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 Student Resources Study Guide: Entrepreneurship Glossary A B C D E F G H I J K L M N O P Q R S T U V W X Y Z accounting Recording, classifying, summarizing, and interpreting financial data, particularly to determine the financial health of a company. accounts payable A form of current liability; money owed by a business. accounts receivable A form of current asset; money owned to a business. accounts receivable financing A loan in which a business's accounts receivable is offered as collateral. accrual basis An accounting system in which income is reported when it is invoiced and expense are recorded when they are incurred. advertising
Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
advertising-as-an-investment method
A method of setting a high advertising budget for a new product in order to attract enough customers to pay for the advertising.
allowance
A price reduction such as a rebate that provides a partial refund to the customer.
angel
A term for a type of nonprofessional investor, usually one who puts money into local firms.
aptitude
An ability or potential for learning a certain skill.
Articles of Incorporation
Filed with the corporation and securities bureau in a state department of commerce; they identify the name and address of a business, its purpose, the names of the initial directors, and the amount of stock to be issued to each director.
asset
Anything of monetary value that a business or entrepreneur owns.
assuming
Taking over the debts of another company.
bad debt
Credit that has been extended to customers but has not been paid, and bad checks that were not paid by the bank.
bait-and-switch
A form of misleading advertising in which a company promises customers a product which is not available, then tries to sell them something more expensive.
balance sheet
A summary of a business's assets, liabilities, and owner's equity.
bankruptcy
A condition in which a business cannot pay its debts and must seek legal protection from debtors.
barriers to entry
Market forces that keep new businesses from starting in a certain industry or block expansion.
beginning inventory
The cost of materials on hand at the beginning of a given accounting period, usually a month.
behavioral data
Data used to segment a market based on how people use a good or service.
benefits
Privileges, or monetary payments beyond salary or wages, that go with a job.
brand
A name, term, design, or symbol (or combination of them) that identifies a business or organization and its products.
brand licensing
The legal authorization by a trademarked brand owner to allow another company (the licensee) to use its brand, brand mark, or trade character for a fee.
brand mark
The part of the brand that is a symbol or design.
brand name
The word, group of words, letters, or numbers representing a brand that can be spoken.
break-even point
The point at which sales revenue equals the costs and expenses of making and distributing a product.
brick-and-mortar retailers
Traditional retailers that sell goods to the customer from their own physical stores.
business cycle
Recurring slow-down and growth of an economy.
business failure
A condition that occurs when a company fails to make a profit and must cease operations.
business philosophy
Describes how an entrepreneur thinks a business should be run and shows an understanding of a business's role in the marketplace.
business plan
A proposal that describes a new business to potential investors and lenders.
business risks
The possibility of business loss or failure.
capacity
The ability of an entrepreneur to pay back a business loan.
capital
The money needed to start and operate a business.
capitalism
An economic system characterized by private ownership of businesses and marketplace competition.
cash basis
An accounting system in which expenses are reported when they are paid and income is reported when it is received.
cash discount
A discount offered to businesses if a bill is paid by a certain date.
cash-flow statement
A monthly plan that shows when you anticipate cash coming into the business and when you expect to pay out cash.
cash sale
A transaction in which the customer pays for the purchase with cash or a check.
casualty insurance
Insurance issued to protect businesses from lawsuits.
chain of command
A clear representation of which employees in a company answer to which other employees.
channel of distribution
The path a product takes from producer or manufacturer to final user.
charge-off
An accounting transaction that removes a bad debt from a business's accounts receivable.
charter
An official document issued by state governments that authorizes a corporation to do business.
collateral
Something of value that a borrower pledges to a lender to ensure repayment of a loan.
commercial loan
A loan in which a bank loans a business a lump sum to be repaid in a single payment after a few months.
commission
A percentage of sales given to salespeople in addition to salary.
common stock
A form of stock that provides maximum dividends; the most common stock.
community relations
The activities that a business uses to acquire or maintain the respect of the community.
community shopping center
A shopping area whose trading area is a 10- to 20-mile radius.
comparative advantage
The value that a nation gains by selling the goods that it produces most efficiently.
competition
The struggle between companies for customers.
competition-oriented pricing
A pricing strategy in which prices are set based on what competitors are charging.
competitive advantage
The advantage gained by a business that can produce a product better or cheaper than its competitors.
