, destruction, or theft of property.
compounding
future value computations
Collateral
hard assets of the borrower, such as real estate or equipment, for which a lender has a legal interest until a loan obligation is fully paid off.
nonadmitted insurer
insurer not licensed for that state
Negotiable
legally collectible
disposable income
money people have to spend after paying for necessary expenses
net worth statement
most commonly used in the event of a tax audit
fraternal insurers
mutual companies that provide life and health insurance to members of a social or religious organization
Lobbying
organized activity by lobbyists to influence public officials to pass laws & make decisions that benefit a profession
Life insurance
pays death benefits
coinsurance
percentage of an amount you have to pay health and property insurance
internship
position in which a person receives training by working with people who are experienced in a particular field
Loss Reducation
reduce frequency of loss EX: sprinklers so that business doesn't stay on fire as long
insurance agent
represents the insurance company // must be licensed by the state in which they conduct business.
Decreasing term life insurance
serves the needs (for term insurance declines as mortgages are paid down and children grow up and leave home) level premium; the face value of the policy declines
country code top-level domain (ccTLD)
the part of the TLD that indicates the country of the Internet address, such as .us for the United states and .fr for France
Representation
the statements made by the insured on the insurance application
waiver
voluntary relinquishment of a legal right
Debt balance
amount still owed on a debt
Dr. Ben Bernanke
The current chairman of the Federal Reserve Bank.
Legal liability arises from 3 general classes of legal wrongs
crime, tort, and breach of contract
4 major personal risks
* Risk of premature death * Risk of insufficient retirement income * Risk of poor health * Risk of unemployment
Characteristics of an ideally insurable risk
* there must be a large number of exposure units * the loss must be accidental & unintentional * the loss must be determinable and measurable * the loss should not be catastrophic * the chance of loss must be calculable * the premium must be economically feasible
3 risks covered by insurance
- Personal risk-- any risk that can affect the health or safety of an individual - Property risk-- any risk that can cause a partial or total loss to property, such as theft, fire, or so-called "acts of God". (uncontrollable natural forces) - Liability risk-- the personal or business risk associated with being found liable to another because of negligence or willful acts that caused a loss to another's property or person, such as injuring someone while driving under the influence of alcohol, or because the insured failed to perform a duty, such as performing contractual obligations.
Resume
-references are on a page by themselves -main categories should be bolded -start with most recent date & work backwards -12 sized font
4 requirements to presume negligence
-there must be a legal duty to perform or to use reasonable care; -there must have been a failure to perform that duty; -the plaintiff must have suffered an injury or a loss; -the negligent act must have been the proximate cause(cause that directly caused the loss or suffering so that if proximate cause didn't happen, then harm would not happen)of the injury.
Progressive Tax
takes a larger share of one's income as the amount of income grows
shared market structure
1.assigned risk plan-- if a particular insurance company writes 10% of the automobile insurance plans within the state, then it is assigned 10% of the high-risk drivers// higher premium 2.joint underwriting association-- similar to the assigned risk plan, but the premiums paid by high-risk drivers goes into a common pool and each company must pay its pro rata share of losses and expenses of the pool// all share underwriting losses 3.reinsurance facility-- a reinsurance pool is established that receives contributions from all of the insurance companies operating within the state; accepts all drivers; insurance company decides whether to place it in the reinsurance pool or accept the driver as a regular customer; insurance company that issued the policy also services the policy 4.specialty auto insurance--specialize in insuring high-risk drivers by charging high premiums for usually the minimum amount of coverage required by the state
Regressive Tax
takes a smaller share of one's income as the amount of income grows
Share draft account
A "checking" account offered to members of a credit union. Instead of checks, "drafts" are written against the member's account
Bretton Woods
A 1944 conference in which representatives of 40 countries met to design a new international monetary system.
Structural Impediments Initiative
A 1990 agreement between the United States and Japan aimed at trying to decrease nontariff barriers restricting imports into Japan.
Public corporation
A corporation whose stock is traded openly in stock markets and may be purchased by an individual
Earnings per share
A corporation's after-tax earnings divided by the number of shares of common stock outstanding
Corporate bond
A corporation's written pledge to repay a specified amount of money with interest.
Tax Haven
A country with exceptionally low, or even no, income taxes.
Freely Convertible Currency
A country's currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency.
Factor Endowments
A country's endowment with resources such as land, labor, and capital.
Revolving credit
A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available to use again
Charge card
A credit card which requires full payment of the bill each month; no interest is charged
Nonconvertible Currency
A currency is not convertible when both residents and nonresidents are prohibited from converting their holdings of that currency into another currency.
Vehicle Currency
A currency that plays a central role in the foreign exchange market (e.g., the US dollar and Japanese yen)
Consumer
A customer who buys the products or services a business produces
Over-The-Counter Bulletin Board (OTCBB)
A dealer network in which many unlisted stocks trade on. Be very wary of some ___ stocks. Moreover, the ___ stocks are either penny stocks or are offered by companies or corporations with bad credit records, so be wary of those kinds of stocks, also.
Pink sheets
A dealer network in which many unlisted stocks trade on. The provider of interdealer, whole sale quotes for over-the-counter stocks not listed on NASDAQ. The print version of the ___ is published monthly, with daily updates. An electronic version, the Electronic Quotation Service (EQS) is a real-time system.
Discharged debt
A debt that is no longer owed after declaration of bankruptcy
Strategic Commitment
A decision that has a long-term impact and is difficult to reverse, such as entering a foreign market on a large scale
Margin call
A demand by a broker that a customer deposit enough to bring his margin up to the minimum requirement. It occurs when the share(s) of stock gets to half of the original purchase price.
Credit union
A democratically owned and controlled not-for-profit financial cooperative that offers a variety of savings and lending services to members
Creditworthy
A determination that you are a good credit risk
Import Quota
A direct restriction on the quantity of a good that can be imported into a country
bait and switch
A dishonest marketing tactic in which a marketer advertises a very attractive price/rate/term that is really a teaser rate meant to attract customers. Once the customer comes into the store/office to inquire about the advertised price/rate (the "bait"), the advertiser will attempt to sell the customer a more expensive product (the "switch").
Exclusive Channels
A distribution channel that outsiders find difficult to access.
Dividends
A distribution of money or stock that a corporation pays to stockholders
Bill of Lading
A document issued to an exporter by a common carrier transporting merchandise. It serves as a receipt, a contract, and a document of title.
Negotiable instrument
A document that contains promises to pay monies and is legally collectible
Sight Draft
A draft payable on presentation to the drawee
misrepresentation
A false or misleading statement that, if intentional and material, can allow the insurer to void the insurance contract.
Consumer Price Index (CPI)
A special average of many prices of goods and services that people often buy; the CPI is calculated by the US Department of commerce
Franchising
A specialized form of licensing in which the franchiser sells intangible property to the franchisee and insists on rules to conduct the business
Ethnocentric Staffing
A staffing approach within the MNE in which all key management positions are filled by parent-country nationals.
Polycentric Staffing
A staffing policy in an MNE in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters.
Geocentric Staffing
A staffing policy where the best people are sought for key jobs throughout an MNE, regardless of nationality
Credit scoring system
A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness
Brokerage firm
A stock broker's business. It charges a fee to act as intermediary between buyer and seller. This term is one of the reasons why investors purchase corporate bonds (Objective 3)
Fractional shares
A stock dividend or stock split that results in some shareholders being entitled to fractions of whole shares. This is included when investors purchase new shares of stock when they are participating in a Dividend Reinvestment Program (DRIP).
