Business Terms- Definition

(Month of June 2015)

LEADER A person or thing that holds
a dominant or superior
position within its field, and
is able to exercise high
degree of control or
influence for others.
INNOVATION The process of translating
an idea or invention into a
good or service that creates
value or for which
customers will pay. To be
called an innovation, an
idea must be replicable at
an economical cost and
must satisfy a specific need.

GLOBALIZATION The worldwide movement

towards economic,
financial, trade and
communications integration.
Globalization implies the
opening of local and
nationalistic perspectives to
a broader outlook of an
interconnected and
interdependent world with
free transfer of capital,
goods and services across
national frontiers.
CREATIVE “Creative Leadership
LEADERSHIP means exercising the vision
to change the traditional
role from the commander to
the coach, manager to
mentor, from director to
delegator and from one who
demands respects to one
who facilitates self- respect.
For enhancing enterprise
value, we need the large
number of creative leaders.”
CULTURE OF Excellence is not by
EXCELLENCE accident. It is a process,
where an individual or
organization or nation
continuously strives to
 better oneself. The
performance standards are
set by themselves, they
work on their dreams with
focus and are prepared to
take calculated risks and do
not be deterred by failures
as they move towards their
dreams.
ORGANIZATION A social unit of people that is
structured and managed to meet a
need or to purse collective goals.
All organizations have a
management structure that
determines relationships between
the different activities and the
members, and subdivides and
assigns roles, responsibilities, and
authority to carry out different
tasks. Organizations are open
systems – they affect and are
affected by their environment.

STAKEHOLDER A person, group or

organization that has
interest or concern in an
organization.Stakeholders
can be affected by the
organization’s actions,
objectives and policies.
Some examples of key
stakeholders are creditors,
directors, employees,
government (and its
agencies), owners
(shareholders), suppliers,
unions, and the community
from which the business
draws its resources.
CORPORATE GOVERNANCE
The framework of rules and
practices by which a board of
directors ensures accountability,
fairness, and transparency in a
company’s relationship with its all
stakeholders (financiers,
customers, management,
employees, government, and the
community.
CLOUD COMPUTING Process where a task is
solved by using a wide
variety of technologies,
including computers,
networks, servers, and the
Internet. Cloud computing is
very similar to grid
computing, however usually
is differentiated from grid
computing due to its use of
Internet tools.
SOCIAL JUSTICE The fair and proper
administration of laws
conforming to the natural
law that all persons,
irrespective of ethnic origin,
gender, possessions, race,
religion, etc., are to be
treated equally and without
prejudice.

Accountability The obligation of an

individual or organization to
account for its activities,
accept responsibility for
them, and to disclose the
results in a transparent
manner. It also includes the
responsibility for money or
other entrusted property.

Computers A group of interconnected

(via cable and/or wireless)
computers and peripherals
that is capable of sharing
 software and hardware
resources between many
users. The Internet is a
global network of networks.
Communications A system that enables
users of telephones or data
communications lines to
exchange info;rmation over
long distances by
connecting with each other
through a system of routers,
servers, switches, and the
like.

MANDATE Written authorization and/or

command by a person,
group, or organization (the
'mandator') to another (the
'mandatary') to take a
certain course of action.
Normally revocable until
executed, a mandate is
automatically terminated on
the bankruptcy,
incapacitation, removal from
office, or death of the
mandator.

METHODOLOGY A system of broad

principles or rules from
which specific methods or
procedures may be derived
to interpret or solve different
problems within the scope
of a particular discipline.
Unlike an algorithm, a
methodology is not a
formula but a set of
practices.
GUARANTOR Person or firm that
endorses a three party
agreement to guarantee
that promises made by the
first party (the principal) to
the second party (client or
lender) will be fulfilled, and
assumes liability if the
principal fails to fulfill them
(defaults). In case of a
default, the guarantor must
compensate the lender or
client, and usually acquires
an immediate right of action
against the principal for
payments made under the
guarantee.

PROACTIVE Action and result oriented

behavior, instead of the one
who waits for things to
happen and then tries to
adjust (react) to them.
Proactive behavior aims at
identification and
exploitation of opportunities
and in taking preemptory
action against potential
problems and threats,
whereas reactive behavior
focuses on fighting a fire or
solving a problem after it
occurs.

BLUE CHIP Large, prestigious,

COMPANIES prosperous, and stable
corporations, which have a
solid, credible record of
earnings and dividend
payments in both good and
bad times, and have a
strong long- term growth
potential. The term comes
from the game of poker in
which the highest value chip
is blue

BALANCE SHEET A condensed statement that

shows the financial position
 of an entity on a specified
date usually the last day of
an accounting period. A
balance sheet states (1)
what assets the entity owns,
(2) how it paid for them, (3)
what it owes (its liabilities),
and (4) what is the amount
left after satisfying the
liabilities. Balance sheet
data is based on a
fundamental accounting
equation (assets = liabilities
+ owners' equity), and is
classified under
subheadings such as
current assets, fixed assets,
current liabilities, Long-
term Liabilities.
Legally binding assurance
EDUCATION -The (which may or may not be in
wealth of knowledge writing) that a good or
acquired by an service is, among other
individual after things, (1) fit for use as
studying particular represented, (2) free from
subject matters or defective material and
experiencing life workmanship, (3) meets
lessons that provide statutory and/or other
an understanding of specifications. A warranty
something. Education describes the conditions
requires instruction of under, and period during,
some sort from an which the producer or
individual or vendor will repair, replace,
composed literature. or other compensate for,
The most common the defective item without
forms of education cost to the buyer or user.
result from years of Often it also delineates the
schooling that rights and obligations of
incorporates studies both parties in case of a
of a variety of claim or dispute.
subjects.

