Management Dictionary

G.V.
R &S-College of Engg & TechAUGMENTUM-2K16
MBA DEPT
We recruit for attitude and train for skill

Human Resource Management:
Ability test--An assessment instrument used to measure an individuals abilities, mental or physical
skills level (i.e. problem solving, manual dexterity, etc.).
Ability--Aptitude or competence, the skill or proficiency needed to perform certain tasks.
Absenteeism--Referred to as the habitual failure of employees to report for work when they are
scheduled to work.
Absolute ratings--A rating method where the rater assigns a specific value on a fixed scale to the
behavior or performance of an individual instead of assigning ratings based on comparisons between
other individuals.
Accessibility--The extent to which a contractor's or employer's facility is readily approachable and
does not inhibit the mobility of individuals with disabilities, particularly such areas as the personnel
office, worksite and public areas.
Accessible format--Materials that are designed in alternate formats such as Braille, audiotape, oral
presentation or electronically for individuals with visual impairments.
Accountability--The responsibility placed on an individual or group for their own or others actions,
conduct, performance, projects, etc.
Accreditation--A process of external quality review and certification by a recognized body that
evaluates individuals, colleges, universities and educational programs to assure they are performing
the functions that they claim to be performing in a competent manner.
Achievement test--A standardized testing instrument used to measure how much an individual has
learned or what skills he or she has attained as a result of education, training or past experience.
Acquisition--The process of acquiring control of another corporation by purchase or stock
exchange.
Action learning--A learner-driven, continuous learning process where learning revolves around the
need to find solutions to real problems.
Active learning--The process of learning new knowledge, skills and behaviors through taking
specific actions or performing specific tasks.
Active listening--A manner of listening that focuses exclusively on what the other person is saying
and validates understanding of both the content of the message and the emotions underlying the
message to ensure exact understanding.
G.V.R &S-College of Engg & TechAUGMENTUM-2K16
MBA DEPT
Adjunct program--A supplemental training tool that applies programming principles to existing
instructional modules, materials, texts, manuals, etc., that are designed to direct the learner to
specific areas within the module.
Administrative service organization (ASO)--A term used to define an organization that provides
outsourced solutions to meet the administrative and HR needs of the client with the client retaining
all employment-related risks and liabilities.
Adverse impact--A substantially different rate of selection in hiring, promotion or other
employment decision that works to the disadvantage of a race, sex or ethnic group.
Adverse selection--An employers selection practices or policies that result in discriminatory or
unfavorable treatment toward an individual or individuals who are members of a protected group.
Advisory committee--A group or panel of internal or external members with no decision- making
authority, assembled to identify and discuss specific issues and make recommendations.
Affected class--Groups of employees, former employees or applicants who have experienced and/or
continue to experience the loss of employment opportunities or benefits due to discriminatory
practices or policies of the employer.
Affirmative action (AA)--Any program, policy or procedure that an employer implements in order
to correct past discrimination and prevent current and future discrimination within the workplace.
Affirmative Action plan (AAP)--A written set of specific, results-oriented procedures to be
followed by all federal contractors holding contracts of $50,000 or more and employing 50 or more
people and intended to remedy the effects of past discrimination against or underutilization of
women and minorities. The effectiveness of the plan is measured by the results it actually achieves
rather than by the results intended and by the good faith efforts undertaken by the contractor to
increase the pool of qualified women and minorities in all parts of the organization.
After-acquired evidence--Used in litigation of employment discrimination disputes, after-acquired
evidence is evidence that the employer discovers after it has already discharged an employee which
proves that even if the discharge in question is found to be illegal, the employer would have
dismissed the employee anyway in light of discovering the misconduct.
Alternation ranking--A rating method used in job evaluation and performance evaluation whereby
the rater is asked to select the best and worst employees from a listing of all employees and then
rank them accordingly.
Alternative assessment--Nontraditional procedures and techniques used within the framework of
instructional programs to evaluate a students educational achievement.
Alternative dispute resolution (ADR)--A voluntary procedure used to resolve disputes or conflicts
between individuals, groups or labor-management. This procedure utilizes the services of a neutral
third party to facilitate discussion and assist the parties in reaching an agreement which is binding.
Alternative worksite--Any location other than the employers physical worksite where employees
are allowed to perform their jobs.
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Analysis of variance--A statistical method used to determine whether a relationship exists among
two or more variables by formulating concurrent comparisons of the variables.
Analytical thinking--The ability to analyze facts, generate a comparison and draw correct
inferences or conclusions from available information.
Anti-nepotism policy--An employers policy that restricts the employment of two or more family
members at the same time.
Annual goal--An annual target for the placement of underutilized groups of protected class members
in job groups where underutilization exists.
Apparent authority--The appearance that an individual has the authority or power to act as an
organizations agent, even though the organization has bestowed no such authority or power to that
individual.
Applicant files--Application forms/resumes and other relevant items maintained by an employer and
used during the selection process.
Applicant flow data--Records of hiring, promotion and other related employment actions used for
the purpose of monitoring selection and employment practices.
Applicant flow log--A chronological listing that records each applicant who applies for employment
or promotion. Data includes applicant's name, race, national origin, gender, referral source, date of
application, job title applied for and disposition.
Applicant pool--The sum total of all individuals who have applied for a position either by
submitting a resume or application for employment which the employer uses to select candidates for
employment.
Applicant tracking--Any paper or computerized system that tracks the organizations data such as
resumes/applications and internal job posting information.
Application service provider (ASP)--A third-party organization that delivers software applications
and related services over the Internet allowing an organization to outsource some or all of its
information technology needs.
Apprenticeship--A system used to train a person in a recognized trade or craft in accordance with
specific standards. The apprenticed individual obtains his or her skills by performing the related
duties for a specified period of time under the tutelage of an experienced craft or tradesman.
Aptitude testing--A standardized testing instrument used during the selection process that is
intended to measure and predict an individuals abilities.
Arbitration--An alternative dispute resolution method that uses a neutral third party (i.e. arbitrator)
to resolve individual, group or labor-management conflicts and issue a binding decision.
Architectural barriers--The physical attributes or design of a building, structure or facility that
prevent individuals with physical disabilities from accessing or freely using the building, structure or
facility.
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Assessment center--A testing location where a candidate being considered for assignment or
promotion to managerial or executive-level position is rated by a team of experienced evaluators
over a series of days using standardized activities, games and other simulations to predict the
candidates future job performance.
Attendance policy--An employers written standards regarding the requirement for employees to be
on time and present at work during regularly scheduled work periods.
Attitude survey--A tool used to solicit and assess employee opinions, feelings, perceptions and
expectations regarding a variety of managerial and organizational issues.
Attrition--A term used to describe voluntary and involuntary terminations, deaths and employee
retirements that result in a reduction to the employer's physical workforce.
Auxiliary aids--"A wide range of services and devices (necessary) for ensuring that equally
effective communication" takes place with regard to persons with hearing, speech and vision
disabilities. Such aids include, but are not restricted to, providing interpreters, assistive listening
devices, materials in Braille, closed caption, telecommunication devices for the hearing impaired,
etc.
Availability analysis--The process of determining the number of qualified minorities and women in
the relevant available workforce who possess or have the ability to acquire the required skills or
qualifications for any available position within the organization
Baby boomers--The term used to describe those individuals born between 1945 and 1970.
Baby busters--The term used to describe those individuals born between 1961 and 1972.
Background check/investigation--Background Investigations and Reference Checks are the
principal means by which employers actively check into the backgrounds of potential hires.
Background investigations and reference checks fall within the HR Discipline of Staffing
Management. Each can involve both verifying information provided by applicants, and ascertaining
pertinent information not provided by applicants themselves. A background investigation generally
involves screening out persons who are not qualified due to criminal convictions, poor driving
records, poor credit history, or misrepresentations on rsums or application forms about education
or prior work history. Reference checks generally involve contacting applicants former employers,
supervisors, co-workers, educators, and athletic coaches for information about the knowledge, skills,
abilities (KSAs), and character of applicants.
Back pay --A common remedy for wage violations is an order that the employer make up the
difference between what the employee was paid and the amount he or she should have been paid.
The amount of this sum is often referred to as "back pay." Among other Department of Labor
programs, back wages may be ordered in cases under the Fair Labor Standards Act (FLSA) on the
various federal contract labor statutes.
Balanced scorecard--A popular strategic management concept developed in the early 1990s by Drs.
Robert Kaplan and David Norton. The balanced scorecard is a management and measurement
system that enables organizations to clarify their vision and strategy and translate them into action.
The goal of the balanced scorecard is to tie business performance to organizational strategy by
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measuring results in four areas: financial performance, customer knowledge, internal business
processes, and learning and growth.
Bankruptcy--A federal law consisting of different chapters (i.e. chapter 7, chapter 11 or chapter 13)
that allows individuals and businesses that are experiencing extreme financial duress and are unable
to meet their financial obligations to eliminate or restructure their debts.
Barrier analysis--The process of reviewing an organizations policies and procedures to identify
and eliminate impediments in recruitment, selection, transfer, or promotion of protected class
individuals throughout the organization.
Behavioral-based interview--An interview technique that focuses on a candidates past
experiences, behaviors, knowledge, skills and abilities by asking the candidate to provide specific
examples of when he or she has demonstrated certain behaviors or skills as a means of predicting
future behavior and performance
Behaviorally anchored rating scale (BARS)-An appraisal that requires raters to list important
dimensions of a particular job and collect information regarding the critical behaviors that
distinguish between successful and unsuccessful performance. These critical behaviors are then
categorized and appointed a numerical value used as the basis for rating performance.
Behavioral risk management--The process of analyzing and identifying workplace behavioral
issues and implementing programs, policies or services most suitable for correcting or eliminating
various employee behavioral problems.
Behavior modification--A conscious attempt to change or eliminate an individuals undesirable
behavior by specifying expected behavior and reinforcing and rewarding desired behavior.
Benchmarking--The systematic process of comparing an organizations products, services and
practices against those of competitor organizations or other industry leaders to determine what it is
they do that allows them to achieve high levels of performance.
Benchmarks--The standards used as a basis for comparison or measurement.
Bereavement leave--An employer policy that provides a specific number of paid days off following
the death of an employees spouse, parent, child, grandparent or in-law so that the employee may
attend funeral proceedings, etc.
Best practices--Defined in a variety of ways, but typically refers to the practices of an organization
that enables them to achieve superior organizational performance results.
Bidding--The practice of posting all job openings internally so that current employees may be
allowed the opportunity to apply for vacant positions prior to the employer seeking qualified
candidates through other external recruitment measures.
Blended workforce--A workforce is comprised of permanent full-time, part-time, temporary
employees and independent contractors.
Blind ad--A job advertisement placed in a newspaper, trade journal/publication, magazine or
Internet job board that contains no identifying information about the employer placing the ad.
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Blue collar workers--Hourly paid workers employed in occupations that require physical or manual
labor.
Bona fide occupational qualification (BFOQ)--A very narrowly interpreted exception to EEO laws
that allows employers to base employment decisions for a particular job on such factors as sex,
religion or national origin, if they are able to demonstrate that such factors are an essential
qualification for performing a particular job.
Bonus plan--An incentive pay plan which awards employees compensation, in addition to their base
salary, for achieving individual or group performance and productivity goals.
Boundary less organization--Defined as an organization that removes roadblocks to maximize the
flow of information throughout the organization.
Branding--The process of identifying and differentiating an organizations products, processes or
services from another organization by giving it a name, phrase or other mark.
Breach of contract--Occurring when an individual who is a party to a contract or agreement does
not uphold or violates the terms of the contract.
Break-even analysis--A measure used to determine the approximate sales volume required to cover
the costs associated with producing a particular product or service.
Broadbanding--A pay structure that consolidates a large number of narrower pay grades into fewer
broad bands with wider salary ranges.
Buddy system--A form of employee orientation whereby a newly hired employee is assigned to
another employee (typically within the same department) who shows the new employee the ropes,
introduces him or her to coworkers, gives personal assistance and answers questions on an as-needed
basis.
Budget--A numerical summary of an organizations available resources and how those resources are
to be allocated based on anticipated future expenditures for various items, such as equipment,
training and development programs, benefits, implementing new processes or services, etc
Bumping--The practice of allowing more senior level employees whose positions have been slotted
for elimination or downsizing the option of accepting an alternative position within the organization,
for which they may be qualified to perform and which is currently occupied by another employee
with less seniority.
Burden of proof---The burden placed on an employer, as a result of a claim of discriminatory
treatment, to provide a verifiable, legitimate and nondiscriminatory reason for any employment
action taken which may have resulted in adverse treatment of a member(s) of a protected group.
Burnout--Physical or emotional exhaustion, lack of motivation or decreased morale resulting from
an individual being exposed to excessive or prolonged stress and frustration caused by personal
problems, work pressures, financial difficulties, etc.
Business continuity planning--Broadly defined as a management process that seeks to identify
potential threats and impacts to the organization and provide a strategic and operational framework
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for ensuring the organization is able to withstand any disruption, interruption or loss to normal
business functions or operation.
Business literacy--The knowledge and understanding of the financial, accounting, marketing and
operational functions of an organization
Business necessity--A defense available when the employer has a criterion for selection that is
facially neutral but which excludes members of one sex, race, national origin or religious group at a
substantially higher rate than members of other groups, thus creating adverse impact. The employer
must be able to prove that the challenged practices effectively carry out the business purposes they
are alleged to serve and that no alternative, nondiscriminatory practices can achieve the safe and
efficient operation of its business.
Business plan--A document that provides relevant information about a company by outlining items
such as the companys business description, market or industry, management, competitors, future
prospects and growth potential, etc.
C-Suite--A term used to describe members of the executive team, i.e. CEO, CFO, CIO, COO, etc.
Call center--The area in an organization responsible for screening, forwarding and logging large
volumes of customer-related calls at the same time through the use of technology and other
resources.
Cafeteria plan--A benefit plan which allows employees to choose between one or more qualified
tax-favored benefits and cash.
Career center--An office set up within an organization to be used for the purpose of providing
outplacement counseling and job placement services to displaced workers.
Career counseling--Guiding individuals through the career planning and career decision-making
process by helping them to make informed decisions regarding educational and occupational
choices, as well as providing resources needed to further developing job search and placement skills.
Career development--The process by which individuals establish their current and future career
objectives and assess their existing skills, knowledge or experience levels and implement an
appropriate course of action to attain their desired career objectives.
Career ladder--The progression of jobs in an organizations specific occupational fields ranked
from highest to lowest based on level of responsibility and pay.
Career mobility--The propensity to make several career changes during an individuals lifetime
instead of committing to a long-term career within a specific occupational field.
Career path--The progression of jobs in an organizations specific occupational fields ranked from
lowest to highest in the hierarchal structure.
Career planning--The process of establishing career objectives and determining appropriate
educational and developmental programs to further develop the skills required to achieve short- or
long-term career objectives.
MBA DEPT
Career plateau--Occurs when an employee has reached the highest position level he or she can
possibly obtain within an organization and has no future prospect of being promoted due to a lack of
skills, corporate restructuring or other factors.
Case study--A case study uses real scenarios that focus on a specific issue(s). It looks deeply at a
specific issue, drawing conclusions only about that issue and only in that specific context
Casual employment--The practice of hiring employees on an as-needed basis, either as a
replacement for permanent full-time employees who are out on short- and long-term absences or to
meet employers additional staffing needs during peak business periods.
Caucus--A labor relations term used to define periodic suspensions of negotiations in order to
provide both sides with an opportunity to consider their relevant positions.
Centralization--The process of consolidating all decision-making authority under one central group
or location.
Change agent--A term used to define an individual or group of individuals who directly or
indirectly cause or accelerate social, cultural, or behavioral change.
Change management--The systematic approach and application of knowledge, tools and resources
to deal with change. Change management means defining and adopting corporate strategies,
structures, procedures and technologies to deal with changes in external conditions and the business
environment.
Charge determination --A letter issued by the Equal Employment Opportunity
Commission (EEOC) to both parties involved in an employment discrimination claim, stating that
there is reason to believe that discrimination occurred and inviting the parties to join the agency in
seeking to resolve the charge, through an informal process known as conciliation.
Climate survey--A tool used to solicit and asses employee opinions, feelings, perceptions and
expectations regarding a variety of factors pertinent to maintaining the organizations climate, such as
opportunities for growth, management, working relationships and environment, etc..
Coaching--A training method in which a more experienced or skilled individual provides an
employee with advice and guidance intended to help him or her develop skills, improve performance
and enhance the quality of his or her career.
Co-employment--The relationship between a Professional Employer Organization (PEO) or
employee leasing firm and an employer, based on a contractual sharing of liability and responsibility
for employees
Cognitive ability testing--A testing instrument used during the selection process in order to measure
the candidates learning and reasoning abilities.
Collective action--A federal agency procedure that permits the aggregation of hundreds or
thousands of claims requiring only that the employees be similarly situated. The collective action
may be maintained in either state or federal court, although as a practical matter, defendants will
remove most actions when the federal statute is pleaded. In states with strong independent state
wage and hour law, plaintiffs will typically plead state law claims in the same complaint.
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Compaq ratio---The ratio of an actual pay rate to the midpoint for the respective pay grade used for
comparing actual rates of pay with the midpoint for a particular pay grade within the salary structure.
Comparative rating--A rating method that determines ratings by making comparisons between the
individuals being rated.
Compensatory time-off plan--The practice of giving employees paid time off that can be used in
the future in lieu of paying them overtime for hours worked in excess of 40 per week. While an
acceptable practice in the public sector
Competency-based pay--A compensation system that recognizes employees for the depth, breadth
and types of skills they obtain and apply in their work. Also known as skill-based and knowledgebased pay.
Competencies--The knowledge, skills and abilities required to perform a specific task or function.
Compressed workweek--An alternative scheduling method that allows employees to work a
standard workweek over less than a five-day period in one week or a 10-day period in two weeks.
Conciliation agreement--A binding written agreement between a contractor and OFCCP that details
specific contractor commitments to resolve major or substantive violations of Executive Order
11246, the Rehabilitation Act or the Vietnam Era Veterans' Readjustment Assistance Act.
Concurrent validity--The means of determining a tests or other assessment tools validity by
comparing test scores against actual job performance.
Condition of employment--An organizations policies and work rules that employees are expected
to abide by in order to remain continuously employed.
Confidentiality agreement--A contract restricting an employee from disclosing confidential or
proprietary information.
Consideration---A benefit or other item of value given to an individual who is asked to sign an
employment contract or agreement (i.e., release agreement) that is above and beyond what the
individual would have been entitled to, had he or she not been asked to sign a contract or agreement.
Constructive discharge--Occurs when a manager/supervisor or employer makes working
conditions so unbearable or abusive that a reasonable person believes that resignation is the only
appropriate action to take.
Construct validity--The extent to which a test or other assessment instrument measures a particular
trait.
Consultant--An individual who works independently to assist and advise client organizations with
various organizational functions and responsibilities on a fee-for-service basis.
Consumer Price Index (CPI)--An index of prices used to measure the change in the cost of basic
goods and services in comparison with a fixed base period. Also called cost-of-living index.
Content validity--The degree to which a test or other assessment instrument used during the
selection process measures the skills, knowledge and abilities or other related job qualifications.
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Contingency planning--The process of identifying an organizations critical information systems

