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

email

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)