COERCION -
Improper use (or
threat of improper
use) of authority,
economic power,
physical force, or
 other such advantage,
by a party to compel
another to submit to
the wishes of its
wielder. Agreements
entered into, or
testaments signed,
under coercion are
considered illegal and
invalid.

WARRANTY

Quantifiable likelihood
(chance) of the occurrence
of an event expressed as
PROBABILITY
odds, or a fraction of 1.
Probability is estimated
usually through repeated
random sampling, and is
represented numerically as
between 0 (impossibility)
and 1 (certainty).

SCARCITY - Ever-present situation in all

markets whereby either less
goods are available than
the demand for them, or
only too little money is
available to their potential
buyers for making the
purchase.
 An increase in an activity's
MARGINAL overall benefit that is
UTILITY - caused by a unit increase in
the level of that activity, all
other factors remaining
constant. Also called
marginal benefit.

KEYNESIAN A school of economic

ECONOMICS thought founded by the UK
economist John Maynard
Keynes (1883-1946) and
developed by his followers.
In 1936, at the height of the
great depression, Keynes'
landmark book The General
Theory of Employment,
Interest and Money caused
a paradigm shift for
economics: it suddenly
replaced their emphasis on
study of the economic
behavior of individuals and
companies
(microeconomics) to the
study of the behavior of the
economy as a whole
(macroeconomics).
BILL OF LADING (B/L) A document issued by a
carrier, or its agent, to the
shipper as a contract of
carriage of goods. It is also
a receipt for cargo accepted
for transportation, and must
be presented for taking
delivery at the destination.
MANAGERIAL Managerial Economics
ECONOMICS deals with the integration of
economic theory with
business practice for the
purpose of facilitating
decision making and
forward planning by
Management.
Commerce A confirmed request by
one party to another to
buy, sell, deliver, or
receive goods or services
 under specified terms and
conditions. When
accepted by the receiving
party, an order becomes a
legally binding contract.
e.g. purchase order.
Law An authoritative
mandate, command, or
direction issued by a court
under its seal. A final court
order is called judgment.
MANAGEMENT The organization and
coordination of the
activities of a business in
order to achieve defined
objectives. Management
consists of the
interlocking functions of
creating corporate policy
and organizing, planning,
controlling, and directing
an organization's
resources in order to
achieve the objectives.
PRODUCTION The processes and
methods used to
transform tangible inputs
(raw materials, semi-
finished goods,
subassemblies) and
intangible inputs (ideas,
information, knowledge)
into goods or services.
Resources are used in this
process to create an
output that is suitable for
use or has exchange
value.
MIXED ECONOMY An economic system in
which both the private
 enterprise and a degree
of state monopoly
(usually in public services,
defense, infrastructure,
and basic industries)
coexist. All modern
economies are mixed
where the means of
production are shared
between the private and
public sectors. It is also
called dual economy.
PROFIT The surplus remaining
after total costs are
deducted from total
revenue and the basis on
which tax is computed
and dividend is paid. It is
the best known measure
of success in an
enterprise.Profit is
reflected in reduction in
liabilities, increase in
assets, and/or increase in
owners' equity. It
furnishes resources for
investing in future
operations, and its
absence may result in the
extinction of a company.
As an indicator of
comparative
performance, however, it
is less valuable than
return on investment
(ROI). It is also called
earnings, gain, or income.
CAPITAL MARKET A financial market that
works as a conduit for
demand and supply of
debt and equity capital. It
channels the money
provided by savers and
depository institutions
(banks, credit unions,
insurance companies,
etc.) to borrowers and
investees through a
variety of financial
instruments (bonds,
notes, shares) called
securities.A capital
market is not a compact
unit, but a highly
decentralized system
made up of three major
parts: (1) stock market,
(2) bond market, and (3)
money market. It also
works as an exchange for
trading existing claims on
capital in the form of
shares.
AUTHORITY It includes a right to
command a situation,
commit resources, give
orders and expect them
to be obeyed, it is always
accompanied by an equal
responsibility for one's
actions or a failure to act.
Power that is delegated
formally.

ADVERTISEMENT (AD) Paid, non-personal, public

communication about
causes, goods and
 services, ideas,
organizations, people, and
places, through means
such as direct mail,
telephone, print, radio,
television, and internet.
An integral part of
marketing,
advertisements are public
notices designed to
inform and motivate.
Their objective is to
change the thinking
pattern (or buying
behavior) of the recipient,
so that he or she is
persuaded to take the
action desired by the
advertiser.
MARKETING MYOPIA A short-sighted and
inward looking approach
to marketing that focuses
on the needs of the
company instead of
defining the company and
its products in terms of
the customers' needs and
wants. It results in the
failure to see and adjust
to the rapid changes in
their markets.
DEMOCRACY Political System that is run
and controlled by citizens
of the country.
Democracies are made up
of elected representatives
and require that
governmental measures
be voted on by these
elected representatives or
 the people. Democracies
are not universal and are
implemented and
enforced in different
manners.
GROSS DOMESTIC The value of a country's
PRODUCT (GDP) overall output of goods
and services (typically
during one fiscal year) at
market prices, excluding
net income from abroad.
Gross Domestic Product
(GDP) can be estimated in
three ways which, in
theory, should yield
identical figures. They
are(1) Expenditure basis:
how much money was
spent, (2) Output basis:
how many goods and
services were sold, and(3)
Income basis: how much
income (profit) was
earned.