Income statement
A summary of a company's revenue and costs for a given year
Civil Law System
A system of law based on a very detailed set of written laws and codes.
Common Law System
A system of law based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics.
Class System
A system of social stratification in which social status is determined by the family into which a person is born and subsequent socioeconomic achievements. Mobility between classes is possible.
Dirty Float System
A system under which a country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.
Floating Exchange Rates
A system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand.
Capitalization table
A table showing the owners of a company's shares and their ownership percentages as well as the debt holders. It also lists the forms of ownership, such as common stock, preferred stock, warrants, options, senior debt, and subordinated debt.
Capital gains
A tax classification of investment earnings resulting from the purchase and sale of assets. Typically, an investor prefers that investment earnings be classified as long term capital gains (held for a year or longer), which are taxed at a lower rate than ordinary income
Tariff
A tax levied on imports
Multilateral Netting
A technique used to reduce the number of transactions between subsidiaries of the firm, thereby reducing the total transaction costs arising from foreign exchange dealings and transfer fees.
Class Consciousness
A tendency for individuals to perceive themselves in terms of their class background.
Certificate of deposit
A time certificate representing a sum of money deposited for a set length of time, such as six months
Character
A trait of creditworthiness indicating a responsible attitude toward paying debts
Futures market
A transaction that allows people to know in advance what they will be paid in the future
Bid, ask, spread (aka bid and ask, bid-ask, and bid-offer)
A two-way price quotation that indicates the best price at which a security (such as a share of stock) can be bought and sold at a given point in time.
Short term capital gain
A type of ___. It is used when a share(s) of stock is held for less than a year, and ___ is taxed at ordinary income tax rates.
Credit report
A written report issued by a credit bureau that contains relevant information about a person's creditworthiness
Municipal bonds (munis)
A type of bond (but NOT a type of corporate bond), specifically a type of state and local government securities. This type of bond is issued by a state or local government (such as cities, state counties, or school districts), ans use the funds invested from bondholders in order to pay for ongoing costs and to build major projects (such as schools, airports, or bridges). Two subtypes of this type of bond are general obligation bonds and revenue bonds. The features of this type of bond are: People like to invest in projects close to home, they are insured (meaning states guarantee repaying them in payments to the bondholders; this means this type of bond is generally NOT high-risk), and the interest earned from this type of bond may be exempt from the federal income tax so that the yield would be higher (but it depends on the use of the given funds) This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Government bonds
A type of bond (but NOT a type of corporate bond). This type of bond is sold in order to obtain money to finance the national debt and the general ongoing costs of government. There are three levels of this type of bond: federal, state, and local municipalities. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Convertible bond
A type of bond, specifically a special kind of corporate bond. It can be exchanged at the owner's option for a specified number of shares of the corporation's common stock. This term is one of the reasons why corporations issue bonds (Objective 2).
Mortgage bond
A type of bond, specifically a type of corporate bond. It is secured by various assets of the issuing firm (usually real estate). Its interest rate is lower than other types of bonds because it is secured by collateral and specific corporate assets. This term is one of the reasons why corporations issue bonds (Objective 2).
Sinking fund
A type of bond. Corporations deposit money into this fund annually or semiannually, and use the money made to pay off the bondholders when this bond issue (order) comes due. This term is one of the reasons why corporations issue bonds (Objective 2).
Subordinated debenture bond
A type of bond. It is unsecured, and gives bondholders a secondary claim to that of mortgage of debenture bondholders with respect to interest payments and a claim on assets. This term is one of the reasons why corporations issue bonds (Objective 2).
High yield bond
A type of bond. It pays a higher rate of interest, but has a higher risk of default than most other types of bonds. This term is one of the reasons why corporations issue bonds (Objective 2).
Debenture bond
A type of bond. Most corporate bonds are this, and they are unsecured (they are backed only by the reputation of the issuing company). This term is one of the reasons why corporations issue bonds (Objective 2).
Serial bonds
A type of bond. These bonds consist of a single issue (order) that has different bonds within the same issue mature on different dates. This term is one of the reasons why corporations issue bonds (Objective 2).
Zero-coupon bond
A type of bond. This bond is issued at a deep discount from its value at maturity and pays no interest to the bondholder at all during the life of this bond. They are considered cheap, safe, and secure, and can be withdrawn before maturity with no withdrawal fee. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Bearer bond
A type of bond. This bond is not entitled to any bondholder (it is unregistered). They have a series of small, detachable coupons (in the form of paper flaps) that border the bottom of the bond certificate itself. On an annual basis, one of the coupons is cut or "clipped" from the bond and taken to a banking institution that is one of the listed paying agents. The elderly often buy these bonds because they do not issue interest to their bondholders. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Registered coupon bond
A type of bond. This bond is registered in the owners name for the face value only and not for interest. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Registered bond
A type of bond. This bond's owner is recorded on the books of the issuer, and it can be transferred to another owner only when endorsed by the registered owner. This term is one of the reasons why investors purchase corporate bonds (Objective 3).
Cooperative
A type of corporation, like a credit union, that is owned by the people who use its services
Common stock
A type security representing ownership rights in a company. Usually, company founders, management and employees own common stock while investors own preferred stock. In the event of a liquidation of the company, the claims of secured and unsecured creditors, bondholders, and preferred stockholders take precedence over common stockholders.
Share of stock
A unit of ownership in a corporation. ___ are traded in either round lots or odd lots, shareholders usually pay a commission when buying and selling ___, and when a shareholder buys stock, he or she is buying a piece of the company or corporation (i.e., you become part owner, along with other individuals and institutions that hold shares. As a shareholder, you can never lose more than you invest.)
Communist Totalitarianism
A version of collectivism advocating that socialism can be achieved only through a totalitarian dictatorship.
Adjusted balance method
A way to compute finance charges in which creditors add finance charges after subtracting payments made during the billing period
Angel
A wealthy individual invests in companies in relatively early stages of development. Usually angels invest less than $1 million per startup. The typical angel-financed startup is in concept or product development phase.
Cardholder agreement
A written contract that sets forth the terms that apply to a credit or charge card account, including the interest rate charged, the method of calculating interest and any annual or transaction fees
Annual report
A yearly-written financial statement that provides an overall summary of a corporation's fiscal performance; it is prepared largely for the review of persons outside that corporation. A bondholder can obtaining a corporation's ___ ___ either by writing or telephoning (calling) the corporation to receive the ___ ___, OR by logging on to the corporation's Web Site, which usually provides and maintains access to their ___ ___. This term describes how the corporation performed in the last year (shows income earnings, assets, and liabilities), and is required to be issued to the corporation's shareholders. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Cultural Controls
Achieving control by persuading subordinates to identify with the norms and value systems of the organization (self-control).
Output Controls
Achieving control by setting goals for subordinates, expressing these goals in terms of objective criteria, and then judging performance by a subordinate's ability to meet these goals.
Bureaucratic Controls
Achieving control through establishment of a system of rules and procedures.
Helms-Burton Act
Act passed in 1996 that allowed Americans to sue foreign firms that use Cuban property confiscated from them after the 1959 revolution.