consumer
Person who uses the product.
consumerism
The societal effort to protect consumer rights by putting legal, moral, and economic pressure on business.
controlling
The process of comparing what you planned with actual performance that involves setting standards, evaluating performance, and solving problems revealed.
cooperative advertising
A cost-sharing arrangement whereby both a supplier and a local advertiser pay for advertising.
cooperative buying group
A small group of retailers who pool their resources in order to purchase products at a discount.
copy
The selling message in a written advertisement.
corporation
A business that is chartered by a state and legally operates apart from the owner or owners.
cost of goods sold
The cost to a business of the products that were actually sold during a given period.
cost-oriented pricing
A pricing strategy in which prices are set based on the cost of making and marketing the product.
coupon
A certificate that allows a customer a discount on a product or service.
credit
The opportunity to obtain money, goods, or services immediately in exchange for a promise to pay in the future.
credit union
A financial institution that is a cooperative association formed by labor unions or groups of employees for the benefit of its members.
current assets
A business's cash and property that can be turned into cash within a year.
current liability
A debt that the business expects to pay within a year.
customer advisory boards
Panels of consumers who make suggestions about products and businesses.
customer profile
Information about the age, income level, ethnic background, occupation, attitudes, life-style, or geographic residence of a targeted customer.
customer
Person who buys the product.
database
A collection or file of related information about a specific topic.
DBA
Doing Business As; designation for a sole proprietor or partnership.
debt capital
Raising funds by borrowing money that will be repaid later.
default
The failure to pay a loan as required in the loan terms.
demand
The amount or quantity of goods and services that consumers are willing and able to buy at various prices.
demand-oriented pricing
A pricing strategy in which prices are set based on consumer demand.
demographics
Statistics that describe a population in terms of personal characteristics.
depreciation
The process by which a fixed asset loses value over time.
dividends
Payments made by companies to stockholders, representing a portion of the company's profits.
e-commerce
The buying and selling of goods through the Internet.
economic risk
The risk of loss of income from changes in overall business conditions.
ending inventory
The cost of materials on hand at the end of a given accounting period, usually a month.
entrepreneurs
People who organize, manage, and take the risk of owning and operating a business.
entrepreneurship
The process of starting and managing your own business; the skills of people who are willing to risk their time and money to run a business.
equipment leasing
A financing option in which a business essentially rents equipment rather than buying it.
equipment loan
A loan offered by a bank to finance the purchase of equipment for a business and repaid over a period of several years.
equity
A measurement of a person's ownership in a business.
equity capital
Raising money from within your company or by selling part of the interest in the business.
escrow account
An account held by a third party into which funds are placed to be held until certain conditions are met.
e-tailing
Retailers selling products over the Internet to the customer.
ethics
Guidelines for good behavior.
factors of production
The technical term economists use for resources.
fad
A product that goes in and out of fashion very quickly.
family business
A business owned and operated by two or more members of the same family.
finance
Money or anything that can be sold very quickly to get money; borrowing money.
fixed assets
The assets of a business that are not expected to be converted into cash within the year, including real estate and equipment.
fixed expenses
Business expenses that do not change each month, such as rent.
flat-rate terms
Describes a rental policy in which a fixed rent is charged each month.
flexible-price policy
Pricing policy that permits customers to bargain for merchandise.
foreclosure
The process a mortgagee goes through to collect collateral when a loan has fallen into default.
foreign corporation
A corporation incorporated under the laws of a different state from the one in which it does business.
franchise
A grant or right to sell a parent company's product or service within a given area or territory.
franchisee
A person who buys a license to operate a named company from a franchisor.
franchisor
A parent company that sells the right to use its name to franchisees who operate a business by
free enterprise system
System in which individuals start and operate their own businesses without government involvement
general partnership
A partnership in which each partner shares in the profits and losses of the business.
geographics
A way of segmenting a market by geographic data including cities, counties, and neighborhoods.
good with an accompanying service
A good offered for sale for which a service is needed or desired to fully use the good.
goods
The kinds of things you can touch or hold in your hand.
Gross National Product (GNP)
The total market value of all goods and services from all forms of economic activity during one year.