SMARTPHONE Mobile phone which

includes functions similar
to those found on personal
computers. Smartphone’s
provide a one-stop
solution for information
management, mobile calls,
email sending, and
Internet access.
Smartphone’s are compact
in size and often only
slightly bigger than
standard mobile
telephones.
SMART CARD Plastic card with
embedded microprocessor
chip, electronic memory,
and a battery. It is used for
information storage and
management and
authentication, it looks
like, works like, and is of
the same size as a bank or
credit card but may not
have a magnetic stripe on
its back. Of the several
types of smart cards, some
are contact-less (do not
require to be swiped
through a magnetic stripe
reader) whereas others
require contact with the
reader.
SMART MONEY Investments or trades
made by sophisticated
investors who have an
understanding of the
financial markets and can
often spot trends before
others, who tend to earn
greater than average
returns on their
investments.
SMART CITY A developed urban area
that creates sustainable
economic development
and high quality of life by
excelling in multiple key
areas; economy, mobility,
environment, people,
living, and government.
Excelling in these key
areas can be done so
through strong human
capital, social capital,
and/or ICT infrastructure.
ACQUISITION Taking custody of records.

Taking possession of an
asset by purchase.

Taking control of a firm

by purchasing 51 percent
(or more) of its voting
shares.
MORTGAGE A legal agreement that
conveys the conditional
right of ownership on an
asset or property by its
owner (the mortgagor) to
a lender (the mortgagee)
as security for a loan. The
lender's security interest
is recorded in the register
of title documents to
make it public
information, and is voided
when the loan is repaid in
full.
DATA MINING Sifting through very large
amounts of data for useful
information. Data mining
uses artificial intelligence
techniques, neural
networks, and advanced
statistical tools (such as
cluster analysis) to reveal
trends, patterns, and
relationships, which might
 otherwise have remained
undetected. In contrast to
an expert system (which
draws inferences from the
given data on the basis of
a given set of rules) data
mining attempts to
discover hidden rules
underlying the data. It is
also called data surfing.
MUTUAL FUNDS An investment vehicle
managed by a finance
professional that raises
capital by selling shares
(called units) in a chosen
and balanced set of
securities to the public. A
mutual fund's capital is
invested in a group
(portfolio) of corporate
securities, commodities,
options, etc., that match
the fund's objectives
detailed in its prospectus.
The level of a mutual
fund's income from its
portfolio determines the
daily market value (called
net asset value) at which
its units are redeemable
on any business day, and
the dividend paid to its
unit holders. Mutual
funds are of two main
types: (1) Open end fund
(2) Closed end fund
DIGITAL MARKETING The promotion of
products or brands via
one or more forms of
electronic media. For
example, advertising
 mediums that might be
used as part of the digital
marketing strategy of a
business could include
promotional efforts made
via the Internet, social
media, mobile phones
and electronic billboards,
as well as via digital and
television and radio
channels.
BUSINESS ANALYTICS Process of determining
and understanding the
effectiveness of various
organizational operations.
Business analytics can be
either focused on internal
or external processes.
Different specializations
exist, encompassing most
major aspects of business,
including risk analysis,
market analysis, and
supply chain analysis.
BAD BANKS A bank set up to buy the
bad loans of a bank with
significant nonperforming
assets at market price. By
transferring the bad
assets of an institutions to
the bad bank, the banks
clear their balance sheet
of toxic assets but would
be forced to take write
downs. Shareholders and
bondholders stand to lose
money from this solution
(but not depositors).
Banks that become
insolvent as a result of the
 process can be
recapitalized, nationalized
of liquidate. Good bank
can focus on its core
business of lending, and
the bad bank can
specialize in maximizing
value from high risk
assets.
CORPORATE SOCIAL A company’s sense of
RESPONSIBILITY responsibility towards the
community and
environment (both
ecological and social) in
which, it operates.
Companies express this
citizenship (1) through
their waste and pollution
reduction processes, (2)
by contributing
educational and social
programs, and (3) by
earning adequate returns
on the employed
resources.
SOCIAL MARKETING 1. Application of
commercial marketing
concepts, knowledge, and
techniques to non-
commercial ends (such as
campaigns against
smoking and drunken
driving) for the society's
welfare.2. Use of
commercial marketing in
promotion of goods and
services in a way that
helps in promoting the
consumers' and, by
 extension, the society's
well being.

PETER PRINCIPLE Observation that in a

hierarchy people tend to
rise to "their level of
incompetence." Thus, as
people are promoted,
they become
progressively less-
effective because good
performance in one job
does not guaranty similar
performance in another.
This principle is named
after the Canadian
researcher Dr. Laurence J.
Peter (1910-90) who
popularized this
observation in his 1969
book 'The Peter Principle.

DIGITAL WALLET/ E- Software that resides on a

WALLET buyer's computer and
holds digital cash, and a
digital certificate with a
digital signature, as well
as billing, shipping, and
payment information for
online transactions. It is
also called electronic
wallet.
M-COMMERCE Electronic commerce (e-
commerce) transacted
over mobile
communication devices
such as cell phones or
personal digital assistants
(PDA). The use of wireless
handheld devices such as
 cellular phones and
laptops to conduct
commercial transactions
online. Mobile commerce
transactions continues to
grow, and the term
includes the purchase and
sale of a wide range of
goods and services, online
banking, bill payment,
information delivery and
so on. It is also known as
'Mobile Commerce'.

PARADIGM Intellectual perception or

view, accepted by an
individual or a society as a
clear example, model, or
pattern of how things
work in the world. This
term was used first by the
US science theorist
& historian Thomas Kuhn
(1922-96) in his 1962
book 'The Structure Of
Scientific Revolution' refer
to theoretical frameworks
within which all scientific
thinking and practices
operate.

CASHLESS ECONOMY It can be defined as a

situation in which the
flow of cash within an
economy is non-existent
and all transactions have
to be through electronic
channels such as direct
 debit, credit and debit
cards, electronic clearing,
payment systems such as
Immediate Payment
Service (IMPS), National
Electronic Funds Transfer
and Real Time Gross
Settlement in India.
PRIORITY SECTOR Priority Sector Lending is
LENDING an important role given
by the Reserve Bank of
India to the banks for
providing a specified
portion of the bank
lending to few specific
sectors like agriculture
and allied activities, micro
and small enterprises,
poor people for housing,
students for education
and other low income
groups and weaker
sections.. This is
essentially meant for an
all round development of
the economy as opposed
to focusing only on the
financial sector.
PAYMENT BANKS Payment Banks and Small
Banks are RBI’s idea of
financial inclusion. These
cater to the credit
requirements and
remittance needs of the
country’s small
businesses, unorganized
sectors, low-income
households, farmers and
migrant work force. RBI,
the central bank of India,
 has granted license to 11
companies for setting up
payments bank. These
include frontline
companies like Reliance
Industries, Airtel M
Commerce and Paytm to
name a few.