D'Amato Act
Act passed in 1996, similar to the Helms-Burton Act, aimed at Libya and Iran.
Strategy
Actions managers take to attain the firm's goals
Human Resource Management
Activities an organization conducts to use its human resource effectively
Production
Activities involved in creating a product
Gross income
All taxable income received, including wages, tips, salaries, interest, dividends, unemployment compensation, alimony and others
Tax Credit
Allows a firm to reduce the taxes paid to the home government by the amount of taxes paid to the foreign government.
Deductions
Amount subtracted from gross pay
Corporate bond
An IOU issued by a corporation in owner to borrow money
Government securities
An IOU issued by the US Treasury in order to borrow money. Owners of these IOUs receive fixed interest payments from the Treasury until the IOU is repaid at a given date in the future. Government securities come in three types. Treasury bills are short-term IOUs that are repaid within a year or less. Treasury notes are medium-term IOUs that are repaid within 1-10 years. Treasury bonds are long-term IOUs that are repaid after 10 years or more
Joint account
An account held by two people
Margin account
An account with a securities brokerage in which the stock broker extends credit. An investor is required to possess this if he or she wants to buy on ___ from his or her investor.
Purchasing Power Parity
An adjustment in gross domestic product per capita to reflect differences in the cost of living.
Joint venture
An agreement between two or more companies to share a business project
Futures contract
An agreement made today for commodities bought and sold in the future
Multilateral Agreement on Investment
An agreement that would make it illegal for signatory states to discriminate against foreign investors; would have liberalized rules governing FDI between OECD states.
Stock table
An alphabetical listing of the the transactions on the stock exchange. It gives various information about each of the stocks listed, such as the price-earnings ratio and the closing price of a particular stock.
Down payment
An amount given as security for a loan to ensure that other remaining payments will be made
Line of credit
An amount that can be borrowed on demand with no collateral
Price-fixing
An antitrust situation that occurs when competitors agree on prices rather than operate on a competitive basis
Ethnocentric Behavior
Behavior that is based on the belief in the superiority of one's own ethnic group or culture; often shows disregard or contempt for the culture of other countries.
Values
Beliefs and principles you consider important, correct, and desirable
Marginal Benefit
Benefit to produce an extra unit
Late Mover Advantage
Benefits enjoyed by a company that is late to enter a new market, such as consumer familiarity with the product or knowledge gained about a market.
Junk bonds
Corporate bonds with a low or no investment rating
Annual Percentage Rate
Cost of credit expressed as a yearly percentage
Pioneering Costs
Costs an early entrant bears that later entrants avoid, such as the time and effort in learning the rules, failure due to ignorance, and the liability of being a foreigner.
Heckscher-Ohlin Theory
Countries will export those goods that make intensive use of locally abundant factors of production and import goods that make intensive use of locally scarce factors of production.
Open-ended credit
Credit wherein the lender places a limit on how much a qualifying customer can borrow during a given period
Fair credit billing act
Creditors must resolve billing errors within a specified period of time
Ethical Systems
Cultural beliefs about what is proper behavior and conduct.
Agency debt
Debt obligations of agencies of the federal government. The can be in the form of notes or bonds issued at face value and carry a stated interest rate payable semi-annually, and are often called "Indirect Debt." This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).
Lag Strategy
Delaying the collection of foreign currency receivables if that currency is expected to appreciate, and delaying payables if that currency is expected to depreciate.
Foreign Direct Investment
Direct investment in business operations in a foreign country
First Mover Disadvantages
Disadvantages associated with entering a foreign market before other international businesses.
Two ways a company can make money through owning stock
Dividend income and capital (quarterly) or paper gain (price appreciation).
Memorandum
Document used generally in syndicate financing of projects to define the work and to detail its financing arrangements.
Eurodollar
Dollar banked outside the United States
core product
Dominant intangible benefit or satisfaction a customer expects from a good or service he or she buys.
Fundamental Analysis
Draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.
European Monetary System
EU system designed to create a zone of monetary stability in Europe, control inflation, and coordinate exchange rate policies of EU countries.
Automated Teller Machine (ATM)
Electronic terminals located on bank premises or elsewhere, through which customers of financial institutions may make deposits, withdrawals, or other transactions as they would through a bank teller
Multidomestic Strategy
Emphasizing the need to be responsive to the unique conditions prevailing in different national markets.
Smoot Hawley Tariff
Enacted in 1930 by the US Congress, this tariff erected a wall of barriers against imports into the United States
Absolute Advantage
Exists when a country can produce a good or service at a lower cost than other countries
Vertical Integration
Extension of a firm's activities into adjacent stages of productions (i.e., those providing the firm's inputs or those that purchase the firm's outputs).
Uncertainty Avoidance
Extent to which cultures socialize members to accept ambiguous situations and to tolerate uncertainty.
Totalitarianism
Form of government in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited.
ASEAN
Formed in 1967, an attempt to establish free trade area between Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand
Strategic Trade Policy
Government policy aimed at improving the competitive position of a domestic industry and/or domestic firm in the world market
Market Segmentation
Identifying groups of consumers whose purchasing behavior differs from others in important ways.
Trade surplus
If a country exports (sells) mort than it imports (buys), it is favorable
Trade deficit
If a country imports more than it exports, it is unfavorable
pro rata share
If a loss occurs that is covered by more than 1 insurance policy that was purchased by the insured, then each policy pays a portion of the loss that is proportional to the amount of that policy over the total amount of all policies for the loss
Law of One Price
In competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in the same currency.
Capital Account
In the balance of payments, records transactions involving the purchase or sale of assets.
Adjusted gross income
Income minus allowable exclusions (such as IRAs and alimony)
Annual report
Information about a company that allows a potential investor to make an investment decision. Annual reports are distributed by the company and are generally designed to show the company in a favorable light
Factors of Production
Inputs into the productive process of a firm, including labor, management, land, capital, and technological know-how.
Simple interest
Interest compounded on the principal only
Compound interest
Interest paid on the original principal plus the accumulated interest
Interest rate risk
Interest rates may go up or down, affecting costs or investments.
Paris Convention for the Protection of Industrial Property
International agreement to protect intellectual property; signed by 96 countries.
International Monetary Fund
International institution set up to maintain order in the international monetary system
World Bank
International institution set up to promote general economic development in the world's poorer nations.
General Agreement on Tariffs and Trade
International treaty that committed signatories to lowering barriers to the free flow of goods across national borders and led to the WTO
after loss duties
Notify the insurer in the event of a loss, and tell the insurer how, when, and where the loss occurred, so that it can be investigated. The insured must protect the property from further damage, and the insurer will pay reasonable costs, such as towing and storage for its safekeeping. The insured will also have to cooperate with the insurer in providing evidence, testimony in court or for discovery, and help in finding or identifying witnesses. If the loss is caused by a collision with another vehicle, especially if it was a hit-and-run collision, the insured must notify the police immediately after the incident or after it is discovered
COMECON
Now-defunct economic association of Eastern European communist states headed by the former Soviet Union.
Licensing
Occurs when a firm (the licensor) licenses the right to produce its product, use its production processes, or use its brand name or trademark to another firm (the licensee). In return for giving the licensee these rights, the licensor collects a royalty fee on every unit the licensee sells
International Trade
Occurs when a firm exports goods or services to consumers in another country
Inefficient Market
One in which prices do not reflect all available information
Retained earnings
One of the choices a company can make on what to do with their dividends. They can either distribute them to their shareholders in the form of a dividend, OR at the same time, the company does not have to declare a dividend; they could instead keep the earnings and reinvest them into the company in order to help maximize their company's profit, which is called ___.