and business operations and developing and implementing plans to enable those systems and
operations to resume following a disaster or other emergency situation.
Contingent worker--Refers to an individual employed in a job that does not have an explicit
contract for long-term employment (i.e., independent contractor or temporary employee)
Contractor--A contractor is a firm that does business with the federal government. A prime
contractor receives $50,000 or more in contracts each year and employs more than 50 people in total
employment. A subcontractor performs part of the contract at the direction of the prime contractor
and receives $10,000 or more in subcontracts each year.
Core competencies--The skills, knowledge and abilities which employees must possess in order to
successfully perform job functions that are essential to business operations.
Core work activities--The tasks or functions within an organization considered essential to the
organizations business operations
Core workers--Employees who are considered to be vital to the organizations successful business
operations.
Corporate citizenship--Corporate Citizenship is the contribution a company makes to society
through its core business activities, its social investment and philanthropy programs, and its
engagement in public policy. The manner in which a company manages its economic, social and
environmental relationships, and the way it engages with its stakeholders (such as shareholders,
employees, customers, business partners, governments and communities), has an impact on the
company's long-term success. ( World Economic Forum)
The term is also used interchangeably with other similar terms such as Corporate Governance and/or
Corporate Social Responsibility.
Corporate culture--The beliefs, values and practices adopted by an organization that directly
influence employee conduct and behavior.
Corporate image--The way in which an organization is viewed by clients, employees, vendors or
the general public.
Corporate values--The prescribed standards, behaviors, principles or concepts that an organization
regards as highly important.
Cost-benefit analysis--A means of measuring the costs associated with a specific program, project,
activity or benefit compared with the total benefit or value derived.
Cost of labor--The total payments in the form of gross salary and wages, bonuses, and other cash
allowances paid to employees and salaries, allowances, fees, bonuses and commissions paid to
working directors and fees paid to non-working directors for their attendance at the Board of
Directors' meetings.
Cost of living--The amount of money needed to buy the goods and services required to maintain a
specific standard of living. The cost of living is closely tied to rates of inflation and deflation. In
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estimating such costs, food, clothing, rent, fuel, lighting, and furnishings as well as expenses for
communication, education, recreation, transportation, and medical services are generally included.
The Consumer Price Index (CPI), a measurement of the cost of living prepared by the U.S. Bureau
of Labor Statistics, tracks changes in retail prices of an average market basket. Changes are
compared to prices in a previously selected base year, from which figures the percentage increase or
decrease in the cost of living can be calculated.
Cost of living adjustment (COLA)--An annual adjustment in wages to offset a change in
purchasing power, as measured by the Consumer Price Index. The Consumer Price Index is used
rather than the Producer Price Index because the purpose is to offset inflation as experienced by the
consumer, not the producer.
Cost-per-hire--The direct and indirect costs that are calculated to measure the costs associated with
filling a vacancy. Direct costs include, but are not limited to, advertising, employment agency fees,
job fairs, employee referrals, credit and reference checking costs, examination and testing costs
during the selection process, signing bonuses, relocation costs, human resource overhead costs,
college recruiting costs, Internet costs and training and communication costs. Indirect costs can
include, but are also not limited to, lower productivity, costs of turnover, morale impacts, safety (if
there is a higher number of accidents as a result of the vacancy), disruption of regular business
functions, overtime (to compensate for the vacancy) and hiring to maintain production
Counseling--Actions or interactions in one or serial form which serve to provide direction, guidance
or advice with respect to recommendations, decisions or courses of action
Craft worker--An individual employed in a profession or activity that uses experienced hands to
make something. Apprenticeships are often required and post secondary vocational schools also
offer such craft oriented training. Training time can be over a course of years and require
certification examinations. Examples: electrician, plumber, tool; and die maker, machinist, HVAC
specialist, journeyman carpenter, cabinet maker.
Crisis management--A broad term that refers to an organizations pre-established activities and
guidelines, for preparing and responding to significant catastrophic events or incidents (i.e., fire,
earthquake, severe storms, workplace violence, kidnapping, bomb threats, acts of terrorism, etc.) in a
safe and effective manner. A successful crisis management plan also incorporates other
organizational programs such as , emergency response , disaster recovery, risk management,
communications, business continuity, etc
Crisis planning--A formal written plan establishing specific measures or actions to be taken when
responding to catastrophic events or tragedies (i.e., fire, earthquake, severe storms, workplace
violence, kidnapping, bomb threats, acts of terrorism, etc.) in the workplace.
Crisis prevention--The process of an organization implementing specific plans and procedures
designed to circumvent certain disasters or emergencies.
Critical success factors--The key items that must be met in order to successfully achieve a specific
objective.
Critical tasks--The job tasks or functions essential to the proper performance of a particular job.
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Cross-functional teams--Work teams comprised of individuals who represent the various

organizational functions, departments or divisions.
Cross training--The process of developing a multi skilled workforce by providing employees with
training and development opportunities to ensure they have the skills necessary to perform various
job functions within an organization.
Cyber smear--Using Web sites, lists , chat rooms or bulletin boards to post insulting or defamatory
statements regarding former employers.
Cultural differences--The diverse behaviors, beliefs, customs, traditions, language and expressions
that are characteristic to groups of people of a particular race, ethnicity or national origin.
Cultural integration--The process of bringing people of different racial or ethnic backgrounds into
equal association
Curriculum vitae (c.v.)--Used in the United States to describe, a longer, more detailed version of a
resume. Internationally is synonymous with resume.
Daily work records--A daily log of job tasks being performed by individual employees over a
certain period of time. Used often as a form of job analysis.
Damages--The amounts awarded by a court to be paid by one party to another as a result of violating
a contract or agreement.
Deauthorization--The termination of union representation over a specific bargaining unit following
a decertification election.
Decentralization--The process of assigning decision-making authority to lower levels within the
organizational hierarchy.
Decertification---Allows members of a particular bargaining unit to terminate their union
representation through a voting process.
Defamation--Injury caused to an individuals character or reputation resulting from another
individual(s) issuing false or malicious statements either verbally or in writing.
Deferred compensation--Payment for services under any employer-sponsored plan or arrangement
that allows an employee (for tax-related purposes) to defer income to the future.
Defined benefit plan--A retirement plan that is not an individual account plan and pays participants
a fixed periodic benefit or a lump-sum amount, calculated using specific formulas that include such
items as age, earnings and length of service.
Defined contribution plan--An individual account plan in which the employer contributes a
specific amount of money into each year that is to be distributed among the accounts of each plan
participant.
De-layering--An organizational restructuring strategy meant to reduce the organizations existing
levels of managers or supervisors.
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Delegation--The process of assigning tasks or projects to subordinates and clearly dictating expected
outcomes and timeframe for completion.
De minimis rule--Described by IRS guidelines as any benefit, property or service provided to an
employee that has so little value (taking into account how frequently similar benefits are provided to
employees) that accounting for it would be unreasonable or administratively impracticable. Cash, no
matter how little, is never excludable as a de minimis benefit, except for occasional meal money or
transportation fare.
Demographics--The physical characteristics of a population, such as age, sex, marital status, family
size, education, geographic location and occupation.
Demotion--A permanent reassignment to a position with a lower pay grade, skill requirement or
level of responsibility than the employees current position.
Departmentation--The process of dividing an organizations labor, functions, processes or units into
separate groups.
Dependent care assistance plan--An employer benefit plan that provides employees with
dependent care assistance, such as paying for or providing qualified child and dependent care
services necessary for them to seek or obtain gainful employment or remain gainfully employed.
Deposition--The process of one party, accompanied by his or her legal counsel, answering questions
under oath about pertinent facts regarding a case put forth by another partys legal counsel;
conducted outside of a courtroom.
Desk audit--A review of a contractor's documents and materials to determine compliance with
affirmative action practices and equal employment obligations as they relate to workforce structure,
personnel policies and procedures, good-faith efforts and areas of potential discrimination. The
Standard Compliance Review Report (SCRR) provides instructions for conducting a desk audit,
which takes its name from the fact that this review and analysis is done at the desk of the compliance
officer assigned to conduct the audit.
Descriptive scale---Any rating scale that uses adjectives or phrases to determine performance
ratings.
Developmental counseling--A form of shared counseling where managers or supervisors work
together with subordinates to identify strengths and weaknesses, resolve performance-related
problems and determine and create an appropriate action plan.
Developmental disabilities--Defined as a severe, chronic disability of an individual that: is
attributable to mental or physical impairment or combination of mental and physical impairments; is
manifested before the individual attains the age of 22; is likely to continue indefinitely; results in
substantial functional limitations in three or more of the following areas of major life activity: selfcare, receptive and expressive living, and economic self-sufficiency; and reflects the individual's
need for a combination and sequence of special, interdisciplinary or generic services, individualized
support or other forms of assistance that are of lifelong or extended duration and are individually
planned and coordinated.
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Development program--Training or educational programs designed to stimulate an individuals