HASHTAG BANKING Banks look at hashtag

banking in two ways—to
provide basic banking
services, and to give
information. Basic
banking services include
fund transfer, prepaid
mobile recharge, checking
account balance and
requesting for bank
statements. To use this
facility, you have to
‘follow’ your bank on
Twitter. This is because
you will have to send
direct or private messages
to the bank, which is only
possible if you and your
bank are following each
other. For the facility,
banks have a format for
every service. For
instance, a Kotak
Mahindra Bank Ltd
customer will have to send
#Bal as a direct message
to @KotakBankLtd. The
response is generated
automatically. Some
banks allow fund transfer
to any customer who has a
Twitter account. You can
get an instant and secure
 update on your account
balance, transaction
history, cheque book
request, Net Banking PIN
request and many more
account activities. You
can also recharge your
pre-paid mobile & DTH
accounts using this
service.
BALLOON PAYMENT The final installment of a
loan to be paid in an
amount that is
disproportionately larger
than the regular
installment. When a loan
is made, repayment of the
principal, which is the
amount of the loan, plus
the interest that is owed
on it, is divided into
installments due at
regular intervals—for
example, every month.
The earlier installments
are usually payment of
interest and a minimal
amount of principal, while
the later installments are
primarily principal. When
a balloon payment is
provided in a loan
agreement there are a
number of installments
for the same small
amount prior to the
balloon payment. People
with irregular or seasonal
sources of income find a
balloon payment
provision in a loan useful
 for budgeting their
expenses.
CREDIT RISK The risk that a party to a
contractual agreement or
transaction will be unable
to meet its obligations or
will default on
commitments. Credit risk
can be associated with
almost any financial
transaction. BASEL-II
provides two options for
measurement of capital
charge for credit risk
1.standardised approach
(SA) - Under the SA, the
banks use a risk-weighting
schedule for measuring
the credit risk of its assets
by assigning risk weights
based on the rating
assigned by the external
credit rating agencies. 2.
Internal rating based
approach (IRB) - The IRB
approach, on the other
hand, allows banks to use
their own internal ratings
of counterparties and
exposures, which permit a
finer differentiation of risk
for various exposures and
hence delivers capital
requirements that are
better aligned to the
degree of risks. The IRB
approaches are of two
types
a) Foundation IRB (FIRB) The bank estimates the
Probability of Default (PD)
associated with each
borrower, and the
supervisor supplies other
inputs such as Loss Given
Default (LGD) and
Exposure At Default (EAD).
b) Advanced IRB (AIRB) In addition to Probability
of Default (PD), the bank
estimates other inputs
such as EAD and LGD. The
requirements for this
approach are more
exacting. The adoption of
advanced approaches
would require the banks
to meet minimum
requirements relating to
internal ratings at the
outset and on an ongoing
basis such as those
relating to the design of
the rating system,
operations, controls,
corporate governance,
and estimation and
validation of credit risk
components, viz., PD for
both FIRB and AIRB and
LGD and EAD for AIRB. The
banks should have, at the
minimum, PD data for five
years and LGD and EAD
data for seven years. In
India, banks have been
advised to compute
capital requirements for
credit risk adopting the SA.
 MARKET RISK Market risk is defined as
the risk of loss arising
from movements in
market prices or rates
away from the rates or
prices set out in a
transaction or agreement.
The capital charge for
market risk was
introduced by the BASEL
Committee on Banking
Supervision through the
Market Risk Amendment
of January 1996 to the
capital accord of 1988
(BASEL I Framework).
There are two
methodologies available
to estimate the capital
requirement to cover
market risks:
1) The Standardised This method, currently
Measurement Method implemented by the
Reserve Bank, adopts a
'building block' approach
for interest-rate related
and equity instruments
which differentiate capital
requirements for 'specific
risk' from those of 'general
market risk'. The 'specific
risk charge' is designed to
protect against an adverse
movement in the price of
an individual security due
to factors related to the
individual issuer. The
'general market risk
charge' is designed to
 protect against the
interest rate risk in the
portfolio.
2) The Internal Models This method enables
Approach (IMA) banks to use their
proprietary in-house
method which must meet
the qualitative and
quantitative criteria set
out by the BCBS and is
subject to the explicit
approval of the
supervisory authority.

OPERATIONAL RISK The revised BASEL II

framework offers the
following three
approaches for estimating
capital charges for
operational risk:
1) The Basic Indicator This approach sets a
Approach (BIA) charge for operational risk
as a fixed percentage
("alpha factor") of a single
indicator, which serves as
a proxy for the bank's risk
exposure.
2) The Standardised This approach requires
Approach (SA) that the institution
separate its operations
into eight standard
business lines, and the
capital charge for each
business line is calculated
by multiplying gross
income of that business
line by a factor (denoted
beta) assigned to that
business line.
 3) Advanced Under this approach, the
Measurement Approach regulatory capital
(AMA) requirement will equal
the risk measure
generated by the banks'
internal operational risk
measurement system. In
India, the banks have
been advised to adopt the
BIA to estimate the
capital charge for
operational risk and 15%
of average gross income
of last three years is taken
for calculating capital
charge for operational
risk.