Column 5 of a stock table
One of the columns of a stock table in a newspaper. This column lists the annual dividend payment per share. IF this space is blank, the company or corporation does not currently pay out dividends.
Column 11 of a stock table
One of the columns of a stock table in a newspaper. This column lists the closing price, or close, for a share of stock. The close is the last trading price recorded when the stock market closed at the very end of the day. If the closing price is up or down more than 5% than the previous day's close, the entire listing for that stock is bold-faced. Keep in mind that you are NOT guaranteed to get this price if you buy the stock the next day because the price for a share of the stock is constantly changing (even after the stock exchange is closed for the day) since trading for shares of stock can go on after the stock market closes (such as 4:00pm for the New York Stock Exchange). The close is merely an indicator of past performance and except in extreme circumstances, it serves as a ballpark of what you should expect to pay for a share of a particular stock.
Column 12 of a stock table
One of the columns of a stock table in a newspaper. This column lists the dollar value change in the price for a share of the stock from the previous day's closing price. When you hear about a stock being "up for the day," it means the net change was positive.
Column 1 of a stock table
One of the columns of a stock table in a newspaper. This column lists the highest price at which a share of stock has traded over the past previous 52 weeks (one year).
Column 2 of a stock table
One of the columns of a stock table in a newspaper. This column lists the lowest price at which a share of stock has traded over the past previous 52 weeks (one year).
Column 3 of a stock table
One of the columns of a stock table in a newspaper. This column lists the name of the company or corporation. If there are no special symbols or letters following the name, it is common stock. Different symbols imply different classes of shares. For examples, the letters "pf: means the shares are of preferred stock.
Column 6 of a stock table
One of the columns of a stock table in a newspaper. This column lists the percentage return on a divined, or in other words, the percent of the dividend out of the price per one share of stock. Its formula is: Annual dividends per share / Price per share.
Column 7 of a stock table
One of the columns of a stock table in a newspaper. This column lists the price-earnings ratio, which has the formula: Current price of a share of stock / Earnings per share ratio over the last four quarters.
Column 8 of a stock table
One of the columns of a stock table in a newspaper. This column lists the total number of shares of stock traded for the day; in a newspaper, it is listed in hundreds in order to save space. To get the actual volume traded, add two zeros to the end of the number listed. For example, if the volume is listed as "3,800," you add two zeros to that number to get the actual volume, making the actual volume to be "380,000" stocks traded for that particular day.
Column 4 of a stock table
One of the columns of a stock table in a newspaper. This column lists the unique alphabetic name which identifies the stock. If you watch financial television, you have seen the ticker tape move across the screen, quoting the latest prices alongside this symbol.
Column 9 of a stock table
One of the columns of a stock table in a newspaper. Together with Column 10, these columns show the price range at which a stock has traded at throughout the day. This column by itself lists the maximum (highest) price that investors have paid for a share(s) of the stock during the day.
Standard & Poor
One of the many corporations that provide bond ratings. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
New York Stock Exchange (NYSE) (Big Board)
One of the main stock exchanges. It was established on May 17th, 1792, is the largest stock exchange in the United States, and became a publicly traded company in 2007 (NYSE Euronext). To have a stock listed on the ___, you must have at least 1.1 million publicly traded shares with a combined market value of at least $9 million. The bell that designates the open and end of the trading day at the ___ rings at 9:30 am to open and at 4:00 pm to close. Also known as the "Big Board," the ___ relied on floor trading only for many years, using the open outcry system. Today, more than half of all ___ trades are conducted electronically, although floor traders are still used to set pricing and deal in high volume institutional trading.
American Stock Exchange
One of the main stock exchanges. It was known as the "Curb Exchange" until 1921, and is located in Manhatten, New York. It uses holdings of small to medium size companies or corporations, who must have at least 250,000 publicly traded share with a combined market value of at least $2.5 million.
Philadelphia Stock Exchange (PHLX)
One of the main stock exchanges. It was the first stock exchange in North America, and is the marketplace for the trading of stocks, equity options, index options, and currency options.
Dow Jones Industrial Average (DJIA)
One of the main stock indexes. It is the world's oldest and best known stock index, began in July, 1884, is an index of 30 Large Cap. stock (which, combined, represent a variety of industries), and gives people and investors a general idea of how a particular stock market (a securities exchange) is doing. The ___ was, at one time, the most renowned indued for United States stocks, but because the ___ contains only thirty companies and corporations, most people and investors agree that the S&P 500 is a better representation of the United States market.
Standard & Poor's (S&P) 500
One of the main stock indexes. It represents a measurement of the changes in a stock market's (a securities exchange's) conditions, which are based on the average performance of five hundred widely-held common stocks. Stock market professionals prefer this index over other indexes (such as the Dow Jones Industrial Average) because the ___ gives a broader picture of the general movement or performance of various stocks. It is one of the most commonly used benchmarks for the overall United States stock market. The Dow Jones Industrial Average (DJIA) was, at one time, the most renowned indued for United States stocks, but because the DJIA contains only thirty companies and corporations, most people and investors agree that the S&P 500 is a better representation of the United States market. IN fact, many people and investors consider it to be *the* definition of the stock market.
Dollar-Cost Averaging
One of the main types of long-term investment strategies. It involves the systematic purchase of an equal dollar amount of the same shares of stock at regular intervals.
Buy and Hold
One of the main types of long-term investment strategies. It is when an investor buys a share(s) of stock and ___ on to it for a long period of time.
Dividend Reinvestment Program (DRIP)
One of the main types of long-term investment strategies. It is when dividends are used to purchase new shares of stock, including fractional shares. This method avoids a broker's fee. Growth stocks usually participate in this.
Direct Investment
One of the main types of long-term investment strategies. It is when investors buy a share(s) of stock directly from a corporation.
Trading in Options
One of the main types of short-term investment strategies. It is an option that gives the investor the right to buy or sell a share(s) at a predetermined price (either a price higher or lower than the current share[s] of stock at the time of purchase). It is available for three, six, or nine-month periods. Two types of ___ are a Call Option and a Put Option.
Buying on Margin
One of the main types of short-term investment strategies. It is borrowing money from an investor's stock broker to buy a share(s) of stock if he opens a margin account and signs a margin agreement. With a ___ purchase, the investor is betting that his already owned share(s) of stock will increase in value. If the share(s) of stock increases in value, the investor repays the loan, and takes the short-term profit. However, if the share(s) of stock does decrease in value, the investor will have to make up the difference between the current decreased value of the share(s) of stock and the value of the share(s) of stock when the ___ agreement was first made. When the share(s) of stock gets to half of the original purchase price, the investor will get an ___ call from his or her broker. In general, the investor who participates in ___ pays a lot of interest to his stock broker or brokerage firm on this.