professional growth by increasing his or her skills, knowledge or abilities.
Dimensions of diversity--Include but are not limited to: age; gender; ethnicity; race; sexual
orientation; physical abilities/qualities; geographic location; income; religious beliefs; parental
status; marital status; military experience; work experience; family status; socio-economic status;
educational background; class; organizational background; group identity; language; organizational
level; thinking styles; communication styles; relationships and group affiliations; and job
classification, job function.
Direct compensation--All compensation (base salary and/or incentive pay) that is paid directly to an
employee.
Direct costs--The costs directly attributed to a particular products, programs or activities.
Direct labor--The workers who actually produce a product or provide a service.
Disability management--The process of coordinating efforts between employees, management,
physicians, rehabilitation service providers and insurance carriers to reduce the impact of workrelated injuries or illnesses and assisting injured employees in continuing to successfully perform
their jobs.
Disaster recovery plan--A set of guidelines and procedures to be used by an organization for the
recovery of data lost due to severe forces of nature, such as earthquakes, fires, tornadoes, floods or
hurricanes.
Discharge--The termination of an employee based on previous disciplinary proceedings or for
violating a major work rule or policy.
Disciplinary action--The means of reprimanding employees who fail to abide by the organizations
performance standards, policies or rules.
Disciplinary layoff--A disciplinary measure in which employees are suspended without pay for a
specified period of time due to violations of a company work rule or policy.
Disclosure--The process of disclosing information to employees or the general public regarding any
business practices or processes that contain the propensity to be hazardous to the environment or the
health and safety of individuals.
Discretionary bonus--A form of variable pay where an employer provides additional cash
compensation to an employee for reasons that are not pursuant to any prior contract, agreement or
promise that would lead the employee to expect the payments regularly.
Discrimination--Any policy or action taken related to recruiting, hiring, promotion, pay or training
practices that result in an unfair disadvantage to either an individual or group of individuals who are
considered part of a protected class.
Disqualifying income--Commonly used as an offset when coordinating income from multiple
sources.
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Disparate impact--Under Equal Employment Opportunity (EEO) law, a less favorable effect for one
group than for another. A disparate impact results when rules applied to all employees have a
different and more inhibiting effect on women and minority groups than on the majority.
Disparate treatment--Such treatment results when rules or policies are applied inconsistently to one
group of people over another. Discrimination may result when rules and policies are applied
differently to members of protected classes
Displaced workers--Individuals who have lost their jobs due to a plant closing, relocation,
downsizing or position elimination.
Dissatisfiers--Factors, such as working conditions, job functions, pay and benefits or organizational
policies and practices, that contribute to employee dissatisfaction.
Distractors--Refers to incorporating incorrect items or answers into a testing instrument where the
testee is asked to select from a group of items or answers (i.e., multiple choice exams).
Diversity--The collective mixture of differences and similarities that includes for example,
individual and organizational characteristics, values, beliefs, experiences, backgrounds, preferences
and behaviors.
Diversity management--A comprehensive organizational and managerial process for leveraging
diversity and achieving inclusion that maximizes the potential of all employees.
Diversity training--A fundamental component of a diversity initiative that represents the
opportunity for an organization to inform and educate senior management and staff about diversity.
The purpose of training is not only to increase awareness and understanding of workplace diversity,
but also to develop concrete skills among staff that will facilitate enhanced productivity and
communications among all employees.
Domestic partner benefits--Benefit plan provided by an employer that recognizes individuals who
are of the same or opposite sex as spousal equivalents for purposes of health care
coverage. Domestic partners are typically defined of as individuals that have lived together in the
same residence for a specified period, are responsible for each other's financial welfare, are not
blood relatives, are at least 18 years of age, are mentally competent, are life partners and would get
legally married should the option become available, are registered as domestic partners if there is a
local domestic partner registry, and are not legally married to anyone else.
Downgrading--The practice of moving an employee to a job that has a lower pay grade or level of
responsibility or skill.
Downshifting--Refers to employees who choose to accept or remain in lower level or lower paying
jobs in order to satisfy their personal and family needs.
Downsizing--The process of reducing the employers workforce through elimination of positions,
management layers, processes, functions, etc.
Dual career ladders/tracks--An employee career development plan allowing employees to alternate
between technical, professional or managerial positions over the course of their careers while they
simultaneously receive higher compensation and gain higher status levels within the organization.
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Due diligence--A critical component of mergers and acquisitions, it is the process of conducting an
investigation and evaluation in order to examine the details of a particular investment or purchase by
obtaining sufficient and accurate information or documents that may influence the outcome of the
transaction.
Early retirement plan--A benefit plan offered by an organization providing incentives geared
toward encouraging employees who are approaching retirement age to voluntarily retire prior to their
normal retirement age.
Early return to work program--Modified work programs designed to get employees who have
been out of work due to injury or illness to return to the workforce sooner by providing them with
less strenuous alternative jobs until they are able to resume their full regular duties.
Employability --Defined as the skills that make the available talent pool ready for absorption into
the corporate environment. These skills help to close the gaps between the campus/academic
education and an organizations expectations, In addition to this, ensuring re-skilling of existing
talent that may have become redundant due to technology changes, business environment,
organizational changes and so on.
Emotional intelligence--Describes the mental ability an individual possesses enabling him or her to
be sensitive and understanding to the emotions of others, as well as to manage his or her own
emotions and impulses.
Employee assistance program (EAP)--A work-based intervention program designed to identify and
assist employees in resolving personal problems (i.e., marital, financial or emotional problems,
family issues, substance/alcohol abuse) that may be adversely affecting the employees performance.
Employee-driven idea system--A type of suggestion program where employees are rewarded for
being ultimately responsible for the management and implementation of any idea they submitted.
Employee engagement--The means of creating a work environment that empowers employees to
make decisions that affect their jobs. Also referred to as employee involvement. Further defined by
the Corporate Leadership Council in the in their 2004 study, Driving Performance and Retention
Through Employee Engagement as the extent to which employees commit to something or
someone in their organization, how hard they work, and how long they stay as a result of that
commitment.
Employee referral program--A recruiting strategy where current employees are rewarded for
referring qualified candidates for employment.
Employee relations--A broad term used to refer to the general management and planning of
activities related to developing, maintaining and improving employee relationships by
communicating with employees, processing grievances/disputes, etc.
Employee retention--Organizational policies and practices designed to meet the diverse needs of
employees and create an environment that encourages employees to remain employed.
Employee self-service--A trend in human resource management that allows employees to handle
many job-related tasks normally conducted by HR (such as benefits enrollment, updating personal
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MBA DEPT
information and accessing company information) through the use of a company's intranet,
specialized kiosks or other Web-based applications.
Employee stock purchase plan--An employer-sponsored plan that allows employees to purchase
company stock below the fair market value.
Employer of choice--A term used to describe a public or private employer whose practices, policies,
benefits and overall work conditions have enabled it to successfully attract and retain talent because
employees choose to work there.
Employment agency--An organization that provides job placement assistance, either on a temporary
or permanent basis, to individuals seeking employment opportunities.
Employment-at-will--A legal doctrine that states that an employment relationship may be
terminated by the employer or employee at any time and for any or no reason.
Employment agreement/contract--A formal, legally binding agreement between an employer and
employee outlining terms of employment such as duration, compensation, benefits, etc.
Employment branding--A combination of marketing, communication and technology used by an
organization intended to give it greater visibility amongst a large population within a short
timeframe.
Employment cost index--Conducted annually as part of the Department of Labors National
Compensation Survey program, the Employment Cost Index measures the relative changes in wages,
benefits and bonuses for a specific group of occupations.
Employment displacement--Occurs when an employee is terminated as a result of position
elimination.
Ethical Leadership--Broadly defined , as the demonstration of normatively appropriate conduct
through personal actions and interpersonal relationships, and promotion of such conduct among
followers through two-way communication, reinforcement, and decision-making processes (M.E
Brown and L.K. Trevino, Measures for Leadership Development Ethical Leadership Scale)
Executive compensation--Compensation packages specifically designed for executive-level
employees that include items such as base salary, bonuses, perquisites and other personal benefits,
stock options and other related compensation and benefit provisions.
Executive development---Training and educational programs designed to increase performance and
further the development of leadership skills for executive and senior-level managerial employees.
Exempt employees--Employees who meet one of the FLSA exemption tests and who are paid on a
fixed salary basis and not entitled to overtime.
Exit interview--An interview conducted at the time of an employees resignation, used to identify
the underlying factors behind an employees decision to leave.
Expatriate--An employee who is transferred to work abroad on a long-term job assignment.
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External benchmarking--The process of comparing an organizations current policies and practices

to that of a competitor organization(s) to determine current and future trends in areas of employment
and business practice (i.e., compensation, benefits, HR practices).
Extrinsic motivator--Organizationally controlled incentives, such as pay, benefits, incentives,
achievement awards, etc., used to reinforce motivation and increase performance.
Extrinsic reward--Work-related rewards that have a measurable monetary value, unlike intrinsic
rewards, such as praise or satisfaction in a job well done.
Face validity--Making a decision regarding the appropriateness of a test or other assessment
instrument based on appearance rather than objective criteria.
Facilitator--A trainer who assists a group in learning or reaching a specific goal by directing and
controlling the group process and allowing the group to work collectively to resolve problems and
come up with solutions.
Fact finding--The process of utilizing an impartial third party, not employed by the organization, to
examine all pertinent facts surrounding a complaint.
Fact-finding conference--An informal meeting directed by the EEOC to settle discrimination
complaints between an employer and the plaintiff.
Factor comparison--A job comparison process involving ranking each individual job by certain
selected compensable factors to establish appropriate values to be used in determining pay rates.
Factor weight--Used in the job evaluation process, it is the process of assigning a weight to
compensable factors to determine their relative worth.
Feedback--Positive or negative information provided to an individual in the form of coaching or
counseling regarding his or her performance or behavior.
Fringe benefit--Employment benefits granted to employees in addition to their current base salary
or wages (i.e., cash, merchandise, services, health insurance, pension plans, holidays, paid vacations,
etc.).
Full-time equivalent (FTE)--A value assigned to signify the number of full-time employees that
could have been employed if the reported number of hours worked by part-time employees had been
worked by full-time employees instead.
Fully insured plan--A benefit plan where the employer contracts with another organization to
assume financial responsibility for the enrollees medical claims and for all incurred administrative
costs.
Functional team--A group of employees who are responsible for a particular function within the
organization.
Gag clause--Refers to the employment contract restrictions used as a means of protecting the
organizations trade secrets or proprietary information.
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Gainsharing plan--A group incentive plan used to enhance productivity by sharing with a group a
percentage of the gains the organization realizes from specific group efforts.
Garnishment--A court order requiring an employer to withhold a certain percentage from an
employees pay in order to settle a debt with a creditor.
Geographical differential--The variance in pay established for same or comparable jobs based on
variations in labor and costs of living among other geographic regions
Glass ceiling--Used to describe the invisible barrier keeping women from advancing into executivelevel positions.
Global compensation--Pay practices relating to employees who are working on assignments in
international locations. A service premium and additional incentives are often included in the
compensation package to offset differences in taxes and cost of living.
Global relocation--The process of transferring an individuals residence from the United States to a
foreign country for the purpose of completing an international job assignment.
Grievance--A formal complaint or allegation by an employee or group of employees made to unfair
treatment or violation of a union contract.
Gross Salaries--The amount of income, exclusive of any deductions, paid to employees during the
calendar year which may include pay for earnings such as: regular earnings, sick and vacation leave,
discretionary day, holiday, longevity, compensatory time, etc.
Grievance procedures--The process and guidelines to be followed by employees, management or
the union when resolving differences or conflicts.
Gross product margin--The difference between the price a certain product is sold at and the cost of
producing the product.
Group dynamics--The social manner in which people interact with each other within a group.
Group interview--An interviewing method where a prospective employee is interviewed by a small
group of his or her peers.
Group outplacement--Used as a cost-cutting measure, it incorporates the same principles as
individual outplacement benefits (i.e., providing job counseling, training and other services to
displaced employees) with the exception that counseling is performed on a group vs. individual
basis.
Hostile takeover--A leveraged purchase of a company that goes against the wishes of the target
company's management and board of directors.
Human capital--The collective knowledge, skills and abilities of an organizations employees.
Human Capital Management --Human Capital Management is an organizational practice by which
the human capital assets of an organization are collectively leveraged to gain a competitive
advantage. This view of Human Capital Management highlights the importance of taking a
systematic approach to integrate and align important organizational elements to effectively drive
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human capital initiatives. (Source: Human Capital Management: Leveraging Your Workforce for a
Competitive Advantage, by Mark Salsbury)
Human resources--The function dealing with the management of people employed within the
organization.
Human resource auditing--The process of assessing HR programs and services to determine
effectiveness or efficiency.
Human resource development--A set of planned activities intended to provide the organization
with the skills it requires to meet current and future business demands.
Human resource information system (HRIS)--A computer database used to gather, store, maintain
and retrieve relevant employee and HR-related information.
Human resource management--The formal structure within an organization responsible for all the
decisions, strategies, factors, principles, operations, practices, functions, activities and methods
related to the management of people.
Human resource management system--A software application combining various human resource
functions, such as benefits, payroll, recruiting, training, etc., into one package.
Human resource metrics--Measurements used to determine the value and effectiveness of HR
strategies. Typically includes such items as cost per hire, turnover rates/costs, training and human
capital ROI, labor /productivity rates and costs, benefit costs per employee, etc.
Human resource planning--The process of anticipating future staffing needs and ensuring that a
sufficient pool of talent possessing the skills and experience needed will be available to meet those
needs.
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"Invest in yourself. Your career is the engine of your wealth."