WAREHOUSE A software application

MANAGEMENT SYSTEM which supports the daily
(WMS) operations of a warehouse
of raw, semi-finished and
finished material for
inbound/out bound
inventory. The software
application allows for a
system of centralized
management of
warehousing tasks
including inventory
control, tracking, and the
location of stock items.
WMS may work on their
own as a single
application or be an
integrated part of a larger
system. Current WMSs
are capable of being
highly complex and
handle significant
amounts of data many
 companies will allocate an
entire staff to the
operation of the software.
LEAN MANUFACTURING Doing more with less by
employing 'lean thinking.'
Lean manufacturing
involves never ending
efforts to eliminate or
reduce 'muda' (Japanese
for waste or any activity
that consumes resources
without adding value) in
design, manufacturing,
distribution, and
customer service
processes. Developed by
the Toyota executive
Taiichi Ohno (1912-90)
during post-Second World
War reconstruction
period in Japan, and
popularized by James P.
Womack and Daniel T.
Jones in their 1996 book
'Lean Thinking.' It is also
called lean production.

VALUE STREAM Value stream mapping is

MAPPING flow of values for the
customer for which
customer would be keen
to avail, in the form of
product or service. This
takes a shape of a flow
diagram in logical view so
that helps a business
boost productivity and
reduces waste. A typical
value stream mapping
process will begin with
 the delivery of raw
materials, proceed
through intermediate
states of production, and
then conclude with the
creation of a finished
product ready for sale to
consumers.

FIVE C'S OF CREDIT Judgmental factors which

(in theory) bankers use to
evaluate the quality of a
personal or small business
loan application. First four
of these are normally
under the control of the
applicant whereas the
fifth is not: (1) Good
reputation and track
record (character) that
indicates a willingness to
meet one's obligations,
(2) Stable and adequate
capital base, (3) Capacity
to generate cash flows
adequate to cover debt-
service, (4) More than
adequate valuable assets
for pledging as collateral,
and (5) economic and
other conditions
conducive to the
applicant's plans. In
practice, however, the
order of the importance
of these factors often is:
collateral, capacity,
capital, conditions, and
character.
SIX R'S OF MARKETING Four factors of a
marketing model that are
focused on the
customers. Many people
believe that the shift is
trending away from the
company, and more
towards the customers,
and so some companies
have shifted from
focusing on the four P’s of
marketing, and moved to
the four R’s of marketing.
As this is a relatively new
idea, there are a few
different versions of the
cycle. The versions tend
to focus on some
combination of these
ideas: recognition,
reputation, relationship,
research, relevance, and
reward. All of these
concepts deal with how a
customer would interact
with the company and its
product/service.

COGNITIVE Psychological processes

involved in acquisition
and understanding of
knowledge, formation of
beliefs and attitudes, and
decision making and
problem solving. They are
distinct from emotional
and volitional processes
involved in wanting and
intending. Cognitive
 capacity is measured
generally with intelligence
quotient (IQ) tests.

FIVE C'S OF MARKETING Used to analyze the five

key areas involved in
marketing decisions for an
organization and includes:
Company, Customers,
Competitors,
Collaborators, and
Climate.
BIG 'Q,' LITTLE 'q' Expression that contrasts
the difference between
striving for quality in all of
the firm's products and
processes (the big 'Q') and
striving for quality in a
limited or specific area
(the little 'q').

CULTURE Broadly, social heritage of

a group (organized
community or society). It
is a pattern of responses
discovered, developed, or
invented during the
group's history of
handling problems which
arise from interactions
among its members, and
between them and their
environment. These
responses are considered
the correct way to
perceive, feel, think, and
act, and are passed on to
the new members
through immersion and
teaching. Culture
 determines what is
acceptable or
unacceptable, important
or unimportant, right or
wrong, workable or
unworkable. It
encompasses all learned
and shared, explicit or
tacit, assumptions,
beliefs, knowledge,
norms, and values, as well
as attitudes, behavior,
dress, and language.
CHARACTER 1.Computing: Letter,
number, punctuation
mark, other mark or
symbol, and 'space' any
element of a given
character set.2.Banking:
One of the five key factors
considered in evaluation
of a loan application is the
applicant's credit history
and reputation in the
community.3.Law:
Reputation of a person,
entity, or witness.4.HR:
Sum total of a person's
behavioral traits, history,
reputation in community,
and values.
ATTITUDE A pre-disposition or a
tendency to respond
positively or negatively
towards a certain idea,
object, person, or
situation. Attitude
influences an individual's
choice of action, and
responses to challenges,
incentives, and
 rewards.Four major
components of attitude
are (1) Affective:
emotions or feelings. (2)
Cognitive: belief or
opinions held consciously.
(3) Conative: inclination
for action. (4) Evaluative:
positive or negative
response to stimuli.
CORPORATION 1.Firm that meets
certain legal requirements
to be recognized as
having a legal existence,
as an entity separate and
distinct from its owners.
Corporations are owned
by their stockholders
(shareholders) who share
in profits and losses
generated through the
firm's operations, and
have three distinct
characteristics (1) Legal
existence: a firm can (like
a person) buy, sell, own,
enter into a contract, and
sue other persons and
firms, and be sued by
them. It can do good and
be rewarded, and can
commit offence and be
punished. (2) Limited
liability: a firm and its
owners are limited in
their liability to the
creditors and other
obligors only up to the
resources of the firm,
unless the owners give
 personal-guaranties. (3)
Continuity of existence: a
firm can live beyond the
life spans and capacity of
its owners, because its
ownership can be
transferred through a sale
or gift of shares.2.
Municipal authority of a
town or city.3. A very
large, usually diversified,
firm.