Selling Short
One of the main types of short-term investment strategies. It is selling a share(s) stock borrowed from a broker that must be replaced at a later time. The investor borrows a stock certificate for a certain number of shares of stock from his or her broker or brokerage firm. When the investor ___, he or she sells the borrowed stock, knowing that he or she must cover his or her short position at a later date. If the price of the share(s) of stock drops, the investors purchases the share(s) of stock at a lower price that he or she sold the borrowed share(s) of stock for. Then, the investor replaces the lower-priced share(s) of stock with the original higher-priced share(s) of stock. There is usually both no broker's fee or interest when ___, but the brokerage firm receives a commission.
Playing the market
One of the main types of short-term investment strategies. It occurs when an investor buys and sells a share(s) of stock for quick profits.
Currency option
One of the main types of stock options. It provides the right to buy a specific currency at a specific price within a specific period of time.
Index option
One of the main types of stock options. Its value is based on the movement of a stock index such as the Major Market Index, Standard and Poor's 100 Index, Standard and Poor's 500 index or the New York Stock Exchange Composite Index. Unlike a stock option, which can be exercised to acquire a fixed number of the underlying shares, exercise of an index option settles only in cash.
Fitch
One of the many corporations that provide bond ratings. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Moody's
One of the many corporations that provide bond ratings. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Earnings per share ratio (earnings growth ratio)
One of the things that can affect the price of a share of stock. It is a company's or corporation's after-tax earnings divided by the number of shares outstanding, and is a measure of the company's or corporation's profitability; the higher this value, the better, and the lower this value, the worse. It is generally considered to be the most important variable when determining share price. Its formula is: After tax income / Outstanding shares. For example, if a company's ___ is 20:1, that means for every share of stock investors purchase from the company, the company makes $20.
Price-earnings ratio
One of the things that can affect the price of a share of stock. It is a ratio of a company's or corporation's current share price compared to its per-share earnings. It shows how much investors are willing to pay per dollar of earnings; generally, the lower the value, the better it is to own that share(s) of stock, and the higher the value, the worse it is. Its formula is: Market value per share / Earnings per share ratio. If the ___ is 20:1, that means investors are willing to pay $2 for $1 of current earnings. The lower this value, the more undervalued. When an investor researches stocks, he or she should compare this ratio with the stock's industry norms AND with the S&P 500's ratio. The lower this ratio, the less expensive the price of one share of stock is relative to the company's or corporation's earnings.
PEG Ratio
One of the things that can affect the price of a share of stock. It is a ratio that shows the relationship between the price-earnings ratio and earnings per share ratio, and tells a much more complete story than the price-earnings ratio on its own. Its formula is: Price-earnings ratio / Earnings per share ratio. The lower this value, the more undervalued the stock is (the better), and the higher this value, the more overvalued the stock is (the worse).
Undervalued stock
One of the things that can affect the price of a share of stock. When investors are paying less than what the stock is "worth."
Overvalued stock
One of the things that can affect the price of a share of stock. When investors are paying more than what the stock is "worth."
Bid
One of the three components of the ___, ask, spread mechanism. It represents the maximum price that a buyer (an investor) or buyers (investors) are willing to pay for a security he or they are buying. It is usually the lower number of the two numbers listed in the ___, ask, spread mechanism.
Ask
One of the three components of the bid, ___, spread mechanism. It represents the minimum price that a seller (an investor) or seller (investors) are willing to receive for a security he or they are selling. It is usually the higher number of the two numbers listed in the bid, ___, spread mechanism.
Spread
One of the three components of the bid, ask, ___ mechanism. A trade or transaction occurs when the buyer (an investor) and seller (also an investor) are agree on a price for a security. It is the difference between the bid and the ask prices (the ___), and is a key indicator the liquidity of the security or asset; generally speaking, the smaller the ___, the better the liquidity.
Limit Order
One of the three types of order that are used to trade shares of stock. It is a request to buy or sell a share(s) of stock at a specified price or better.
Market Order
One of the three types of order that are used to trade shares of stock. It is a request to buy or sell a share(s) of stock at its current market value.
Stop Order (Stop-Loss Order)
One of the three types of order that are used to trade shares of stock. It is a request to sell a particular share(s) of stock at the next available opportunity after the stock's market price reaches a specified amount (either at a relatively higher or lower price than the stock's current market value at the time of the purchase of the share[s] of stock).
Common stock
One of the two general types of stock. It is when the owner shares directly in thee success or failure of a business. A stated dividend is payed to ___holders, but is subject to have its value change. The remainder of the earnings available for distribution is shared by both preferred and ___holders. The shareholder profits when the company profits and loses money in his shares of stock when the company's value decreases, has a say in the company's decisions (in the form of either in person or through a proxy), such as whether or not the company issues additional stock, whether or not the company should be sold to additional buyers, or whether or not the board of directors should be changed. The shareholder gets one vote for each share he owns. If the shareholder cannot vote in person, he or she can vote by proxy, which is giving his or her voting rights to someone else. A proxy is valid until the shareholder revokes it. Stock certificates print how many shares of stock a stockholder owns in a company.
Preferred stock
One of the two general types of stock. Its dividends are always fixed and required, regardless of how a company is doing, is less risky than common stock, if the company fails the ___holder gets paid first, do not have voting rights, has a par value attached to it (usually $25), and has two types: cumulative ___ and convertible ___. The remainder of the earnings available for distribution is shared by both ___ and common stockholders.
Cumulative preferred stock
One of the two types of preferred stock. If a corporation's board of directors votes "no" to pay dividends, they can omit dividends paid to both common and preferred stockholders. It is an issue whose unpaid dividends accumulate and must be paid before any cash dividends are to be paid to the common stockholders. So, if a corporation does not pay a dividends, say, in the year 1999, but in the year 2000 has 100,000 dividends to distribute, the preferred stockholders get their dividends first that include both the dividend they did not get in 1999, which makes for a total of 200,000 dividends the corporation has to distribute in 2000.
Convertible preferred stock
One of the two types of preferred stock. It can be exchanged at the stockholder's option, for a specified number of shares of common stock.
Cyclical stock
One of the types of stock. Its shares do well when the economy is stable or growing, but often does poorly during recessions. Examples of industries that issue this type of stock are airlines, travel-based industries, automobiles, and home builders.
Defensive stock
One of the types of stock. Its shares remains stable and pay dividends even during an economic decline, usually has a history of stable earnings, is not subject to the ups and downs of business cycles (utilities, drugs, and food are all examples of industries that are not), and the means for the demands of these products is consistent regardless of economic conditions.
Growth Stocks
One of the types of stock. They are stocks in companies or corporations that reinvest their profits into the business so that the business can grow and expand. They usually pay little to no dividends. Investors buy them for their increase in value. An example of a company that issues this type of stock is Google.
Income Stocks
One of the types of stock. They are stocks that have a consistent history of paying high dividends.
Penny Stocks
One of the types of stock. They are stocks that have a traded value of under $5 per share, and are very high risk (speculative).
Round lot
One of the ways a share of stock is traded. It is composed of 100 shares of stock or multiples of 100 shares of stock (such as 600 and 6,000 shares).
Odd lot
One of the ways a share of stock is traded. It is composed of fewer than 100 shares of a particular stock (such as 48 shares).
Call Option
One the main types of Trading in Options. It is an option that is sold by a stockholder (an investor) and gives the purchaser of the share(s) of stock (NOT the stockholder) the right to *buy* one hundred shares of stock at a guaranteed price before a specified expiration date. The purchaser of the share(s) of stock is betting that the share(s) will *increase* in value before the expiration date of the __.