- Paul Clitheroe
ACCOUNTING/FINANCE:
Account a record of financial transactions; usually refers to a specific category or type, such as
travel expense account or purchase account.
Accountant A person who trained to prepare and maintain financial records.
Accounting a system for keeping score in business, using dollars.
Accounting period the period of time over which profits are calculated. Normal accounting
periods are months, quarters, and years (fiscal or calendar).
Accounts payable amounts owed by the company for the goods or services it has purchased from
outside suppliers.
Accounts receivable amounts owed to the company by its customers.
Accrual basis, system, or method an accounting system that records revenues and expenses at
the time the transaction occurs, not at the time cash changes hands. If you buy a coat and charge it,
the store records or accrues the sale when you walk out with the coat, not when you pay your bill.
Cash basis accounting is used by individuals. Accrual basis accounting is used by most businesses.
Accrued expenses, accruals an expense which has been incurred but not yet paid for. Salaries are
a good example. Employees earn or accrue salaries each hour they work. The salaries continue to
accrue until payday when the accrued expense of the salaries is eliminated.
Aging a process where accounts receivable are sorted out by age (typically current, 30 to 60 days
old, 60 to 120 days old, and so on.) Aging permits collection efforts to focus on accounts that are
long overdue.
Amortize to charge a regular portion of an expenditure over a fixed period of time. For example if
something cost $100 and is to be amortized over ten years, the financial reports will show an
expense of $10 per year for ten years. If the cost were not amortized, the entire
$100 would show up on the financial report as an expense in the year the expenditure was made.
Appreciation an increase in value. If a machine cost $1,000 last year and is now worth
$1,200, it has appreciated in value by $200. (The opposite of depreciation.)
Assets things of value owned by a business. An asset may be a physical property such as a
building, or an object such as a stock certificate, or it may be a right, such as the right to use a
patented process.
Current Assets are those assets that can be expected to turn into cash within a year or less. Current
assets include cash, marketable securities, accounts receivable, and inventory.
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Fixed Assets cannot be quickly turned into cash without interfering with business operations. Fixed
assets include land, buildings, machinery, equipment, furniture, and longterm investments.
Intangible Assets are items such as patents, copyrights, trademarks, licenses, franchises, and other
kinds of rights or things of value to a company, which are not physical objects. These assets may be
the most important ones a company owns. Often they do not appear on financial reports.
Audit a careful review of financial records to verify their accuracy.
Bad debts amounts owed to a company that are not going to be paid. An account receivable
becomes a bad debt when it is recognized that it won't be paid. Sometimes, bad debts are written off
when recognized. This is an expense. Sometimes, a reserve is set up to provide for possible bad
debts. Creating or adding to a reserve is also an expense.
Balance sheet a statement of the financial position of a company at a single specific time (often at
the close of business on the last day of the month, quarter, or year.) The balance sheet normally lists
all assets on the left side or top while liabilities and capital are listed on the right side or bottom. The
total of all numbers on the left side or top must equal or balance the total of all numbers on the right
side or bottom. A balance sheet balances according to this equation: Assets = Liabilities + Capital.
Bond a written record of a debt payable more than a year in the future. The bond shows amount of
the debt, due date, and interest rate.
Book value total assets minus total liabilities. (See also net worth.) Book value also means the
value of an asset as recorded on the company's books or financial reports. Book value is often
different than true value. It may be more or less.
Breakeven point the amount of revenue from sales which exactly equals the amount of expense.
Breakeven point is often expressed as the number of units that must be sold to produce revenues
exactly equal to expenses. Sales above the breakeven point produce a profit; below produces a loss.
Capital money invested in a business by its owners. (See equity.) On the bottom or right side of a
balance sheet. Capital also refers to buildings, machinery, and other fixed assets in a business. A
capital investment is an investment in a fixed asset with a longterm use.
Capitalize to capitalize means to record an expenditure on the balance sheet as an asset, to be
amortized over the future. The opposite is to expense. For example, research expenditures can be
capitalized or expensed. If expensed, they are charged against income when the expenditure occurs.
If capitalized, the expenditure is charged against income over a period of time usually related to the
life of the products or services created by the research.
Cash money available to spend now. Usually in a checking account.
Cash flow the amount of actual cash generated by business operations, which usually differs from
profits shown.
Chart of accounts a listing of all the accounts or categories into which business transactions will
be classified and recorded. Each account usually has a number. Transactions are coded by this
number for manipulation on computers.
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Contingent liabilities liabilities not recorded on a company's financial reports, but which might
become due. If a company is being sued, it has a contingent liability that will become a real liability
if the company loses the suit.
Cost of sales, cost of goods sold the expense or cost of all items sold during an accounting
period. Each unit sold has a cost of sales or cost of the goods sold. In businesses with a great many
items flowing through, the cost of sales or cost of goods sold is often computed by this formula: Cost
of Sales = Beginning Inventory + Purchases During the Period Ending Inventory.
Credit an accounting entry on the right or bottom of a balance sheet. Usually an increase in
liabilities or capital, or a reduction in assets. The opposite of credit is debit. Each credit in a balance
sheet has a balancing debit. Credit has other usages, as in "You have to pay cash, your credit is no
good." Or "we will credit your account with the refund."
Debit an accounting entry on the left or top of a balance sheet. Usually an increase in assets or a
reduction in liabilities. Every debit has a balancing credit.
Deferred income a liability that arises when a company is paid in advance for goods or services
that will be provided later. For example, when a magazine subscription is paid in advance, the
magazine publisher is liable to provide magazines for the life of the subscription. The amount in
deferred income is reduced as the magazines are delivered.
Depreciation an expense that is supposed to reflect the loss in value of a fixed asset. For example,
if a machine will completely wear out after ten year's use, the cost of the machine is charged as an
expense over the tenyear life rather than all at once, when the machine is purchased. Straight line
depreciation charges the same amount to expense each year.
Accelerated depreciation charges more to expense in early years, less in later years. Depreciation is
an accounting expense. In real life, the fixed asset may grow in value or it may become worthless
long before the depreciation period ends.
Discounted cash flow a system for evaluating investment opportunities that discounts or reduces
the value of future cash flow. (See present value.)
Dividend a portion of the aftertax profits paid out to the owners of a business as a return on their
investment.
Double entry a system of accounting in which every transaction is recorded twice as a debit
and as a credit.
Earnings per share a company's net profit after taxes for an accounting period, divided by the
average number of shares of stock outstanding during the period.
80 20 rule a general rule of thumb in business that says that 20% of the items produce 80% of
the action 20% of the product line produces 80% of the sales, 20 percent of the customers generate
80% of the complaints, and so on. In evaluating any business situation, look for the small group
which produces the major portion of the transactions you are concerned with. This rule is not exactly
accurate, but it reflects a general truth, nothing is evenly distributed.
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Equity the owners' share of a business.

Expenditure an expenditure occurs when something is acquired for a business an asset is
purchased, salaries are paid, and so on. An expenditure affects the balance sheet when it occurs.
However, an expenditure will not necessarily show up on the income statement or affect profits at
the time the expenditure is made. All expenditures eventually show up as expenses, which do affect
the income statement and profits. While most expenditures involve the exchange of cash for
something, expenses need not involve cash. (See expense below.)
Expense an expenditure which is chargeable against revenue during an accounting period. An
expense results in the reduction of an asset. All expenditures are not expenses. For example, a
company buys a truck. It trades one asset cash to acquire another asset. An expenditure has
occurred but no expense is recorded. Only as the truck is depreciated will an expense be recorded.
The concept of expense as different from an expenditure is one reason financial reports do not show
numbers that represent spendable cash. The distinction between an expenditure and an expense is
important in understanding how accounting works and what financial reports mean. (To expense is a
verb. It means to charge an expenditure against income when the expenditure occurs. The opposite is
to capitalize.)
Fiscal year an accounting year than begins on a date other than January 1.
Fixed cost a cost that does not change as sales volume changes (in the short run.) Fixed costs
normally include such items as rent, depreciation, interest, and any salaries unaffected by ups and
downs in sales.
Goodwill in accounting, the difference between what a company pays when it buys the assets of
another company and the book value of those assets. Sometimes, real goodwill is involved a
company's good reputation, the loyalty of its customers, and so on. Sometimes, goodwill is an
overpayment.
Interest a charge made for the use of money.
Inventory the supply or stock of goods and products that a company has for sale. A manufacturer
may have three kinds of inventory: raw materials waiting to be converted into goods, work in
process, and finished goods ready for sale.
Inventory obsolescence inventory no longer salable. Perhaps there is too much on hand, perhaps
it is out of fashion. The true value of the inventory is seldom exactly what is shown on the balance
sheet. Often, there is unrecognized obsolescence.
Inventory shrinkage a reduction in the amount of inventory that is not easily explainable. The
most common cause of shrinkage is probably theft.
Inventory turnover a ratio that indicates the amount of inventory a company uses to support a
given level of sales. The formula is: Inventory Turnover = Cost of Sales Average Inventory.
Different businesses have different general turnover levels. The ratio is significant in comparison
with the ratio for previous periods or the ratio for similar businesses.
Invested capital the total of a company's longterm debt and equity.
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MBA DEPT
Improvement - EXPENDITURE directed to a particular ASSET to improve its performance or