GROSS INCOME Though operating

income gives a more
accurate picture of a
company's profitability,
gross income provides a
top-line view of a
company's production or
(in case of a merchant)
sales related cost
structure. It is a measure
of how well (or badly) a
company is utilizing its
capital, capacity, and
other resources, and
shows its competitive
strengths and weaknesses
in comparison with other
companies in the same
industry. A high gross
income means stability in
times of economic
downturn because the
company can afford to cut
prices; a low gross income
may mean low
creditworthiness or
inability to fight off
 competition. A falling
gross income shows cost
of production is rising
faster than the selling
price, or that inventory is
shrinking due to stealing
or spoilage. It is allocated
to employees as wages, to
lenders as interest, to
investors as dividends, to
government as taxes, and
to the company as
reinvestment. When
expressed as a percentage
of cost of sales, it is called
gross margin. It is also
called gross profit or value
added.

APTITUDE Acquired or natural

ability (usually
measurable with aptitude
tests), for learning and
proficiency in a specific
area or discipline.
Aptitude is expressed in
interest, and is reflected
in current performance
which is expected to
improve over time with
training.
LEADERSHIP 1. The individuals who
are the leaders in an
organization, regarded
collectively.2. The
activity of leading a
group of people or an
organization or the
ability to do this.
 Leadership involves:
Establishing a clear
vision,Sharing that
vision with others so
that they will follow
willingly,Providing the
information,
knowledge and
methods to realize
that vision,
andCoordinating and
balancing the
conflicting interests of
all members and
stakeholders.A leader
steps up in times of
crisis, and is able to
think and act
creatively in difficult
situations. Unlike
management,
leadership cannot be
taught, although it
may be learned and
enhanced through
coaching or
mentoring. 3. The act
of inspiring
subordinates to
perform and engage in
achieving a goal.
DISCRIMINATION 1. Bias or prejudice
resulting in denial of
opportunity, or unfair
treatment regarding
 selection, promotion,
or transfer.
Discrimination is
practiced commonly
on the grounds of age,
disability, ethnicity,
origin, political belief,
race, religion, sex, etc
factors which are
irrelevant to a person's
competence or
suitability.2. Unequal
treatment provided to
one or more parties on
the basis of a mutual
accord or some other
logical or illogical
reason.3. Differences
in two rates not
explainable or
justifiable by economic
considerations such as
costs.

AGGREGATE 1. General: Collective

amount, sum, or mass
arrived-at by adding or
putting together all
components,
elements, or parts of
an assemblage or
group, without
implying that the
resulting total is whole
(contains everything
 that should be in it).2.
Construction: Granular
mineral material (such
as sand, gravel,
crushed stone) used
with a bonding
medium (such as
cement or clay) to
make concrete,
plaster, or terrazzo
mixture.

E-TENDERING An internet based

process wherein the
complete tendering
process; from
advertising to
receiving and
submitting tender-
related information
are done online. This
enables firms to be
more efficient as
paper-based
transactions are
reduced or eliminated,
facilitating for a more
speedy exchange of
information.
SIX SIGMA Originally developed in
1986 by Motorola, the
business management
strategy is now used in
many different
industries in an effort
 to improve the quality
of products or services
produced by the
business through the
removal of defects and
errors. The strategy
involves creating
groups of people
within the business or
organization who have
expert status in
various methods, and
then each project is
carried out according
to a set of steps in an
effort to reach specific
financial milestones. A
six sigma process is
defined as one in
which 99.99966% of
products created are
expected to be
statistically free from
defects.
ETHICAL Equitable, fair, and just
dealing with people
that, although
pragmatically flexible
according to the
situation and times,
conforms to self-
imposed high
standards of public
conduct. Once
practically
interchangeable with
 'moral,' this term has
acquired quasi-legal
connotations and has
moved closer to
'legitimate' following
the recent (second half
of the 20th century)
schism between private
morality and public
morality.

EMPIRICAL Knowledge derived

from investigation,
observation,
experimentation, or
experience, as
opposed to theoretical
knowledge based on
logical or
mathematical
assumptions.
CONTROL GROUP 1. A group of subjects
or conditions that is
matched as closely as
possible with an
experimental group,
but is not exposed to
any experimental
treatment. The results
are then compared to
determine the changes
that may occur due to
the experimental
treatment.2. The
 people in an
organization who have
the power to make
and implement
decisions.
AMBIGUOUS Unclear or uncertain.
An ambiguous phrase
is one that is not easy
to understand, and
often could be
interpreted different
ways. Something
ambiguous can
occasionally be
deceptive, either
intentionally or
unintentionally,
because the
interpreter isn't able
to figure out the actual
meaning. The terms
and conditions of a
website, or the
warranty of a product,
if written with
ambiguity, could lead
to a consumer not
understanding the
consequences of
certain behaviors.

HIATUS A temporary pause or

break. The term is
commonly used to
designate a break in
 continuous airing of a
television show, such
as the break between
seasons, or a break in
a person's
employment history.

INFRASTRUCTURE 1. Basic and usually

permanent framework
which supports a
superstructure and is
supported by a
substructure.2.
Relatively permanent
and foundational
capital investment of a
country, firm, or
project that underlies
and makes possible all
its economic activity.
It includes
administrative,
telecommunications,
transportation, utilities,
and waste removal and
processing facilities.
Some definitions also
include education,
health care, research
and development, and
training facilities.
VOLUME The number of shares
traded on a given
exchange or in a single
security or index. High
 volume is generally
regarded as an
indication of investor
enthusiasm and low
volume is taken as a
sign of investor
lethargy. Volume is a
component of many
technical analysis
tools.