Put Option
One the main types of Trading in Options. It is an option that is sold by a stockholder (an investor) to sell one hundred shares of stock at a guaranteed price before a specified expiration date. The purchaser of the share(s) of stock (NOT the stockholder) is betting that the share(s) of stock will *decrease* in value before the expiration date of the ___.
Democracy
Political system in which government is by the people, exercised either directly or through elected representatives.
International Accounting Standards Committee
Organization of representatives of 106 professional accounting organizations from 79 countries that is attempting to harmonize accounting standards across countries.
Finance company
Organization that makes high-risk consumer loans. high interest rates
Investment
Outlay of money in the hope of realizing a profit
Stock
Ownership in a corporation; stock can be common or preferred
MERCOSUR
Pact between Argentina, Brazil, Paraguay, and Uruguay to establish a free trade area.
Deferral Principle
Parent companies are not taxed on the income of a foreign subsidiary until they actually receive a dividend from that subsidiary.
Home country
Parent company with divisions or separate companies in host countries
Creditworthiness
Past and future ability to repay debts
Transnational Strategy
Plan to exploit experience-based cost and location economies, transfer core competencies with the firm, and pay attention to local responsiveness.
Value Creation
Performing activities that increase the value of goods or services to consumers
Debt collector
Person hired by a creditor to collect overdue balance on an account
Maker
Person or business initiating a bill of lading (draft).
Debtor
Person who borrows money from others
Creditor
Person/Business that loans money to others
Predatory Pricing
Reducing prices below fair market value as a competitive weapon to drive weaker competitors out of the market ("fair" being cost plus some reasonable profit margin).
Drag on return
Reduction in returns from an investment (such as in a mutual fund) due to management expenses, charges or fees, and capital gains tax.
Infrastructure
Refers to a nation's transportation, communication, and utility systems
International Business
Refers to business activities needed for creating, shipping, and selling goods and services across national borders, also called foreign or world trade
Personal risk
Risk that directly affects and individual.
Competition Policy
Regulations designed to promote competition and restrict monopoly practices.
Limited liability
Relatively recent type of US business structure that combines the limited personal liability feature of a corporation with the single taxation feature of a partnership or sole-proprietor firm. Its profits and tax benefits are split any way the stockholders/shareholders choose.
Unbundling
Relying on more than one financial technique to transfer funds across borders.
Deregulation
Removal of government restrictions concerning the conduct of a business.
Royalties
Remuneration paid to the owners of technology, patents, or trade names for the use of same
Consumer credit protection act
Requires lender to inform consumers about all costs of a credit purchase before agreement
Character
Responsible attitude towards obligations
Informal trade barriers
Restrictions based on a country's culture, traditions, and religion
Capital Controls
Restrictions on cross-border capital flows that segment different stock markets; limit amount of a firm's stock a foreigner can own; and limit a citizen's ability to invest outside the country.
S.M.A.R.T.
S = Specific M = Measurable A = Attainable R = Realistic T = Timely
Collateral
Savings, bonds, insurance policy, jewelry, property or other item that is pledged to pay off a loan or other debt if payments are not made according to the contract; also called security
Bilateral Netting
Settlement in which the amount one subsidiary owes another can be cancelled by the debt the second subsidiary owes the first.
Benefits
Sick pay, vacation time, and other company-provided supplements to income
Sole proprietorship
Simplest, oldest and most common form of business ownership in which only one individual acquires all the benefits and risks of running an enterprise. Most popular, least record keeping, minimal regulatory controls, and avoidance of double taxation.
How to get a stock quote on the Internet
Simply enter the ticker the ticker symbol into the quote box of any major financial Web Site, such as Yahoo! Finance, CBS Marketwatch, or MSN Moneycentral. Interpreting the data on a quote for a stock on a Web Site is exactly the same as with interpreting a quote for a stock on a newspaper.
Currency Swap
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.
Social Insurance
Social Security, Medicare, Unemployment, Workers Compensation, etc.
Norms
Social rules and guidelines that prescribe appropriate behavior in particular situations.
Liquidity risk
Some long term investments, such as a house, can be difficult to convert quickly
Cosigner
Someone who promises to pay if the borrower fails to pay
Co-signer
Someone who signs a loan with the borrower and promises to assume the responsibility of repaying the debt in the event that the borrower does not repay it
Collateral
Something of value that can be sold to pay a debt
Asset
Something valuable that an entity owns, benefits from, or has use of, in generating income.
subrogation
taking the place of the insured as to rights and remedies
Credit score
Tells potential creditors the likelihood that you will repay debt as agreed
Not an Acceptable Statement for an Interview (too specific)
Thank you for your time & consideration, I will be available for my interview September 26th @ 3pm
Acceptable Statement
Thank you for your time, I will be available for an interview Mon-Fri 8-2. If you have any questions, feel free to call me @ 555-286-6751
AMEX
The American Stock Exchange, which is one of the organized stock markets in the US
Free Trade
The absence of barriers to the free flow of goods and services between countries
Materials Management
The activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution.
Market Economy
The allocation of resources is determined by the invisible hand of the price system.
Face value
The amount a bondholder will be repaid when the bond matures or is due
Profit
The amount a business earns when the money received from selling its product or service is greater than its costs
Service charge
The amount charged borrowers by merchants or banks for servicing or carrying an account or loan
Unused credit
The amount of credit above what you owe that you could use; a maximum is usually set
Credit limit
The amount of credit you are authorized to use
Gold Par Value
The amount of currency needed to purchase one ounce of gold.
Book value
The book value of a company is the value of the common stock. The book value of an asset of a company is typically based on its original cost minus accumulated depreciation.
Vertical Differentiation
The centralization and decentralization of decision-making responsibilities
National Association of Securities Dealers (NASD)
The company that owns the NASDAQ.
Culture
The complex whole that includes knowledge, belief, art, morals, law, custom, and other capabilities acquired by a person as a member of society.
Short-term investing
The continual buying and selling of stock in an effort to have one's money grow faster than the general level of stock prices
Annual Percentage Rate (APR)
The cost of credit for one year expressed as a percentage
Interest rates
The cost of using someone else's money
Host country
The country in which the MNC places business activities
Current Account Deficit
The current account of the balance of payments is in deficit when a country imports more goods and services than it exports.
Current Account Surplus
The current account of the balance of payments is in surplus when a country exports more goods and services than it imports.
Economic Exposure
The extent to which a firm's future international earning power is affected by changes in exchange rates.
Social Mobility
The extent to which individuals can move out of the social strata into which they are born
Translation Exposure
The extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in foreign exchange values.
Par value
The face value of a bond. This term is one of the characteristics of corporate bonds (Objective 1).
Relevant bond-buying Web Sites
The following are ___ ___ ___ ___ for the purchase of bonds: Http://www.bonds-online.com, http://www.buysellbonds.com, http://www.municipalbonds.com, http://www.investinginbonds.com, http://www.emuni.com, and http://www.fmsbonds.com. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Hierarchy of money given when a company or corporation closes
The importance of the various kinds of investors who invest money into a company (by order of importance, with #1 being the most important and #4 being the least important): 1. Creditors 2. Bondholders 3. Preferred stockholders 4. Common stockholders
Periodic rate
The interest rate described in relation to a specific amount of time. For example, the Monthly Periodic Rate is the cost of credit per month
Prime rate
The interest rate that commercial banks charge their preferred customers (corporations) for very short term loans. During a recession in the United States, the Federal Reserve bank increases the ___ of United States, and during an inflation period in the United States of United States, the Federal Reserve Bank decreases the ___ of United States.