Gross Domestic Product (GDP)
The total value of all goods and services produced by workers within the U.S. during the year.
gross profit
The difference between sales revenue and the cost of goods sold.
gross sales
The total of all sales for any period of time.
horizontal organization
A business structure in which employees are organized into self-managing teams that set their own goals and make their own decisions.
human risks
Type of business risks caused by human mistakes, as well as the unpredictability of customers, employees, or the work environment.
income statement
A summary of a business's income and expenses during a specific period, such as a month, a quarter, or a year; often called profit and loss statement.
incubator
A company that encourages entrepreneurship and provides resources to help entrepreneurs start new businesses.
industrial good
Any product purchased by a company for use by the company.
insolvency
Describes the condition of a borrower who cannot pay his or her debts.
institutional advertising
Advertising attempts to create a favorable impression and goodwill for a business or an organization.
interest
The money paid for the use of money borrowed or invested.
inventory
An amount of goods stored by a business, including raw materials, purchased components, manufactured subassemblies, works in process, packaging materials, and finished goods.
inventory financing
A revolving credit account backed by a company's inventory.
job description
Written statements listing the requirements of a particular job.
joint ventures
Partnerships between companies, often used to enable a company to do business in another country.
leader
An item priced very low to lure customers.
liability
A debt owed by a company.
lien
A legal hold on property that ensures that a debt will be paid.
life-style
goals A person's idea of the way they want to live in the future.
limited partnership
A partnership in which each limited partner is liable for any debts only up to the amount of his or her investment in the company.
line organization
A form of business organization in which each employee is responsible for reporting to only one manager.
line-and-staff organization
A form of business organization in which each employee reports to a manager, but is also assisted and advised by a staff specialist.
line of credit
A loan on which interest is charged only on the amount borrowed, and not necessarily on the full credit limit.
long-term liability
A debt that the business does not expect to pay off within a year.
loss leader
An item priced at or below cost in order to attract customers.
management
The business function used to plan, organize, and control all available resources to reach company goals.
manufacturer's representative
A person hired by a manufacturer to sell its products to wholesalers and retailers.
market
All potential customers who share common needs and wants, and who have the ability and willingness to buy a product.
market analysis
Part of a business plan that includes an examination of all aspects of the business's potential sales area, including customers, competition, and economic conditions.
market position
A company's relative standing in relation to its competitors.
market research
The systematic gathering, recording, analyzing, and presentation of information related to marketing goods and services.
market saturation
A condition in which a potential sales area has too many businesses offering similar products or services.
market segmentation
A way of analyzing a market by specific characteristics in order to identify a target market.
market share
A firm's percentage of the total sales volume generated by all competitors in given market.
marketing concept
The idea that businesses must satisfy customers' needs and wants in order to make a profit.
marketing information system
A set of procedures and methods that regularly generates, stores, analyzes, and distributes marketing information for use in making marketing decisions.
marketing mix
Four basic marketing strategies, collectively known as the four Ps-product, place, price, and promotion.
marketing research
The marketing function that links the consumer, customer, and public to the market through information.
marketing
The process of developing, promoting, and distributing products to satisfy customers' needs and wants.
marketplace
Wherever two or more people agree to buy and sell a product.
markup pricing
A pricing strategy in which prices are set based on costs plus a set markup.
media
The agencies, means, or instruments used to convey advertising messages to the public.
middle management
A level of supervisory employees who implement the decisions of top management.
mini-nationals
Midsize and smaller companies that have operations in foreign countries.
mission statement
Describes the ultimate goals of a company.
mixed-brand strategy
A branding strategy that involves simultaneously offering a combination of manufacturer, private distributor, and generic brands.
monopoly
Exclusive control over a product or the means of producing it.
natural risk
The risk of business loss from natural causes such as floods, tornadoes, hurricanes, fires, lightning, droughts, earthquakes, and unexpected changes in normal weather conditions.
neighborhood shopping center
A shopping area that attracts customers within a 6- to 10-mile radius.
net income
The amount left after the total expenses are subtracted from gross profit.
net profit
Gross sales minus cost of goods sold minus operating expenses.
net sales
The amount left after gross sales have been adjusted for returns and allowances.
net worth
The difference between the assets of a business and its liabilities; also known as owner's equity.
networking
Finding contacts among people you know, including family and friends, former employers, and professional people you know personally.
news release
A prewritten story about a company that is sent to the various media.
nonprice competition
A business's choice to compete on the basis of factors not related to price.