useful life.
Imputed Interest - If no interest or an unrealistic amount of interest is charged in a salve
involving certain kinds of deferred payments, then the transaction will be treated as if the realistic
rate of interest had been used. The difference between the realistic interest and the interest actually
used is referred to as imputed interest.
Income - Inflow of REVENUE during a period of time. (See NET INCOME.)
Income Statement - Summary of the effect of REVENUES and expenses over a period of time.
Income Tax Basis - (1) For tax purposes, the concept of basis determines the proper amount of
gain to report when an ASSET is sold. Basis is generally the cost paid for an asset plus the amounts
paid to improve the asset less deductions taken against the asset, such as DEPRECIATION and
AMORTIZATION. (2) For accounting purposes, a consistent basis of accounting that uses income
tax accounting rules while GENERALLY ACCEPTED
Independence Standard Board (ISB) - This is the private sector standard-setting body governing
the independence of AUDITORs from their public company clients. It came about from
discussions between the AICPA, other accounting representatives and the SEC.
Individual Retirement Account (IRA) - An IRA is a personal savings plan that allows an
individual to make cash contributions per year dependent on the individual's adjusted gross income
and participation in an employer's retirement plan. Under a traditional IRA these earnings are not
taxable until the time of withdrawal from the plan.
Inheritance - As distinguished from a BEQUEST or devise, an inheritance is property acquired
through laws of descent and distribution from a person who dies without leaving a will. The value
of property inherited id excluded from a taxpayers gross income, but if the property inherited
produces income it is included in gross income. A taxpayer's basis in inherited property is the fair
market value at the time of death.
Initial Public Offering (IPO) - When a private company goes public for the first time.
Inquiry - A procedure that consists of seeking information, both financial and non financial, of
knowledgeable persons throughout the company. It is used extensively throughout the audit and
often is complementary to performing other procedures. Inquiries may range from formal written
inquiries to informal oral inquiries.
Insolvent - When an entity's LIABILITIES exceed its ASSETS.
Installment - Partial payment.
Installment Method - Tax ACCOUNTING method of reporting GAIN on the sale of an ASSET
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MBA DEPT
exchanged for a RECEIVABLE. In general, the gain is reported as the note is paid off.
Intangible Asset - Asset having no physical existence such as trademarks and patents. (
Interest - Payment for the use or forbearance of money.
Interim Financial Statements - FINANCIAL STATEMENTS that report the operations of an
entity for less than one year.
Internal Audit - AUDIT performed within an entity by its staff rather than an independent certified
public accountant.
Internal Control - Process designed to provide reasonable assurance regarding achievement of
various management objectives such as the reliability of financial reports.
Internal Control Over Financial Reporting - A process designed by, or under the supervision of
the company's principal executive and principal financial officers or persons performing similar
functions and effected by the company's board of directors, management, and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
1. Pertain to the maintenance of records that accurately and fairly reflect the transactions and
dispositions of the assets of the company.
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP and that receipts and expenditures are being made
only in accordance with authorizations of management and directors of the company.
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company's assets that could have a material effect on the
financial statements.
Internal Rate of Return - Method that determines the discount rate at which the present value of
the future CASH FLOWS will exactly equal investment outlay.
Internal Revenue Code - Collection of tax rules of the federal government. Also referred to as
Title 26 of the United States Code.
Internal Revenue Service (IRS) - Federal agency that administers the INTERNAL REVENUE
CODE. The IRS is part of the United States Treasury Department.
International Accounting Standards Committee, the (IASC) - is an independent private sector
body, formed in 1973, with the objective of harmonizing the accounting principles which are used
in businesses and other organizations for financial reporting around the world. Its members are 143
professional accounting bodies in 104 countries.
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Internet/World Wide Net - The Internet is the unregulate wild west show of computer networks
connected together throughout the world. The World Wide Web or WWW, is part of the Internet.
Inventory - Tangible property held for sale, or materials used in a production process to make a
product.
Investment - EXPENDITURE used to purchase goods or services that could produce a return to
the investor.
Investment Tax Credit - This is a component of the general business credit and consists of the
following:
1. The energy credit;
2. The rehabilitation credit; and
3. The reforestation credit.
Involuntary Conversions - This is a conversion of property where it is in whole or part destroyed,
stolen, seized, requisitioned or condemned (or where there is a threat or imminence of requisition
or condemnation).
Issuer - This term means an issuer, the securities of which are registered under Section 12 of the
Securities Exchange Act of 1934, or that is required to file reports under Section 15(d) of that Act,
or that files or has filed a registration statement with the SEC that has not yet become effective
under the Securities Act of 1933 and that it has not withdrawn.
Journal a chronological record of business transactions.
Jeopardy - If the IRS believes that collection of tax appears to be in jeopardy (danger of being
uncollected), it may immediately assess and collect such tax. The intermediate steps are bypassed.
Joint Return - A return filed by married taxpayers or surviving spouses.
Joint Venture - When two or more persons or organizations gather CAPITAL to provide a
product or service. Often carried out as a PARTNERSHIP.
Journal - Any book containing original entries of daily financial transactions.
Junk Bonds - DEBT SECURITIES issued by companies with higher than normal credit risk.
Considered "non-investment grade" bonds, these SECURITIES ordinarily yield a higher rate of
interest to compensate for the additional risk.
Keogh Plan - Also known as an HR 10, this is a qualified retirement plan for self employed who
do not incorporate their business. If qualifications are met the taxpayer may receive a deduction
for contributions made.
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Key Employee - For purposes of rules that apply to top heavy plans, a key employee:
1. An officer of the employer earning more than $130,000;
2. An individual who owns more than 5 percent of the employer;
3. An individual who owns more than 1 percent of the employer and compensation greater than
$150,000.
Key Person Insurance - Business-owned life insurance contract typically on the lives of principal
officers that normally provides for guaranteed death benefits to the company and the accumulation
of a cash surrender value.
Kiting - Writing checks against a bank account with insufficient funds to cover them, hoping that
the bank will receive deposits before the checks arrive for clearance.
Ledger a record of business transactions kept by type or account. Journal entries are usually
transferred to ledgers.
Liabilities amounts owed by a company to others. Current liabilities are those amounts due
within one year or less and usually include accounts payable, accruals, loans due to be paid within a
year, taxes due within a year, and so on. Longterm liabilities normally include the amounts of
mortgages, bonds, and longterm loans that are due more than a year in the future.
Liquid having lots of cash or assets easily converted to cash.
Last in, First out (LIFO) - ACCOUNTING method of valuing inventory under which the costs of
the last goods acquired are the first costs charged to expense. Commonly known as LIFO.
Lease - Conveyance of land, buildings, equipment or other ASSETS from one person (LESSOR) to
another (LESSEE) for a specific period of time for monetary or other consideration, usually in the
form of rent.
Leasehold - Property INTEREST a LESSEE owns in the leased property.
Ledger - Any book of accounts containing the summaries of debit and credit entries.
Lessee - Person or entity that has the right to use property under the terms of a LEASE.
Lessor - Owner of property, the temporary use of which is transferred to another (LESSEE) under
the terms of a LEASE.
Letter of Credit - Conditional bank commitment issued on behalf of a customer to pay a third party
in accordance with certain terms and conditions. The two primary types are commercial letters of
credit and standby letters of credit.
Leveraged Buy Out - Acquisition of a controlling INTEREST in a company in a transaction
financed by the issuance of DEBT instruments by the acquired entity.
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Leveraged Lease - Transaction under which the LESSOR borrows funds to acquire property which
is leased to a third party. The property and lease rentals are security for the LESSOR'S indebtedness.
Liability - DEBTS or obligations owed by one entity (DEBTOR) to another entity (CREDITOR)
payable in money, goods, or services.
Lifetime Learning Credit - This allows a credit for 20 percent of qualified tuition and fees paid by
the taxpayer with respect to one or more students for any year that the HOPE SHCOLARSHIP
CREDIT is not claimed.
Limited Liability Company (LLC) - Form of doing business combining limited liability for all
owners (called members) with taxation as a PARTNERSHIP. An LLC is formed by filing
ARTICLES OF ORGANIZATION with an appropriate state official. Rules governing LLCs vary
significantly from state to state.
Limited Liability Partnership (LLP) - GENERAL PARTNERSHIP which, via registration with an
appropriate state authority, is able to enshroud all its partners in limited liability. Rules governing
LLPs vary significantly from state to state.
Limited Partnership - PARTNERSHIP in which one or more partners, but not all, have limited
liability to creditors of the partnership.
Liquid Assets - Cash, cash equivalents, and marketable SECURITIES.
Liquidation - Winding up an activity by distributing its ASSETS to the appropriate parties and
settling its DEBTS.
Listed Property - Limits are imposed on the DEPRECIATION deduction a taxpayer may claim on
certain listed property as follows:
1. A passenger car;
2. Other property used as transportation;
3. Property used for purposes of entertainment, recreation, or amusement;
4. A computer and peripheral equipment; and
5. Cellular telephone.
Litigation Support/Dispute Resolution - A service that CPAs often provide to attorneys - e.g.,
expert testimony about the value of a business or other asset, forensic accounting (a partner stealing
from his other partners, or a spouse understating his income in a matrimonial action). The lawyer
hires the CPA to do the investigation and determine the amount of money stolen or understated.
Long-Term Debt - DEBT with a maturity of more than one year from the current date.
Loss - Excess of EXPENDITURES over REVENUE for a period or activity. Also, for tax purposes,
an excess of basis over the amount realized in a transaction. (See NET INCOME.)
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MBA DEPT
Lower of Cost or Market - Valuing ASSETS for financial reporting purposes. Ordinarily, "cost" is
the purchase price of the asset and "market" refers to its current replacement cost. GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP) requires that certain assets (e.g.,
INVENTORIES) be carried at the lower of cost or market.
Management Accounting - Reporting designed to assist management in decision-making, planning,
and control. Also known as Managerial Accounting.
Management Discussion and Analysis (MD&A) - SEC requirement in financial reporting for an
explanation by management of significant changes in operations, ASSETS, and LIQUIDITY.
Management's Report - Management is required to include in its annual report its assessment of
the effectiveness of the company's internal control over financial reporting in addition to its audited
financial statements as of the end of the most recent fiscal year.
Margin - Excess of selling price over the unit cost.
Mark-to-Market - Method of valuing ASSETS that results in adjustment of an asset's carrying
amount to its market value.
Marketable Securities - Stocks and other negotiable instruments which can be easily bought and
sold on either listed exchanges or over-the-counter markets.
Married Taxpayers - Taxpayers that are married may file a JOINT RETURN, therefore combining
their INCOME and expenses. Individuals will be considered married if:
1. They are living as husband and wife;
2. They are recognized living as common law marriage; or
3. Legally married but separated and living apart but not legally divorced.
Marriage is determined as of the last day of the tax year.
Matching Principle - A fundamental concept of basic accounting. In any one given accounting
period, you should try to match the revenue you are reporting with the expenses it took to generate
that revenue in the same time period, or over the periods in which you will be receiving benefits
from that expenditure. A simple example is depreciation expense. If you buy a building that will last
for many years, you don't write off the cost of that building all at once. Instead, you take
depreciation deductions over the building's estimated useful life. Thus, you've "matched" the
expense, or cost, of the building with the benefits it produces, over the course of the years it will be
in service.
Material Weakness - A significant deficiency or combination of significant deficiencies that results
in more than a remote likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected.
Materiality - Magnitude of an omission or misstatements of ACCOUNTING information that, in the
light of surrounding circumstances, makes it probable that the judgment of a reasonable person
relying on the information would change or be influenced.
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MD&A - See MANAGEMENT DISCUSSION AND ANALYSIS.

Merger - BUSINESS COMBINATION that occurs when one entity directly acquires the ASSETS
and LIABILITIES of one or more entities and no new corporation or entity is created. (See
CONSOLIDATION.)
Monetary Items - Definite fixed amounts stated in terms of dollars, either by law or by contract
agreement.
Mortgage - Legal instrument evidencing a security interest in ASSETS, usually real
estate.Mortgages serve as COLLATERAL for PROMISSORY NOTES.
Municipal Bond - BOND issued by a government or public body, the INTEREST on which is
typically exempt from federal taxation.
Matching Principle - A fundamental rule f baxic accounting. In any one given accounting period,
you should try to match the revenue you are reporting with the expenses it took.
Mutual Fund - Investment company which generally offers its shares to the general public and
invests the proceeds in a diversified portfolio of SECURITIES. (See CLOSED-END MUTUAL
FUND and OPEN-END MUTUAL FUND.)
Marginal cost, marginal revenue marginal cost is the additional cost incurred by adding one
more item. Marginal revenue is the revenue from selling one more item. Economic theory says that
maximum profit comes at a point where marginal revenue exactly equals marginal cost.
Net worth total assets minus total liabilities. Net worth is seldom the true value of a company.
NASBA - See NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY.
National Association of State Boards of Accountancy - serves as a forum for the 54 State
Boards of Accountancy, which administer the uniform CPA examination, license Certified Public
Accountants and regulate the practice of public accountancy in the United States.
Negative Assurance - Report issued by an ACCOUNTANT based on limited procedures that states
that nothing has come to the accountant's attention to indicate that the financial information is not
fairly presented.
Negligence - The omission to do something which a reasonable man, guided by those ordinary
considerations which ordinarily regulate human affairs, would do, or the doing of something which
a reasonable and prudent man would not do. Negligence is the failure to use such care as a
reasonably prudent and careful person would use under similar circumstances; it is the doing of
some act which a person of ordinary prudence would not have done under similar circumstances or
failure to do what a person of ordinary prudence would have done under similar circumstances. The
term refers only to that legal delinquency which results whenever a man fails to exhibit the care
which he ought to exhibit, whether it be slight, ordinary, or great. It is characterized chiefly by
inadvertence, thoughtlessness, inattention, and the like, while "wantonness" or "recklessness" is
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characterized by willfulness. The law of negligence is founded on reasonable conduct or reasonable

care under all circumstances of particular care. Doctrine of negligence rests on duty of every person
to exercise due care in his conduct toward others from which injury may result.
Net Assets - Excess of the value of SECURITIES owned, cash, receivables, and other ASSETS
over the LIABILITIES of the company.
Net Income - Excess or DEFICIT of total REVENUES and GAINS compared with total expenses
and losses for an ACCOUNTING period. (See INCOME and LOSS.)
Net Lease - In addition to the rental payment, the LESSEE assumes all property charges such as
taxes, insurance, and maintenance.
Net Sales - Sales at gross invoice amounts less any adjustments for returns, allowances, or
discounts taken.
Net Worth - Similar to EQUITY, the excess of ASSETS over LIABILITIES.
Non-for-Profit Organization/Tax-Exempt Organization - An incorporated organization which
exists for educational or charitable purposes, and from which its shareholders or trustees do not
benefit financially. Also called not-for-profit organization.
Nonresident Alien - Any citizen that is not a resident or citizen of the United States. Income of
such individuals is subject to taxation if it is effectively connected with a United States trade or
business.
Non Routine Transactions - Activities that occur only periodically, the data involved are
generally not part of the routine flow of transactions.
No-Par Stock - Stock authorized to be issued but for which no PAR VALUE is set in the
ARTICLES OF INCORPORATION. A STATED VALUE is set by the BOARD OF DIRECTORS
on the issuance of this type of stock.
No-Par Value - Stock or bond that does not have a specific value indicated. (See STATED
VALUE.)
Notional - Value assigned to ASSETS or LIABILITIES that is not based on cost or market (e.g.,
the value of a service not yet rendered).
Objectivity - Emphasizing or expressing the nature of reality as it is apart from personal
reflection or feelings; independence of mind.
Obligations - Any amount which may require payment by an entity at a future time.
OCBOA - See OTHER COMPREHENSIVE BASIS OF ACCOUNTING.
OPEB - See OTHER POST-RETIREMENT EMPLOYEE BENEFIT.
Open-End Mutual Fund - MUTUAL FUND that does not have a fixed number of shares
outstanding, offers new shares to the public, and buys back outstanding shares at market value.
Operating Agreement - Agreement, usually a written document, that sets out the rules by which a
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LIMITED LIABILITY COMPANY (LLC) is to be operated. It is the LLC equivalent of corporate