Finance Charge
The interest you pay for the use of a credit card
Close (aka closing price)
The last trading price recorded when the stock market closed at the very end of the day. If the closing price is up or down more than 5% than the previous day's close, the entire listing for that stock is bold-faced. Keep in mind that you are NOT guaranteed to get this price if you buy the stock the next day because the price for a share of the stock is constantly changing (even after the stock exchange is closed for the day) since trading for shares of stock can go on after the stock market closes (such as 4:00pm for the New York Stock Exchange). The close is merely an indicator of past performance and except in extreme circumstances, it serves as a ballpark of what you should expect to pay for a share of a particular stock.
Book runner
The lead bank that manages the transaction process for an eqity or debt financing, including documentation, syndication, pricing, allocation, and closing.
Bond indenture
The legal conditions of a bond are described in this document. This term is one of the characteristics of corporate bonds (Objective 1).
Minimum Efficient Scale
The level of output at which most plant-level scale economies are exhausted.
Legal Risk
The likelihood that a trading partner will opportunistically break a contract or expropriate intellectual property rights.
Economic Risk
The likelihood that events, including economic mismanagement, will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise.
Political Risk
The likelihood that political forces will cause drastic changes in a country's business environment that will adversely affect the profit and other goals of a particular business enterprise.
Domestic Business
The making, buying, and selling, of goods within a country
Gross Domestic Product
The market value of a country's output attributable to factors of production located in the country's territory.
Gross National Product
The market value of all the final goods and services produced by a national economy.
Yield to maturity
The measure of a bond's interest rate that will be earned assuming the bond is held to maturity. The formula for this term is: ((Dollar amount of annual interest) + ((Face value of bond - Market value of bond) / (Number of financial periods))) / ((Market value of bond + Face value of bond) / (2)). This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Bank statement
The record of checks paid, deposits made, and all other activity on an account
Foreign Exchange Risk
The risk that changes in exchange rates will hurt the profitability of a business deal
Foreign Exchange Exposure
The risk that future changes in a country's exchange rate will hurt the firm
Blank endorsement
The signature of the payee written on the back of the check exactly as it appears on the front of the check
Joint endorsement
The signatures, on the back of a check, of both persons named as payees on the front of the check
Swaps
The simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.
Minimum monthly payment
The smallest payment you can make to maintain a credit account on current status
Home Country
The source country for foreign direct investment.
Projected Rate
The spot exchange rate forecast for the end of the budget period.
Initial Rate
The spot exchange rate when a budget is adopted
Ending Rate
The spot exchange rate when budget and performance are being compared.
The Internet
The term given to a world wide network of computers, through which people can exchange information. This term can be used in the following ways to evaluate a bond: to obtain the price information of a bond (the bid, ask, face value, etc.), to trade bonds online for a lower commission, and to research information on the corporation or on government bond issues online. This term is one of key factors in evaluating bonds when making an Investment (Objective 5).
Comparative Advantage
The theory that countries should specialize in the production of goods and services they can produce most efficiently. A country is said to have a comparative advantage in the production of such goods and services.
Stock of Foreign Direct Investment
The total accumulated value of foreign-owned assets at a given time
Principal
The total amount that is financed or borrowed an on which interest is compounded
Market Capitalization (Market Cap)
The total dollar market value of all of a company's or corporation's outstanding shares. It is calculated by multiplying a company's or corporation's outstanding shares by the current market price of one share. For example, if a company has 35 million shares outstanding, each with a market value of $100 per share, the company's ___ is $3.5 billion (35,000,000 shares • $100 per share = a ___ of $3,500,000,000). The investment community uses this figure to determine a company's or corporation's size, as opposed to sales or total asset figures. There are three categories for this figure: large ___, mid ___, and small ___.
Gross pay
The total salary before any deductions are made
Countertrade
The trade of goods and services for other goods and services.
Social Democrats
Those committed to achieving socialism by democratic means
Reason why corporations issue stock
To raise capital (money) to finance anything from new equipment purchases to taking over another company; this reason is essentially a way for corporations to raise money. Note: a company must already have gone public to ___. Companies can issue either common or preferred stock, or both.
Formal trade barriers
Trade barriers created by the government
Trade Creation
Trade created due to regional economic integration; occurs when high-cost domestic producers are replaced by low-cost foreign producers in a free trade area.
Financial advisers
Trained professional planners who give overall investment advice
3 major credit bureaus
TransUnion, Experian, Equifax
Noninsurance transfer of risk
Transfer of risks by contracts * Hedging price risks * Incorporation of a business firm
Temporal Method
Translating assets valued in a foreign currency into the home currency using the exchange rate that existed when the assets were originally purchased.
Multinational strategy
Treats each country market differently, develops products and marketing strategies that adapt to the customs, tastes, and buying habits of a distinct national market
Maastricht Treaty
Treaty agreed to in 1991, but not ratified until January 1, 1994, that committed the 12 member states of the European Community to a closer economic and political union.
Globalization
Trend away from distinct national economic units and toward one huge global market.
Globalization of Production
Trend by individual firms to disperse parts of their productive processes to different locations around the globe to take advantage of differences in cost and quality of factors of production.
International Strategy
Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies
Proprietorship
Type of business organization where one person or a family owns the firm.
S corporation
Type of the US corporate structure in which the firm's income is passed through its stockholders (shareholders) in proportion of their investment, and taxed at personal income tax rates. S corporations (s stands for small) can have only one type of stock and only a limited number of stockholders. Also called subchapter S corporation.
conflict of interest
a clash between a person's private interests and his or her responsibilities in a position of trust
Capital or paper gain (price appreciation)
___ is made when an investor sells a share(s) of stock for more than what was originally paid for it. A rate of return is exactly how much money that investor made from selling his or her investment; it is expressed as a pecent. There are two types of ___: short term gain and long term gain.
Andean Pact
a 1969 agreement between Bolivia, Chile, Ecuador, Columbia, and Peru to establish a customs union
contract
a binding legal agreement between two or more persons or parties
accounting period
a block of time, such as a month, a quarter, or a year, covered by an accounting report
capacity
a borrower's ability to repay a debt as judged by lenders or the legal ability to enter into a binding agreement
character
a borrower's reputation for fair and ethical practices, including business experience, dealings with other businesses, and reputations in the community
surplus lines broker
a broker licensed to place business with non-admitted insurers if no insurance available for a specific thing
cybermediary
a business that acts as a broker or agent to facilitate transactions over the Internet
discontinuance
a business that disappears form the tax __ because it may be operating under a new name or because the owner has purposely discontinued in order to start a new business up
business failure
a business that has stopped operating, with a loss to creditors, and one that no longer appears on the tax rolls
corporation
a business that is registered by a state and operates apart from its owners. It issues shares of stock and lives on after the owners have sold their interest or passed away. Corporations can purchase goods or services, sue and be sued, and conduct all types of business transactions.
clicks and mortar
a business that operates both a traditional physical storefront and an online store
stop-loss limit
a cap on the coinsurance payment, which prevents a financial burden if the loss is a large amount; ex: loss is $100,000, and the stop-loss limit is $3,000, and the deductible is $1,000, then the insured would have to pay the $1,000 deductible and $3,000 for the coinsurance, not 20,000 (20% coinsurance)
debit card
a card issued by a financial institution that can be used as an alternative to cash; purchase amounts on a debit card are withdrawn directly from the purchaser's checking or savings account
proximate cause
a cause that directly caused the loss or suffering so that if the proximate cause didn't happen, then the harm would not have happened. (court cases)
Enterprise Risk
all major risks faced by a business firm. Includes pure risk, speculative risk, strategic risk, operational risk and financial risk.