nonprofit organizations
Service organizations not operated for the purpose of making a profit.
objective-and-task method
A method of determining an advertising budget based on a company's objectives and the tasks required to meet them.
odd-cent pricing
A pricing strategy that offers a price that ends in an odd number in order to make it seem less expensive to customers.
one-price policy
Pricing policy in which all customers are charged the same price for goods and services.
opening cash fund
The coins and currency designated for a cash register for a given day's business.
open-to-buy
The amount of money left for buying goods after all other expenses have been considered.
operating expenses
The costs of doing business, including rent, payroll, and promotion, etc.
organization chart
A diagram of the various jobs and functions that are found in a company, and their relationship to one another.
parliamentary procedure
A structure for holding group meetings and making decisions.
partnership
A legal agreement between two or more people to be jointly responsible for the success or failure of a business.
patent
A legal protection that gives an inventor the exclusive right to make, use, and sell an invention for 17 years.
penetration pricing
A pricing policy that sets a very low initial price for a new product.
percentage lease
A lease in which the landlord charges a minimum monthly rent in addition to a percentage of a store's sales.
percentage-of-sales method
A method for determining an advertising budget based on a company's sales.
performance bonds
Insurance against losses that might occur when work or a contract is not finished on time or as agreed; also called surety bonds.
perishable
Describes something that will be wasted or spoiled if not used.
perpetual inventory system
Tracks the number of items in inventory on a constant basis.
personal financial statement
A summary of an entrepreneur's current personal financial condition.
personal selling
Any form of direct contact occurring between a salesperson and a customer.
petty cash fund
A business's cash fund used to pay for small, incidental expenses.
physical distribution
All the activities that help to ensure that the right amount of product is delivered to the right place at the right time.
physical inventory system
Method of inventory control in which stock is inspected or actually counted to determine the quantity on hand.
planning
The first step in the management process that involves deciding what will be done and how it will be accomplished.
planning goals
Small steps you take to get from where you are now to where you want to be.
preferred stock
Ownership in a company that is more expensive than common stock, receives dividends first, but offers a smaller return.
prepaid expenses
Any expenses, such as a rental deposit, that must be paid before a business can begin operations, but are expected to be refunded when a business closes or moves.
press conference
A meeting in which a business or organization invites media members to hear an announcement about a newsworthy event.
press kit
A folder containing articles, news releases, feature stories, and photographs about a company, product, or person.
prestige pricing
Setting higher-than-average prices to suggest status and prestige to the consumer.
price
The value of money (or its equivalent) placed on a good or service.
price competition
Competition based on the sale price of a product.
price discrimination
A situation in which a firm charges different prices to similar customers in similar situations.
price fixing
An illegal practice that involves competitors agreeing on certain price ranges within which they set their own prices.
price lining
A pricing technique in which a store offers all merchandise in a given category at certain prices, such as $10 and $20.
pricing objectives
The goals a business intends to meet through its pricing strategy.
principal
The amount of money borrowed.
private distributor brand
A brand owned and initiated by wholesalers and retailers; also called a private brand, store brand, or dealer brand.
private sector
Businesses not associated with government agencies.
product
A good or service being sold.
product depth
The number of product items offered within each product line.
product features
Basic, physical, or extended attributes of the product or purchase.
product item
A specific model, brand, or size of a product within a product line.
product life cycle
The stages that a product goes through during its life: introduction, growth, maturity, and decline.
product line
A group of closely related products that are manufactured or sold by a business.
product mix
All of the different products that a company makes or sells.
product planning
Making decisions about those features that are needed to sell a business's products, services, or ideas.
product positioning
A plan for creating an image for a product.
product promotion
Communication used by a business to convince potential customers to buy a specific product.
product width
The number of different product lines a business manufactures or sells.
product with important services
A product/service mix that offers a product with services, such as a service contract or warranty.
production
The process of creating, growing, manufacturing, or improving goods and services.
productivity
Output per worker hour.
profit
The money earned from conducting business after all costs and expenses have been paid.
promotion
Any form of communication a business or organization uses to inform, persuade, or remind customers.
promotional pricing
A pricing strategy that emphasizes price in order to attract customers.
prospect
A potential customer; also called a lead.
prototype
A model of a new product created as part of the product development cycle.
psychographics
A way of segmenting a market based on people's attitudes, beliefs, opinions, and life-styles.