BYLAWS or a PARTNERSHIP agreement.
Operating Cycle - Period of time between the acquisition of goods and services involved in the
manufacturing process and the final cash realization resulting from sales and subsequent
collections.
Option - Right to buy or sell something at a specified price during a specified time period.
Ordinary Income - One of two classes of income (the other being CAPITAL GAINS) taxed under
the INTERNAL REVENUE CODE. Historically, ordinary income is taxed at a higher rate than
capital gains.
Organization Expenditures - The costs of organizing a trade or business or for profit activity
before it begins active business. A taxpayer may elect to amortize such expenses for a tern no
less than 60 months. If the election is not made then the expenses are not deductible and may
only be recovered when the business ceases operation or is sold.
Other Comprehensive Basis of Accounting (OCBOA) - Consistent accounting basis other than
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) used for financial reporting.
Examples include an INCOME TAX BASIS or a CASH BASIS.
Other Post-Retirement Employee Benefit (OPEB) - All post-retirement benefits other than
pensions, provided by employers to employees.
Opportunity cost a useful concept in evaluating alternate opportunities. If you choose alternative
A, you cannot choose B, C, or D. What is the cost or loss of profit of not choosing B, C, or D? This
cost or loss of profit is the opportunity cost of alternative A. In personal life you may buy a car
instead of taking a European vacation. The opportunity cost of buying the car is the loss of the
enjoyment of the vacation.
Overhead a cost that does not vary with the level of production or sales, and usually a cost not
directly involved with production or sales. The chief executive's salary and rent are typically
overhead.
Post to enter a business transaction into a journal or ledger or other financial record.
Prepaid expenses, deferred charges assets already paid for, that are being used up or will expire.
Insurance paid for in advance is a common example. The insurance protection is an asset. It is paid
for in advance, it lasts for a period of time, and expires on a fixed date.
Present value a concept that compares the value of money available in the future with the value
of money in hand today. For example, $78.35 invested today in a 5% savings account will grow to
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MBA DEPT
$100 in five years. Thus the present value of $100 received in five years is $78.35. The concept of
present value is used to analyze investment opportunities that have a future payoff.
Priceearnings (p/e) ratio the market price of a share of stock divided by the earnings (profit) per
share. P/e ratios can vary from sky high to dismally low, but often do not reflect the true value of a
company.
Profit the amount left over when expenses are subtracted revenues. Gross profit is the profit left
when cost of sales is subtracted from sales, before any operating expenses are subtracted. Operating
profit is the profit from the primary operations of a business and is sales minus cost of sales minus
operating expenses. Net profit before taxes is operating profit minus nonoperating expenses and plus
nonoperating income. Net profit after taxes is the bottom line, after everything has been subtracted.
Also called income, net income, earnings. Not the same as cash flow and does not represent
spendable dollars.
Paid in Capital - Portion of the stockholders' EQUITY which was paid in by the stockholders, as
opposed to CAPITAL arising from profitable operations.
Parent Company - Company that has a controlling interest in the COMMON STOCK of another.
Partnership - Relationship between two or more persons based on a written, oral, or implied
agreement whereby they agree to carry on a trade or business for profit and share the resulting
profits. Unlike a CORPORATION'S shareholders, the partnership's general partners are liable for the
DEBTS of the partnership. (See GENERAL PARTNERSHIP, LIMITED LIABILITY
PARTNERSHIP, LIMITED PARTNERSHIP.)
Par Value - Amount per share set in the ARTICLES OF INCORPORATION of a CORPORATION
to be entered in the CAPITAL STOCKS account where it is left permanently and signifies a cushion
of EQUITY capital for the protection of CREDITORS.
Passive Activity Loss - LOSS generated from activities involved in the conduct of a trade or
business in which the taxpayer does not materially participate.
Passive Income - Includes income derived from such sources as dividends, interest, royalties, rents,
amounts received from personal service contracts, and income received as a beneficiary of an estate
or trust.
Patronage Dividends - These dividends are amounts paid by a cooperative to its members and
customers based on the quantity or value of business conducted with or for the members during the
tax year.
PCAOB - Public Corporation Accounting Oversight Board, a private-sector, non-profit corporation,
created by the Sarbanes-Oxley Act of 2002, to oversee the AUDITORs of public companies in order
to protect the interests of investors and further the public interest in the preparation of informative,
fair, and independent audit reports.
Peer Review - Process by which an accounting firm's practice is evaluated for compliance with
professional standards. The objective is achieved through the performance of an independent review
by one's peers.
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MBA DEPT
Penalty - The various government codes contain numerous provisions which impose penalties on a
taxpayer (any type of taxpayer) for failure to perform a specific act or omitting vital information on a
return.
Pension - Retirement plan offered by an employer for the benefit of an employee, usually at
retirement, through a TRUSTEE who controls the plan ASSETS. (See EMPLOYEE BENEFIT
PLAN.)
Perpetual Inventory - System that requires a continuous record of all receipts and withdrawals of
each item of INVENTORY.
Personal Financial Planning - Process for arriving at a comprehensive plan to solve an individual's
personal, business, and financial problems and concerns.
Personal Financial Specialist (PFS) - CERTIFIED PUBLIC ACCOUNTANT who specializes in
PERSONAL FINANCIAL PLANNING and completes a series of requirements that include
education, experience, ethics and an exam.
Personal Financial Statements - FINANCIAL STATEMENTS prepared for an individual or family
to show financial status.
Personal Property - Movable property that is not affixed to the land (REAL PROPERTY). Personal
property includes tangible items such as cash, cars and computers, as well as intangible items, such
as royalties, patents and copyrights.
Phantom Income - Income reported on a TAX BASIS for which no cash or financial benefit is
realized.
Pledged Asset - ASSET placed in a TRUST and used as COLLATERAL for a DEBT.
Pooling of Interest - Used to account for the acquisition of another company when the acquiring
company exchanges its voting COMMON STOCK for the voting common stock of the acquired
company when certain criteria are met.
Post-Retirement Benefits - PENSIONS, health care, life insurance and other benefits that are
provided by an employer to retirees, their dependents, or survivors.
Preferred Stock - Type of CAPITAL STOCK that carries certain preferences over COMMON
STOCK, such as a prior claim on DIVIDENDS and ASSETS.
Premium - (1) Excess amount paid for a BOND over its face amount. (2) In insurance, the cost of
specified coverage for a designated period of time.
Prepaid Expense - Cost incurred to acquire economically useful goods or services that are expected
to be consumed in the revenue-earning process within the operating cycle.
Present Value - CURRENT VALUE of a given future cash flow stream, discounted at a given rate.
Preventive Controls - These have the objective of preventing errors or fraud from occurring in the
first place that could result in a misstatement of the financial statements.
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MBA DEPT
Prime Rate - Rate of interest charged by major U.S. banks on loans made to their preferred
customers.
Principal - Face amount of a SECURITY, exclusive of any PREMIUM or INTEREST. The basis for
INTEREST computations.
Private Placement - Sales of SECURITIES not involving a PUBLIC OFFERING and exempt from
registration pursuant to certain EXEMPTIONS.
Privilege - A right or immunity granted as a peculiar benefit advantage.
Privity - An interest in a transaction, contract or legal action to which one is not a party, arising out
of a relationship to one of the parties.
Profit Sharing Plan - DEFINED CONTRIBUTION PLAN characterized by the setting aside of a
portion of an entity's profits in participant's accounts. (See EMPLOYEE BENEFIT PLAN.)
Pro Forma - Presentation of financial information that gives effect to an assumed event (e.g.,
MERGER).
Projection - Prospective FINANCIAL STATEMENTS that include one or more hypothetical
assumptions.
Promissory Note - Evidence of a DEBT with specific amount due and interest rate. The note may
specify a maturity date or it may be payable on demand. The promissory note may or may not
accompany other instruments such as a MORTGAGE providing security for the payment thereof.
Proprietorship - Business owned by an individual without the limited liability protection of a
CORPORATION or a LIMITED LIABILITY COMPANY (LLC). Also known as sole
proprietorship.
Pro Rata - Distribution of an expense, fund, or DIVIDEND proportionate with ownership.
Prospective Financial Information (forecast and projection) - Forecast: Prospective financial
statements that present, to the best of the responsible party's knowledge and belief, an entity's
expected financial position, results of operations, and changes in financial position. A financial
forecast is based on the responsible party's assumptions reflecting conditions it expects to exist and
the course of action it expects to take. Projection: Prospective financial statements that present, to
the best of the responsible party's knowledge and belief, given one or more hypothetical
assumptions, an entity's expected financial position, results of operations, and changes in financial
position.
Prospectus - Major part of the registration statement filed with the SECURITIES AND
EXCHANGE COMMISSION (SEC) for PUBLIC OFFERINGS. A prospectus generally describes
SECURITIES or partnership interests to be issued and sold.
Proxy - Document authorizing someone other than the shareholder to exercise the right to vote the
stock owned by the shareholder.
Public Offering - Offering shares to the public. Generally done through SEC filings.
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Public Oversight Board (POB) - The POB is an independent oversight board, composed of public
members, which monitors and evaluates peer reviews conducted by the SEC Practice Section
(SECPS) of the AICPA's Division for CPA Firms as well as other activities of the SECPS.
Purchase Method of Accounting - ACCOUNTING for a MERGER by adding the acquired
company's ASSETS at the price paid for them to the acquiring company's assets.
Push-Down Accounting - Method of ACCOUNTING in which the values that arise from an
acquisition are transferred or "pushed down" to the accounts of an acquired company.
Puts - A put is an option to sell a certain number of shares of stock at a stated price within a certain
period. The gain or loss on a put is short or long term depending on the holding period of the stock
involved. (Also see CALLS)
Qualified Opinion - AUDIT opinion that states, except for the effect of a matter to which a
qualification relates, the FINANCIAL STATEMENTS are fairly presented in accordance with
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The AUDITOR is required
to qualify when there is a scope limitation.
Quasi-Reorganization - Type of reorganization in which, with shareholder approval, the
management revalues ASSETS and eliminates the DEFICIT (increased by asset devaluations if
any) by charging it to other EQUITY accounts without the creation of a new corporate entity or
without court intervention.
Retained earnings profits not distributed to shareholders as dividends, the accumulation of a
company's profits less any dividends paid out. Retained earnings are not spendable cash.
Return on investment (ROI) a measure of the effectiveness and efficiency with which managers
use the resources available to them, expressed as a percentage. Return on equity is usually net profit
after taxes divided by the shareholders' equity. Return on invested capital is usually net profit after
taxes plus interest paid on longterm debt divided by the equity plus the longterm debt. Return on
assets used is usually the operating profit divided by the assets used to produce the profit. Typically
used to evaluate divisions or subsidiaries. ROI is very useful but can only be used to compare
consistent entities similar companies in the same industry or the same company over a period of
time. Different companies and different industries have different ROIs.
Revenue the amounts received by or due a company for goods or services it provides to
customers. Receipts are cash revenues. Revenues can also be represented by accounts receivable.
Risk the possibility of loss; inherent in all business activities. High risk requires high return. All
business decisions must consider the amount of risk involved.
Ratio Analysis - Comparison of actual or projected data for a particular company to other data
for that company or industry in order to analyze trends or relationships.
Real Estate Investment Trust (REIT) - Investor-owned TRUST which invests in real estate and,
instead of paying income tax on its income, reports to each of its owners his or her pro rata share of
its income for inclusion on their income tax returns. This unique trust arrangement is specifically
provided for in the INTERNAL REVENUE CODE.
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Real Estate Mortgage Investment Conduit (REMIC) - An entity that holds a fixed pool of
mortgages and issues multiple classes of interest s in itself to investors. A qualified REMIC is
generally taxed like a partnership, unless it takes contributions after its start up day or engages in a
prohibited transaction.
Real Property - Land and improvements, including buildings and PERSONAL PROPERTY that
is permanently attached to the land or customarily transferred with the land.
Reasonable Assurance - Management's assessment of the effectiveness of internal control over
financial reporting is expressed at the level of reasonable assurance. It includes the understanding
that there is a remote likelihood that material misstatements will not be prevented or detected on a
timely basis. It is a high level of assurance.
Recapitalization - An internal reorganization of a corporation including a rearrangement of the
capital structure by changing the kind of stock or the number of shares outstanding or issuing
stock instead of bonds. It is distinguished from most other types of reorganization because it
involves only one corporation and is usually accomplished by the surrender by shareholders of
their securities for other stock or securities of a different type.
Receivables - Amounts of money due from customers or other DEBTORS.
Reconciliation - Comparison of two numbers to demonstrate the basis for the difference
between them.
Redemption Value - Price to be paid by an ENTITY to retire its BONDS or PREFERRED
STOCK.
Red Herring - "Pre-release" PROSPECTUS offering. An announcement of a future issuance of
SECURITIES, given restricted circulation during the waiting period of 20 days or other specified
period between the filing of a registration statement with the SEC and the effective date of the
statement. A red herring is not an offer to sell or the solicitation of an offer to buy.
Refinancing Agreement - Arrangement to provide funding to replace existing financing, the most
common being a refinance of a home MORTGAGE.
Regulated Investment Company (RIC) - Commonly called a MUTUAL FUND, this is a
domestic corporation that acts as an investment agent for its shareholders by typically investing in
government and corporate securities and distributing the DIVIDENDS and INTEREST income
earned from such investments. In order to be considered a RIC a CORPORATION must make an
irrevocable election tax election in order to be treated as one.
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MBA DEPT
Reinsurance - Process by which an insurance company obtains insurance on its insurance

claims with other insurers in order to spread the risk.
Related Party Transaction - Business or other transaction between persons who do not have an
arm's-length relationship (e.g., a relationship with independent, competing interests). The most
common is between family members or controlled entities. For tax purposes, these types of
transactions are generally subject to a greater level of scrutiny.
Relevant Assertions - Assertions that have a meaningful bearing on whether the account is
fairly stated.
Reorganization - This is a change in the businesses capital arrangements. If for a
CORPORATION there are seven statutory options for reorganization that would cause the
corporation and shareholders to not recognize any GAIN or LOSS on the exchange of stock.
Repairs - EXPENDITURES made in order to keep property in good condition but that do not
appreciably prolong the life or increase the value of the property.
Replacements - EXPENDITURES for making good or whole the portions of property that have
deteriorated through use or have been destroyed through accident.
Report Release Date - The date the company's financial statements are issued.
Repurchase Agreement (Repos) - Agreement whereby an institution purchases SECURITIES

under a stipulation that the seller will repurchase the securities within a certain time period at a
certain price.
Research and Development (R&D) - Research is a planned activity aimed at discovery of new
knowledge with the hope of developing new or improved products and services. Development is
the translation of research findings into a plan or design of new or improved products and services.
Reserve - ACCOUNT used to earmark a portion of EQUITY or fund balance to indicate that it is
not available for expenditure. An obsolete term in the United States. More commonly used in
Europe.
Resident Alien - This is an individual that is not a citizen, but who has a residence in the United
States. They are taxed on all of their INCOME worldwide in the same manner a citizen of the
United States is.
Restricted Assets - Cash or other ASSETS whose use in whole or in part is restricted for
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MBA DEPT
specific purposes bound by virtue of contracted agreements.