Gross Income
all of the taxable income you receive during the year
cooperative education
allow students to enhance classroom learning with part-time work related to their majors and interests
buy back option
allows consumers to have dollar deductible for higher premiums
stacking
allows the insured to collect up to the total limits of coverage for all vehicles owned by the insured, whether they are insured under the same or different policies
accelerated death benefit
allows the insured to withdraw some of the death benefits when the insured is terminally ill
Comparative negligence
allows the plaintiff to collect some damages, but it will be reduced by the amount by which the plaintiff contributed to his own injury
deductible
amount of money subtracted from the value of a loss
Estimated Tax
amount of tax you estimate you will owe on income received without holdings
Tax Liability
amount of total tax you owe on a year's income
factory mutual
commercial property insurer that insures only those sites that meet its rigid safety and construction qualifications (highly protected risk)// inspects all sites regularly, and offers loss control services to reduce risk
Social Security tax
commonly referred to as a fee collected from most employees to support a federal program that provides old-age, survivors, and disability insurance
Capacity
competence of the parties to enter into a contract
Utmost good faith (uberrimae fidei)
complete and total honesty—all statements must be true and all material facts must be revealed; otherwise, insurance could not be provided economically
Spreadsheet
computer program that organizes data in columns & rows & performs calculations using the data
Hazard
condition that creates or increases chance of loss
economy
consists of the ways in which people make, distribute, and use their goods and services
contract of adhesion
contract drafted by one party and signed by the weaker party, who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract.
Job Follow Up
contract that occurs with an employer after the interview but before the hiring occurs
noninsurance transfers
contract-- like warranty hedging-- an investment to reduce the risk of price movements in an asset; forward contract (bank guarantee some money at some rate) a hedge is a futures position that is approximately equal and opposite to the hedger's position in the underlying asset. incorporating (business risks)-- claiming corporate entity as separate from owners (branch of company wont be affected by some loss i guess)
demutulize
convert their legal organization from a mutual company to a stock company
Material Representation
convincing statement made to induce someone to enter into a contract to which the person would not have agreed without that assertion
Fixed Expenses
costs that don't change from month to month
Variable Expenses
costs that vary in amount & type, depending on the choices you make
hospital-surgical insurance plan (basic plan)
cover basic medical expenses, but not major medical catastrophes; hospital expenses, surgical expenses, outpatient services, and doctor visits; limit 100,000
Fidelity Bond
cover losses caused by dishonest of emplyees
uninsured motorist coverage
cover the insured if they suffer damages from uninsured motorists
Accident and health insurance
coverages sold by life and health insurers
Personal Lines
coverages that insure the real estate and personal property of individuals and families or provide them with protection
HEALTH INSURANCE: basic plan(hospital surgical insurance plan)
covered basic medical expenses; hospital expenses, surgical expenses, outpatient services, and doctor visits
Yearly renewable term insurance
covers 1 year, and is renewable every year up to a certain age limit, without the need to provide evidence of insurability; premiums increase each year
comprehensive coverage
covers all other insurable damage to the insured's motor vehicle that is not the result of the collision, Ex: vandalism
all risk coverage policy
covers any risk that is not specifically excluded
D & O Insurance
covers directors and officers of insurance companies to protect them from lawsuits of mismanagement etc
Inland marine insurance
covers goods being shipped on land.
Fire Insurance
covers losses caused by fire and lightning;
Credit insurance
covers manufacturers and wholesalers against loss
Ocean marine insurance
covers ocean-going vessels and their cargo from loss or damage due to perils of the sea
Personal Auto Policy
covers personal vehicles, but not recreational vehicles; covers pickups or vans weighing less than 10,000 pounds, if they are not used for business delivery; ranching + farming; carpenter or plumber
Aircraft insurance
covers physical damage and legal liability arising out of the ownership
Boatowners insurance
covers the boats and watercraf
Homeowner's Insurance
covers the dwelling, other structures, and personal property against loss or damage from numerous perils
term to age 65 policy
covers the insured to age 65. level premium; level face value
Liability insurance
covers the insured's legal liability arising out of property damage or a injury
General Liability Insurance
covers the legal liability of business firms and other organizations that arise out of property damage
Commercial auto insurance
covers the legal liability of business firms arising out of the ownership or operation of business vehicles
yearly renewable term insurance policy
covers the policyholder for 1 year; provides no cash value, so most of the premium covers the mortality charge, the amount that must be paid for those who die
Workers Compensation Insurance
covers workers for a job-related accident or disease. Pays for medical bills
data mining tools
software programs that statistically analyze data to identify patterns, trends, and relationships within data; used in e-commerce to understand consumer behavior
producer
someone who manufactures something
supplier
someone whose business is to supply a particular service or commodity
business broker
someone whose job it is to bring buyers and sellers of business together for a fee
Consideration
something of value exchanged for something else of value
benefit
something that promotes or enhances the value of a product or service to a customer
three damages awarded for negligence
special damages, general damages, punitive damages
Self-Insurance
special form of planned retention by which part or all of a given loss exposure AKA: self funding (losses are funded and paid for by the firm).
enterprise zones
specially designated areas of a community that provide tax benefits to new businesses locating there; communities may also provide grants for new product development
express warranty
specifically stated in the contract
insuring agreement (insurance contract)
specifies the risks that are covered, the limits of the policy, and the term of the policy
limitations
specify the limits of the policy
exclusions
specify what is not covered by the contract
Budget
spending & saving plan based on your expected income & expenses
Objective Risk varies inversely with
square root of # of cases under observation EX: 10,000 houses were insured Objective Risk is 10/100 or 10%
miscellaneous-type vehicle endorsement
standard auto insurance policy for motorcycles, mopeds, motor scooters, motor homes, snowmobiles, and most other recreational vehicles;
single limit
standard policy provides this; limit for all liability, no matter how it is apportioned
Warranty
statement assuring quality & performance of a product or service
affirmative warranty
statement of fact (basically representation)
The Law of Large Numbers
states that if the # of exposure units increases, the more closely the actual loss experience will approach the expected loss experience
insuring agreement
states what insurer promises + under which conditions
modified whole life insurance
stepped premiums that allow young people to pay smaller premiums when they are making less, then after a specific time, the premiums step up to a higher level as the insured's income increases
birthday rule
stipulates that whichever parent has the earlier birthday is the insurance that is considered primary
coordination-of-benefits clause
stipulates which insurance is primary and which is excess
coordination of benefit clause
stipulates which insurance is primary and which is excess// in GROUP health insurance
----------- expected value of probability distribution
sum of possibility of event happening x possible event (or amount of loss)
Financial statement
summary report that shows how a firm has used the funds entrusted to it by its stockholders and lenders and what is its current financial position. (Balance sheet, income statement, and cash flow statement)