psychological pricing
Pricing techniques that create an illusion for customers or that make shopping easier for them.
public employment agencies
Employment agencies supported by state or federal taxes that offer free services to both job applicants and employers.
public relations
Any activity designed to create a favorable image toward a business, its products, or its policies.
public sector
Local, state, and federal government agencies and services, such as schools and libraries.
publicity
A specific kind of public relations that involves placing positive and newsworthy information about a business, its products, or its policies in the media.
quantity discount
A discount offered to a business for purchasing a specific quantity of product.
quorum
A proportion of the membership needed to conduct official business.
quota
The amount or number of sales a salesperson is required to make during a given period.
real estate financing
A loan for which real estate is offered as collateral; also called a mortgage.
rebate
A sales promotion in which a portion of the sales price is returned to the customer.
regional shopping center
A shopping center attracting customers from 20 to 40 minutes away.
retailers
Businesses that buy goods from wholesalers or manufacturers and resell them to customers.
revolving accounts
Charge accounts for which the retailer determines the credit limit and when payments are due.
risk management
The systematic process of managing an organization's risk exposure to achieve objectives in a manner consistent with public interest, human safety, environmental factors, and the law.
risk
The possibility of financial loss.
sales representatives
Employees of wholesalers who sell to retailers.
service with accompanying products
A product/service mix in which a service is the primary offering, such as interior decorating, and products, such as curtains and carpet, are offered to accompany and augment the service.
services
The kinds of things you can't physically touch; tasks performed for a customer.
shareholders
The people who own the corporation; also called stockholders.
short-term loan
A commercial loan, line of credit, or other debt offered to a business for a short period of time.
signature loan
An unsecured loan.
silent partner
A partner in a business who invests money but is not active in running the business.
six-month merchandise plan
The budget that estimates planned purchases for a six-month period.
skimming pricing
A pricing policy that sets a very high price for a new product.
Small Business Administration (SBA)
A federal agency that provides assistance and protection to small businesses.
sole proprietorship
A business owned and operated by one person.
span of control
The number of employees a manager or supervisor directs.
start-up costs
The funds needed to start a business.
statement of financial requirements
A part of a business plan that describes start-up costs as business expenses and the accompanying assets they create.
stock
A portion of ownership in a business.
stock turnover
The number of times the average inventory has been sold and replaced in a given period of time.
stockholders
The people who own the corporation; also called shareholders.
Subchapter S corporation
A small corporation that is taxed like a partnership or proprietorship.
suggestion selling
Selling additional goods or services to the customer.
superregional shopping center
A shopping center that exceeds 750,000 square feet and includes three or more department stores.
supervisory-level management
Front-line managers who supervise the activities of the employees who carry out the tasks determined by the plans of management.
supplies
Products that a business buys for its operations, but that are not part of inventory.
suppliers
The vendors and manufacturers from which a business buys the products necessary to operate.
test marketing
The process of having consumers try a product in order to gauge reaction.
top management
Those who make planning decisions that affect the whole company.
trade character
A brand mark with human form or characteristics.
trade discount
A price reduction offered to businesses for performing a function, usually in the channel of distribution.
trade name
Identifies the company or a division of a particular corporation.
trademark
A brand name, brand mark, trade name, trade character, or a combination of these, that is given legal protection by the federal government.
trading area
The geographical area from which a business draws its customers.
unlimited liability
The condition facing a general partner or sole proprietor in which liability is not limited to a person's investment in the business, but extends to the entrepreneur's total ability to make payments.
unsecured loan
A loan offered based on a business's ability to repay the loan and not secured by collateral.
values
Beliefs that guide the way people live.
variable expenses
Business expenses that will change from month to month, such as advertising.
variable pricing
A pricing policy which allows bargaining by customers.
venture capitalist
A professional investor who invests in new, untested businesses and new business models.
vertical organization
A business structure in which each employee has specific duties and answers to one manager who supervises similar employees.
visual merchandising
The coordination of all the physical elements in a place of business that project a specific image to its customers.
volume discount
A discount offered to entities that purchase products in large quantity.
wholesalers
Companies that obtain goods from manufacturers and resell them to industrial users, other wholesalers, and retailers.
workers' compensation
A type of insurance required by all states that covers workers injured in the workplace.
working capital
Cash available for the day-to-day operation of a business.
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