Restricted Fund - Fund established to account for assets whose income must be used for purposes
established by donors or grantors of such ASSETS. (See FUND ACCOUNTING and
UNRESTRICTED FUNDS.)
Restructuring - Reorganization within an entity. Restructuring may occur in the form of changing
the components of CAPITAL, renegotiating the terms of DEBT agreements, etc.
Retained Earnings - Accumulated undistributed earnings of a company retained for future needs
or for future distribution to its owners.
Return on Investment (ROI) - Ratio measure of the profits achieved by a firm through its basic
operations. An indicator of management's general effectiveness and efficiency. The simplest
version is the ratio of NET INCOME to total ASSETS.
Revenue Recognition - Method of determining whether or not income has met the conditions of
being earned and realized or is realizable.
Revenues - Sales of products, merchandise, and services; and earnings from INTEREST,
DIVIDEND, rents.
Review - Accounting service that provides some assurance as to the reliability of financial
information. In a review, a CERTIFIED PUBLIC ACCOUNTANT (CPA) does not conduct an
examination under GENERALLY ACCEPTED AUDITING STANDARDS (GAAS).
Review Engagement - Agreement between a CERTIFIED PUBLIC ACCOUNTANT (CPA) and
his or her client to perform a review.
Right to Set off - DEBTOR'S legal right, to discharge all or a portion of the DEBT owed to
another party by applying against the debt an amount that the other party owes to the debtor.
Risk Management - Process of identifying and monitoring business risks in a manner that offers a
risk/return relationship that is acceptable to an entity's operating philosophy.
ROI - RETURN ON INVESTMENT.
Routine Transactions - Recurring financial activities reflected in the accounting records in the
normal course of business.
Sales amounts received or due for goods or services sold to customers. Gross sales are total sales
before any returns or adjustments. Net sales are after accounting for returns and adjustments.
Stock a certificate (or electronic or other record) that indicates ownership of a portion of a
corporation; a share of stock. Preferred stock promises its owner a dividend that is usually fixed in
amount or percent. Preferred shareholders get paid first out of any profits. They have preference.
40
MBA DEPT
Common stock has no preference and no fixed rate of return. Treasury stock was originally issued to
shareholders but has been subsequently acquired by the corporation .
Authorized by unissued stock is stock which official corporate action has authorized but has not sold
or issued. (Stock also means the stock of goods, the stock on hand, the inventory of a company.)
Sunk costs money already spent and gone, which will not be recovered no matter what course of
action is taken. Bad decisions are made when managers attempt to recoup sunk costs.
S Corporation - An S Corporation is a corporation which, under the Internal Revenue Code, is
generally not subject to federal income taxes. Instead, taxable income of the corporation is passed
through to its stockholders in a manner similar to that of a partnership.
Safe Harbor Rule - Concept in statutes and regulations whereby a person who meets listed
requirements will be preserved from adverse legal action. Frequently, safe harbors are used where
a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended
violation.
Sale-Leaseback Transaction - Sale of property by a seller who simultaneously leases the
property back from the purchaser.
Salvage Value - Selling price assigned to retired FIXED ASSETS or merchandise unsalable
through usual channels.
Sarbanes-Oxley (SOX) - The Sarbanes-Oxley Act was signed into law on 30 July 2002 by
President Bush. The Act is designed to oversee the financial reporting landscape for finance
professionals. Its purpose is to review legislative audit requirements and to protect investors by
improving the accuracy and reliability of corporate disclosures. The act covers issues such as
establishing a public company accounting oversight board, auditor independence, corporate
responsibility and enhanced financial disclosure. It also significantly tightens accountability
standards for directors and officers, auditors, securities analysts and legal counsel. The law is
named after Senator Paul Sarbanes and Representative Michael G. Oxley.
SAS - STATEMENTS ON AUDITING STANDARDS.
SEC -SECURITIES AND EXCHANGE COMMISSION.
SEC Filings - Financial and informational DISCLOSURES required by the SEC in order to
comply with certain sections of the Securities Act of 1933 and the Securities and Exchange
Act of1934. Some of the more common filings that publicly owned companies must submit
are the FORM 10-K, FORM 10-Q and FORM 8-K.
SEC Registration Statement - DISCLOSURE document that must be filed with the SEC in
connection with a public offering of SECURITIES, unless the offering is exempt.
41
MBA DEPT
Securities and Exchange Commission (SEC) - Agency authorized by the United States
Congress to regulate the financial reporting practices of most public corporations.
Security - Any kind of transferable certificate of ownership including EQUITY SECURITIES
and DEBT SECURITIES.
Securitization -Source of financing whereby an entity's ASSETS (typically mortgage loans, lease
obligations or other types of RECEIVABLES) are placed in a special purpose vehicle that issues
SECURITIES collateralized by such assets.
Security Interest - Legal interest of one person in the property of another to assure performance of
a second person under a contract.
Self Employment Tax - Most individuals that are in business for themselves, such as SOLE
PROPRIETORS, PARTNERS or independent contractor, are subject to self employment taxes.
The taxes provide coverage for the self employed individual for social security (OASDI) and
Medicare benefits (HI) similar to the taxes withheld by employers from wages it pays the
employees.
Settlement Method - Method of ACCOUNTING for SECURITIES whereby transactions are
recorded on the date the securities settle by the delivery or receipt of securities and the receipt or
payment of cash.
.
Short Sale - Sale of an item before it is purchased. A person entering into a short sale believes
the price of the item will decline between the date of the short sale and the date he or she must
purchase the item to deliver the item under the terms of the short sale.
Short-Term - Current; ordinarily due within one year.
Significant Accounts - An account is significant if there is more than a remote likelihood that the
account could contain misstatements that individually or when aggregated with others, could have a
material effect on the financial statements, considering the risks of both overstatement and
understatement.
Significant Deficiency A control deficiency or combination of control deficiencies, that adversely
affects the company's ability to initiate, authorize, record, process or report external financial data
reliably in accordance with GAAP such that there is more than a remote likelihood that a
misstatement of the company's annual or interim financial statements that is more than
inconsequential will not be prevented or detected
Trial balance at the close of an accounting period, the transactions posted in the ledger are added
up. A test or trial balance sheet is prepared with assets on one side and liabilities and capital on the
other. The two sides should balance. If they don't, the accountants must search through the
transactions to find out why. They keep making trial balances until the balance sheet balances.
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MBA DEPT
Variable cost a cost that changes as sales or production change. If a business is producing nothing
and selling nothing, the variable cost should be zero. However, there will probably be fixed costs.
Working capital current assets minus current liabilities. In most businesses the major
components of working capital are cash, accounts receivable, and inventory minus accounts payable.
As a business grows it will have larger accounts receivable and more inventory. Thus the need for
working capital will increase.
Writedown the partial reduction in the value of an asset, recognizing obsolescence or other
losses in value.
Writeoff the total reduction in the value of an asset, recognizing that it no longer has any value.
Writedowns and writeoffs are noncash expenses that affect profits.
Business has only two functions - marketing and innovation.
Marketing Terms
Aided recall. Respondents are asked if they remember a commercial for the brand being tested.
Alternative hypothesis. A competing hypothesis to the null.
Attitude. A learned predisposition to respond in a consistently favourable or unfavourable manner
with respect to a given object.
Audit. A formal examination and verification of either how much of a product has sold at the store
level (retail audit) or how much of a product has been withdrawn from warehouses and delivered to
retailers (warehouse withdrawal audits).
Balanced scale. Scale using an equal number of favourable and unfavourable categories.
Banner. The variables that span the columns of the cross-tab; generally represents the subgroups
being used in the analysis.
Before-after design. Experiment where a measurement is taken from respondents before they
receive the experimental treatment condition; the experimental treatment is then introduced, and the
post-treatment measurement is taken.
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MBA DEPT
Before-after with control design. Experiment that adds a control group to the basic before-after
design; the control group is never exposed to the experimental treatment.
Between-group variations. Between-group differences in scores for groups that were exposed to
different treatments - represents "explained" variation.
Blind testing. Tests where the brand name of the product is not disclosed during test.
Cartoon completion test. Projective technique that presents respondents with a cartoon of a
particular situation and asks them to suggest the dialogue that one cartoon character might make in
response to the comment(s) of another cartoon character.
Causality. Relationship where a change in one variable produces a change in another variable. One
variable affects, influences, or determines some other variable.
Chi-square test statistic. Measure of the goodness of fit between the numbers observed in the
sample and the numbers we should have seen in the sample, given the null hypothesis is true.
Cognition. A person's knowledge, opinions, beliefs and thoughts about the object.
Comparative scaling, (non-metric scaling) Scaling process in which the subject is asked to compare
a set of stimulus objects directly with one another.
Comparison product test. Designs where a consumer rates products by directly comparing two or
more products.
Concept board. Illustration and copy describing how the product works and its end-benefits.
Concept evaluation tests. Concept tests designed to gauge consumer interest and determine
strengths and weaknesses of the concept.
Concept screening test. Concept tests for screening new product ideas or alternative end-benefits
for a single product idea.
Concept test. Collection of information on purchase intentions, likes/dislikes and attribute rating in
order to measure the relative appeal of ideas or alternative positioning and to provide direction for
the development of the product and the product advertising.
Concept. An idea aimed at satisfying consumer wants and needs.
Concept/construct. Names given to characteristics that we wish to measure.
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MBA DEPT
Confidence interval. Range into which the true population value of the characteristic being
measured will fall, assuming a given level of certainty.
Confounds or confounding variables. Extraneous causal factors (variables) that can possibly affect
the dependent variable and, therefore, must be controlled.
Connotative meaning. The associations that the name implies, beyond its literal, explicit meaning;
the imagery associated with a brand name.
Constant sum scale. Procedure whereby respondents are instructed to allocate a number of points or
chips among alternatives according to some criterion - for example, preference, importance, and so
on.
Constitutive definition. Specifications for the domain of the constructs of interest so as to
distinguish it from other similar but different constructs.
Continuous rating scale. (graphic rating scale) Procedure that instruct the respondent to assign a
rating by placing a marker at the appropriate position on a line that best describes the object under
study.
Control test market. Method in which the entire test market project is handled by an outside
research company.
Copy recall. Percentage of respondents in the programme audience that correctly recalled copy
elements in the test commercial.
Cross-price elasticity of demand. The percentage of change in demand for one product divided by
the percentage change in price of the second product, assuming that all other factors affecting
demand are constant.
Diary panels. Samples of households that have agreed to provide specific information regularly over
an extended period of time. Respondents in a diary panel are asked to record specific behaviours as
they occur, as opposed to merely responding to a series of questions.
Delphi method. A method of forecasting based on asking a group of experts for their best estimate
of a future event, then processing and feeding back some of the information obtained, and then
repeating the process; on the last set of responses, the median is usually chosen as the best estimate
for the group.
Dependent variable. A variable whose value is thought to be affected by one or more independent
variables. For instance, sales (dependent variable) are likely to be a function of advertising,
availability, price, degree of competitive advantage, customer tastes, etc.
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MBA DEPT
Depth interview ("one-on-one"). Sessions in which free association and hidden sources of feelings
are discussed, generally through a very loose, unstructured question guide, administered by a highly
skilled interviewer. It attempts to uncover underlying motivations, prejudice, attitudes toward
sensitive issues, etc.
Dollar metric scale. (graded paired comparison) Scale that extends the paired comparison method
by asking respondents to indicate which brand is preferred and how much they are willing to pay to
acquire their preferred brand.
Double-barrelled questions. Questions in which two opinions are joined together.
Dummy magazine test. A realistic-looking test format using a dummy magazine that systematically
varies the advertisements in such a way that some families receive magazine containing the test ad
and other (matched) families receive a dummy magazine containing no ads at all.
Duo-trio designs. Test where a respondent is given a standard product and asked to determine which
of two other products is more similar.
Electronic process. Review of the questionnaires for maximum accuracy and precision.
Ethnography. The systematic recording of human cultures.
Experimental design. A contrived situation designed so as to permit the researcher to manipulate
one or more independent variables whilst controlling all extraneous variables and measuring the
resultant effects on a dependent variable.
Filter question. A question that is asked to determine which branching question, if any, will be
asked.
Focus group interview. Interview in which the interviewer listens to a group of individuals, who
belong to the appropriate target market, talk about an important marketing issue.
Forced itemised test. Procedure in which a respondent indicates a response on a scale, even though
he or she may have "no opinion" or "no knowledge" about the question.
Frequency distribution. The number of respondents who choose each alternative answer as well as
the percentage and cumulative percentage of respondents who answer.
Funnel sequence. The procedure of asking the most general (or unrestricted) question about the
topic under study first, followed by successively more restricted questions.
Gross incidence. Product/category use incidence for the entire population.
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MBA DEPT
Hypothesis. An assumption or guess the researcher or manager has about some characteristic of the
population being sampled.
Independent variable. A variable over which the researcher is able to exert some control with a
view to studying its effect upon a dependent variable. For instance, an experiment may be conducted
where the price (independent variable) of a dozen boxed carnations is varied and the sales
(dependent variable) is observed at each price set.
Internal secondary data. Data available within the organisation - for example, accounting records,
management decision support systems, and sales records.
Interval data. Measurements that allow us to tell how far apart two or more objects are with respect
to attributes and consequently to compare the difference between the numbers assigned. Because the
interval data lack a natural or absolute origin, the absolute magnitude of the numbers cannot be
compared.
Itemised (closed-ended) questions. Format in which the respondent is provided with numbers
and/or predetermined descriptions and is asked to select the one that best describes his or her
feelings.
Itemised rating scaling. The respondent is provided with a scale having numbers and/or brief
descriptions associated with each category and asked to select one of the limited number of
categories, ordered in terms of scale position, that best describes the object under study.
Judgemental sampling. Studies in which respondents are selected because it is expected that they
are representative of the population of interest and/or meet the specific needs of the research study.
Judgemental data. Information generally based on perceptions or preference may give better
indications of future patterns of consumption.
Jury of expert opinion. A method of forecasting based on combining the views of key executives.
Laboratory experimental environment. Research environment constructed solely for the
experiment. The experiment has direct control over most, if not all, of the crucial factors that might
possibly affect the experimental outcome.
Likert scale. Scaling technique where a large number of items that are statements of belief or
intention are generated. Each item is judged according to whether it reflects a favourable or
unfavourable attitude toward the object in question. Respondents are then asked to rate the attitude
towards the object on each scale item in terms of a five-point category labelled scale.
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MBA DEPT
Line marking. Similarity judgements recorded by making a mark on a 5-inch line anchored by the
phrases "exactly the same" and "completely different".
Line marking/continuous rating non-comparative scale. Procedure that instructs the respondent
to assign a rating by placing a marker at the appropriate position on a line that best describes the
object under study. There is no explicit standard for comparison.
Loaded questions. Questions that suggest what the answer should be or indicate the researcher's
position on the issue under study.
Loadings. Weightings that give the correlation of the attribute with respect to the dimension.
Magnitude estimation. Scale in which respondents assign numbers to objects, brands, attitude
statements, and the like so that ratios between the assigned numbers reflect ratios among the objects
on the criterion being scaled.
Mail diary services. General term for services involving a sample of respondents who have agreed
to provide information such as media exposure and purchase behaviour on a regular basis over an
extended period of time.
Mail surveys. Data-collection method that involves sending out a fairly structured questionnaire to a
sample of respondents.
Mall-intercept personal survey. Survey method using a central-location test facility at a shopping
mall; respondents are intercepted while they are shopping.
Market segment. Subgroups of consumers who respond to a given marketing-mix strategy in a
similar manner.
Maturation. Threat to internal validity; refers to changes in biology or psychology of the respondent
that occur over time and can affect the dependent variable irrespective of the treatment conditions.
Measurement. Process of assigning numbers to objects to represent quantities of attributes.
Monadic products test. Designs where a consumer evaluates only one product, having no other
product for comparison.
Mortality. Threat to internal validity; refers to the differential loss (refusal to continue in the
experiment) of respondents from the treatment condition groups.
Nominal data. Measurement in which the numbers assigned allow us to place an object in one and
only one of a set of mutually exclusive and collectively exhaustive classes with no implied ordering.
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MBA DEPT
Non-comparative scaling (monadic scaling). Scaling method whereby the respondent is asked to
evaluate each object on a scale independently of the other objects being investigated.
Non-probability samples. Form of sampling where there is no way of determining exactly what the
chance is of selecting any particular element or sampling unit into the sample.
Non-response error. Error that occurs because not all of the respondents included in the sample
respond; in other words with non-response, the mean true value (on the variable of interest) of the
sample respondents who do respond may be different from the entire sample's true mean value (on
the variable of interest).
Non-sampling error. Degree to which the mean observed value (on the variable of interest) for the
respondent of a particular sample agrees with the mean true value of the particular sample of
respondents (on the variable of interest).
Observational methods. Observation of behaviour, directly or indirectly, by human or mechanical
methods.
Optical scanning. Direct machine reading of numerical values or alphanumeric codes and
transcription onto cards, magnetic tape, or disk.
Order bias. Condition whereby brands receive different ratings depending on whether they were
shown first, second, third, etc.
Ordinal data. Measurement in which the response alternatives define an ordered sequence so that
the choice listed first is less (greater) that the second, the second less (greater) than the third, and so
forth. The numbers assigned do not reflect the magnitude of an attribute possessed by an object.
Over-registration. Condition that occurs when a sampling frame consists of sampling units in the
target population plus additional units as well.
Paired comparison designs. Tests where a consumer directly compares two products.
Paired comparison scale. Scale that presents the respondent with two objects at a time and asks the
respondent to select one of the two according to some criterion.
Primary data. Data collected for a specific research need; they are customised and require
specialised collection procedures.
Print ad tests. Attempts to assess the power of an ad placed in a magazine or newspaper to be
remembered, to communicate, to affect attitudes, and ultimately, to produce sales.
49
MBA DEPT
Probability sampling designs. Samples drawn in such a way that each member of the population
has a known, non-zero chance of being selected.
Project proposal. A written description of the key research design that defines the proposed study.
Projective techniques. A class of techniques which presume that respondents cannot or will not
communicate their feelings and beliefs directly; provides a structured question format in which
respondents can respond indirectly by projecting their own feelings and beliefs into the situation
while they interpret the behaviour of others.
Proportional allocation. Sampling design guaranteeing that stratified random sampling will be at
least as efficient as SRS. The number of elements selected from a stratum is directly proportional to
the size of the stratum.
Purchase intent scale. Procedure attempting to measure a respondent's interest in a brand or
product.
Q-sort scale. Rank order procedure in which objects are sorted into piles based on similarity with
respect to some criterion.
Qualitative research methods. Techniques involving relatively large numbers of respondents,
which are designed to generate information that can be projected to the whole population.
Quota sampling. Design that involves selecting specific numbers of respondents who possess
certain characteristics known, or presumed, to affect the subject of the research study.
Random sampling error. Error caused when the selected sample is an imperfect representation of
the overall population; therefore, the true mean value for the particular sample of respondents (on the
variable of interest) differs from the true mean value for the overall population (on the variable of
interest).
Random sources of error. Denoted by X, component made up of transient personal factors that
affect the observed scale score in different ways each time the test is administered.
Range. Differences between largest and smallest values of distribution.
Rank-order scale. Scale in which respondents are presented with several objects simultaneously and
requested to "order" or "rank" them.
Ratio data. Measurements that have the same properties as interval scales, but which also have a
natural or absolute origin.
50
MBA DEPT
Recall. Measures of how many people remember having seen the test ad both on an unaided and
aided basis.
Related samples. The measurement of the variables of interest in one sample can affect the
measurement of the variable in some other sample.
Residual. An error term representing the difference between the actual and predicted values of the
dependent variable.
Response error. Error that occurs because respondents (who do respond) may give inaccurate
answers, or a respondent's answers may be misrecorded.
Response rates. The total number of respondents sent questionnaires who complete and return them,
expressed as a percentage.
Sample two-stage cluster sampling. Design in which the clusters at the first stage are selected by
SRS; at the second stage the sampling units are selected probabilistically by SRS from each sample
cluster so that with clusters of equal size the same fraction of sampling units is drawn from each
sample cluster.
Sample. A subset of the target population from which information is gathered to estimate something
about the population.
Sampling frame. An explicit list of individuals or households that are eligible for inclusion in the
sample.
Sampling interval. Computed by taking n/N together with r, the first chosen element to be included
in the sample, determines which elements will be included in the sample.
Sampling units. The elements that make up the population.
Sampling variable. Variable that represents the characteristic of the population that we wish to
estimate.
Sampling. Identification of a group of individuals or households (or institutions or objects) that can
be reached by mail, telephone, or in person, and that possess the information relevant to solving the
marketing problem at hand.
Scale transformation. Procedures for transforming data by one of a number of simple arithmetic
operations to make comparisons across respondents and/or scale items.
51
MBA DEPT
Secondary data. Data that have been collected for another project and have already been published.
Sources can be in-house or external.
Selection bias. Threat to internal validity; refers to the improper assignment of respondents to
treatment conditions.
Semantic differential scale. Semantic scale utilising bi-polar adjectives as end points.
Sentence completion. Projective technique whereby respondents are asked to complete a number of
incomplete sentences with the first word or phrase that comes to mind.
Simple one-stage cluster sampling. One-step design in which the first stage clusters all sampling
units are selected by SRS, and within each selected cluster all sampling units are chosen.
Simple random sampling. Design guaranteeing that every sample of a given size as well as every
individual in the target population has an equal chance of being selected.
Simple weighting. Procedure that attempts to remove non-response bias by assigning weights to the
data that in some sense account for non-response.
Simulated test market. Method whereby various groups of pre-selected respondents are
interviewed, monitored and sampled about the new product; in addition, respondents may be
exposed to various media messages in a controlled environment.
Single-stage cluster sample. One step design where, once the sample of clusters is selected, every
sampling unit within each of the selected clusters is included in the sample.
Snowball design. Sample formed by having each respondent, after being interviewed, identify
others who belong to the target population of interest.
Split-halves. Scale items split in terms of odd-and even-numbered Hems or randomly. Standard
deviation. Index of variability in the same measurement units used to calculate the mean.
Standard error (s). Indication of the reliability of an estimate of a population parameter; it is
computed by dividing the standard deviation of the sample estimate by the square root of the sample
size.
Stapel scale. Procedure using a single criterion or key word and instructing the respondent to rate
the object on a scale.
Store audits. Studies that monitor performance in the marketplace among dollar and unit
sales/share, distribution/out of stock, inventory, price, promotional
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MBA DEPT
Stratified sampling. Design that involves partitioning the entire population of elements into subpopulation, called strata, and then selecting elements separately from each sub-population.
Survey. A method of gathering information from a number of individuals (the respondents, who
collectively form a sample) in order to learn something about a larger target population from which
the sample was drawn.
Syndicated research services. Market research suppliers who collect data on a regular basis with
standardised procedures. The data are sold to different clients.
Systematic sampling. Design whereby the target sample is generated by picking an arbitrary
starting point (in a list) and then picking every nth element in succession from a list.
Systematic sources of error. Denoted by X, component made up of stable characteristics that affect
the observed scale score in the same way each time the test is administered.
Target population. Set of people, products, firms, markets, etc., that contain the information that is
of interest to the researcher.
Telephone surveys. Survey that involves phoning a sample of respondents drawn from an eligible
population and asking them a series of questions.
Telescoping. Condition that occurs when a respondent either compresses time or remembers an
event as occurring more recently than it actually occurred.
Test markets. A system that allows the marketing manager to evaluate the proposed national
marketing program in a smaller, less expensive situation with a view to determining whether the
potential profit opportunity from rolling out the new product or line extension outweighs the
potential risks.
Thematic apperception test (TAT). Projective technique presenting respondents with a series of
pictures or cartoons in which consumers and products are the primary topic of attention.
Third person/role playing. Projective technique that represent respondents with a verbal or visual
situation and asks them to relate the feelings and beliefs of a third person to the situation, rather than
to directly express their own feelings and beliefs about the situation.
Top-down approach. Process of breaking down clusters: or, at the beginning, all respondents
belong to one segment, and then respondents are partitioned into two segments, then three segments,
and so on until each respondent occupies his or her own segment.
53
MBA DEPT
Tracking. System for measuring the key sales components of customer awareness and trail and
repeat purchases.
Trade-off procedure. Technique where the respondent is asked to consider two attributes at a time to rank the various combinations of each pair of attribute descriptions from a most preferred to least
preferred.
Treatment. A reference to an independent variable that has been manipulated by the researcher. For
example, a researcher may be investigating the customer benefits of three prototype packaging
designs in order to determine which design to use. The independent variable which is manipulated is
product packaging.
Treatment. Term for that independent variable that has been manipulated.
Triangle designs. Tests where a respondent is given two samples of one product and one sample of
another and asked to identify the one that differs.
Two-tail hypothesis test. Test used when the alternative hypothesis is non-directional - the region of
rejection is in both tails of the distribution.
Type I error. Situation occurring when the null hypothesis is in fact true, but is nevertheless rejected
on the basis of the sample data.
Type II or beta error. Situation occurring when we fail to reject the null hypothesis (HO), when in
fact the alternative (HA) is true.
Unaided questions. Questions that do not provide any clues to the answer.
Unaided recall. Respondents are asked if they remember seeing a commercial for a product in the
product category of interest.
Unbalanced scale. Scale using an unequal number of favorable and unfavorable scale categories.
Unfinished scenario story completion. Projective technique whereby respondents complete the end
of a story or supply the motive for why one or more actors in a story behaved as they did.
Unstructured interview. Method of interviewing where questions are not completely predetermined
and the interviewer is free to probe for all details and underlying feelings.
Utility scale values. Ratings that indicate how influential each attribute level is in the consumer's
overall evaluations.
54
MBA DEPT
Validation. Procedure where between 10 and 20 percent of all respondents "reportedly" interviewed
are re contacted by telephone and asked a few questions to verify that the interview did in fact take
place.
Validity. Refers to the best approximation to truth or falsity of a proposition, including propositions
concerning cause-and-effect relationships.
Word association. Projective technique whereby respondents are presented with a list of words, one
at a time, and asked to indicate what word comes immediately to mind.
ALL THE BEST