FEDERAL RESERVE US central-banking

SYSTEM (THE FED) system comprising of
12 regional central
banks (called the
Federal Reserve Banks)
owned by private
banks. Governed by
seven-member (each
appointed by the US
president for 14 years)
board of governors,
the Fed regulates
interest rates and
availability of bank
credit and sets other
monetary policies such
as legal reserve
requirements for
banks. Both its
chairman (who is its de
facto CEO) and vice-
chairman are
appointed by the US
president for a
 renewable four-year
term. The Fed
publishes 'Federal
Reserve bulletin,' an
authoritative source of
data on banking,
economy, and money.
GENERALLY Authoritative rules,
ACCEPTED practices, and
ACCOUNTING conventions meant to
PRINCIPLES (GAAP) provide both broad
guidelines and
detailed procedures
for preparing financial
statements and
handling specific
accounting
situations.Generally
accepted accounting
principles (GAAP)
provide objective
standards for judging
and comparing
financial data and its
presentation, and limit
the directors' freedom
in showing an
unrealistic picture
through creative
accounting. An auditor
must certify that the
provisions of GAAP
have been followed in
reporting an
organization's financial
 data in order it to be
accepted by investors,
lenders, and tax
authorities. Most
developed countries
(Canada, India, Japan,
UK, US, etc.) have their
own GAAP which may
differ from those of
others in minor or
major details.
EARNINGS PER SHARE Net income of a firm
(EPS) divided by the number
of its outstanding
shares the shares held
by the stockholders
(shareholders).
Primary earnings per
share (also called fully
diluted EPS) takes into
account all shares
currently outstanding,
plus the number of
shares that would be
outstanding if all
convertible bonds and
convertible preferred
stock (preference
shares) were
exchanged for
common stock
(ordinary shares). It is
also called net income
per share. Formula:
(Total revenue - Total
 expenses) ÷ Number of
outstanding shares.
BILL OF MATERIALS 1. A list of materials
(BOM) required by a
contractor to
complete a contract or
by a supplier or vendor
to complete an
order.2. A list of all
raw materials, parts,
intermediates,
subassemblies, etc.,
(with their quantities
and description)
required to construct,
overhaul, or repair
something.
MANAGEMENT An organized approach
INFORMATION to the study of the
SYSTEM (MIS) information needs of
an organization's
management at every
level in making
operational, tactical,
and strategic
decisions. Its objective
is to design and
implement
procedures, processes,
and routines that
provide suitably
detailed reports in an
accurate, consistent,
and timely manner.In
a management
 information system,
modern, computerized
systems continuously
gather relevant data,
both from inside and
outside an
organization. This data
is then processed,
integrated, and stored
in a centralized
database (or data
warehouse) where it is
constantly updated
and made available to
all who have the
authority to access it,
in a form that suits
their purpose.
LIMITED LIABILITY Relatively recent
COMPANY (LLC) type of US business
structure that combines
the limited personal
liability feature of a
corporation with the
single taxation feature
of a partnership or
sole-proprietorship
firm. Its profits and tax
benefits are split any
way the stockholders/
shareholders (whether
individuals or other
firms) choose. Tax
return for a LLC is
filed with the taxation
authorities only for the
 purpose of
information, and each
shareholder files own
tax return separately.
Also called company
limited by share.
ABC ANALYSIS An analysis of a range
of items that have
different levels of
significance and
should be handled or
controlled differently.
It is a form of Pareto
analysis in which the
items (such as
activities, customers,
documents, inventory
items, sales territories)
are grouped into three
categories (A, B, and C)
in order of their
estimated importance.
'A' items are very
important, 'B' items
are important, 'C'
items are marginally
important.For
example, the best
customers who yield
highest revenue are
given the 'A' rating,
are usually serviced by
the sales manager, and
receive most
attention. 'B' and 'C'
 customers warrant
progressively less
attention and are
serviced accordingly.
TRANSPARENCY 1. See-through, clear
piece of acetate used
for projecting data,
diagrams, and text
onto a screen with an
overhead projector.2.
Lack of hidden
agendas and
conditions,
accompanied by the
availability of full
information required
for collaboration,
cooperation, and
collective decision
making.3. Minimum
degree of disclosure to
which agreements,
dealings, practices,
and transactions are
open to all for
verification.4. Essential
condition for a free
and open exchange
whereby the rules and
reasons behind
regulatory measures
are fair and clear to all
participants.
PRICE TO EARNINGS Most common
(PE) RATIO measure of how highly
 a firm's share is
valued, it shows the
premium the stock
market puts on the
stock of fast growth
firms as compared
with stock of those
with sluggish growth-
record. Formula:
Market price of each
share ÷ Earnings per
share (EPS).