G.V.R & S-MBA DEPT
Contact : TAIDALA VASANTHARAO
HEAD, DEPARTMENT OF MANAMENT STUDIES
G V R & S COLLEGE OF ENF\GINEERING AND TECHNOLOGY
BUDAMPADU,
GUNTUR -13 , MOBILE NO: 90595631825
E-MAIL: vasantharao.taidala@gmail.com
55
56
MBA DEPT

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G.V.

R &S-College of Engg & TechAUGMENTUM-2K16

We recruit for attitude and train for skill

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Contingency planning--The process of identifying an organizations critical information systems

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Cross-functional teams--Work teams comprised of individuals who represent the various

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Development program--Training or educational programs designed to stimulate an individuals

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External benchmarking--The process of comparing an organizations current policies and practices

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"Invest in yourself. Your career is the engine of your wealth."

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Equity the owners' share of a business.

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Improvement - EXPENDITURE directed to a particular ASSET to improve its performance or

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MD&A - See MANAGEMENT DISCUSSION AND ANALYSIS.

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characterized by willfulness. The law of negligence is founded on reasonable conduct or reasonable

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LIMITED LIABILITY COMPANY (LLC) is to be operated. It is the LLC equivalent of corporate

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Reinsurance - Process by which an insurance company obtains insurance on its insurance

Repurchase Agreement (Repos) - Agreement whereby an institution purchases SECURITIES

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specific purposes bound by virtue of contracted agreements.

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Business has only two functions - marketing and innovation.

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