ZONING Legislative process

that divides privately-
owned urban areas
into different zones
(such as residential,
commercial, industrial)
according to the
specified land use.
Each zone is regulated
as to the density,
location, size, and type
of buildings permitted
therein.
VIRAL MARKETING Explosive growth in
sales or spread of
product information
through customer
contact (referrals). The
term was coined by the
US venture capital firm
Draper, Fisher,
Jurveston.
 CERTIFICATE OF Receipt issued by a
DEPOSIT (CD) depository institution
(such as a bank, credit
union, or a finance or
insurance company) to
a depositor who opens
a certificate account or
time deposit account.
Issued in a negotiable
or non-negotiable
form, it states the (1)
amount deposited, (2)
rate of interest, and (3)
minimum period for
which the deposit
should be maintained
without incurring early
withdrawal penalties.
RETURN ON EQUITY Ratio measuring
(ROE) stockholders'
(shareholders')
profitability, expressed
as a percentage of the
firm's net worth. ROE
indicates a firm's
efficiency in applying
common-stockholders'
(ordinary-
shareholders') money.
Formula: Net
income ÷ Net worth
REQUEST FOR Document used in
PROPOSALS (RFP) sealed-bid procurement
procedures through
which a purchaser
advises the potential
suppliers of (1)
 statement and scope of
work, (2)
specifications, (3)
schedules or timelines,
(4) contract type, (5)
data requirements, (6)
terms and conditions,
(7) description of
goods and/or services
to be procured, (8)
general criteria used in
evaluation procedure,
(9) special contractual
requirements, (10)
technical goals, (11)
instructions for
preparation of
technical,
management, and/or
cost proposals. RFPs
are publicly advertised
and suppliers respond
with a detailed
proposal, not with only
a price quotation. They
provide for
negotiations after
sealed proposals are
opened, and the award
of contract may not
necessarily go to the
lowest bidder.
STANDARD Standardized method
INDUSTRIAL of classifying
CLASSIFICATION (SIC) business/industrial
CODE activity, it represents
principle segments of
 an economy with a
numerical code. In the
US, sic was established
in 1987 and is now
being replaced with the
North American
industry Classification
System (NAICS) that
covers Canadian and
Mexican industries as
well.
PARTICIPATORY NOTES Participatory Notes (or P-
Notes) are offshore
derivative instruments used
by foreign investors who
are interested in betting on
Indian securities but not
keen on registering with the
capital market regulator
SEBI. P-notes are issued by
foreign brokerages
registered with SEBI or
foreign arms of domestic
brokerages to overseas
investors. The broker buys
Indian securities (Shares,
debt or derivatives) and
issues P-notes to the client
for a fee.
ONLINE SHOPPING The act of purchasing
products or services over the
Internet. Online shopping has
grown in popularity over the
years, mainly because people
find it convenient and easy to
bargain shop from the
comfort of their home or
office. One of the most
enticing factor about online
shopping, particularly during a
holiday season, is it alleviates
the need to wait in long lines
or search from store to store
for a particular item.
ONLINE BANKING Computerized service that
allows a bank's customers to
 get online with the bank via
telephone lines to view the
status of their account(s)
and transaction history. It
usually also allows them to
transfer funds, pay bills,
request check books, etc.

FROZEN ACCOUNT Bank account from which no

funds may be withdrawn
because of a legal ruling or
process. A deceased
customer's account is
automatically frozen until its
legal beneficiary or heir is
appointed, declared, or found.
Order by the court can also
freeze an account.

INTEGRATED MARKETING An approach to achieving the

COMMUNICATIONS (IMC) objectives of a marketing
campaign, through a well
coordinated use of different
promotional methods that are
intended to reinforce each
other.As defined by the
American Association of
Advertising Agencies,
integrated marketing
communications " ...
recognizes the value of a
comprehensive plan that
evaluates the strategic roles
of a variety of communication
disciplines advertising, public
relations, personal selling, and
sales promotion and combines
them to provide clarity,
consistency, and maximum
communication impact."
International Bank Account A system of numbering that
Number (IBAN) was created to categorize the
bank accounts across the
globe. European banks
originated the system to make
transactions between
different countries easier to
make, but more countries are
implementing the practice.
RESERVE BANK OF INDIA The central bank of India,
founded in 1935, which
maintains the monetary policy
of its national currency, the
rupee, and the nation's
currency reserves. It is a
member of the Asian Clearing
Union. The primary function
of this establishment is to
regulate the issuing of bank
notes to ensure secure
monetary stability in India.

VIRAL MARKETING Spreading a brand message

using word of mouth, or via e-
mail, originating from the firm
although this is not apparent.
Examples of techniques
include: jokes, film clips,
games and website addresses:
they are suitably interesting to
be forwarded to others.
FREE CASH FLOW FOR THE The ability for a company to
FIRM (FCFF) handle operating expenses
after cash disbursements
and investment payments
have been made.
EFFICIENT MARKET Early 1990's capital market
HYPOTHESIS theory that it is impossible to
earn abnormal capital gains or
profit on the basis of the
market information. It states
that the price of a financial
instrument (bond, share, etc.)
reflects all the information
currently available and, if the
price is rumored to increase in
the near future, investors or
traders will buy the
instrument now thus driving
its price up and negating the
anticipated increase. And that
it is impossible to predict
movement of prices with any
degree of certainty because
prices follow a random walk
and therefore, on average, no
one is likely to beat the
market. The critics of this
theory point out that only a
few individuals are as rational
 as it presumes them to be,
and that information
gathering is expensive and
tedious enough to make it
unlikely to be reflected in the
prices.
GOLDEN PARACHUTE Huge bonus and/or a lucrative
contract offered to a director
or key employee to
compensate for loss of office
after a takeover or merger. It
may also include a
stockholding (shareholding) in
the new setup.

FORWARD CONTRACT Binding contract under which

a commodity or financial
instrument is bought or sold
at the market price (spot
price) as on today (date of
making the contract), but is to
be delivered on a stated
future (forward) date in
settlement of the contract. In
contrast, a futures contract is
only a formal promise. It is
also called cash contract, cash
forward contract, or cash
forward sale.

INTER BANK TRANSFER Inter Bank Transfer enables

electronic transfer of funds
from the account of the
remitter in one Bank to the
account of the beneficiary
maintained with any other
Bank branch. There are two
systems of Inter Bank Transfer
- RTGS and NEFT. Both these
systems are maintained by
Reserve Bank of India.

RTGS (REAL TIME GROSS This is a system where the

SETTLEMENT) processing of funds transfer
instructions takes place at the
time they are received real
time). Also the settlement of
funds transfer instructions
occurs individually on an
instruction by instruction basis
(gross settlement). RTGS is the
 fastest possible interbank
money transfer facility
available through secure
banking channels in India. The
minimum amount of RTGS is
Rs 2 Lakhs and the maximum
amount is Rs 5 Lakhs.
NEFT (NATIONAL This system of fund transfer
ELECTRONIC FUND operates on a Deferred Net
TRANSFER) Settlement basis. Fund
transfer transactions are
settled in batches as opposed
to the continuous, individual
settlement in RTGS. Presently,
NEFT operates in hourly
batches from 8 am to 7 pm on
week days and 8 am to 1 pm
on Saturdays. The minimum
amount of NEFT can be any
amount but the maximum
amount is Rs 5 Lakhs.
DISHONOR OF A CHEQUE According to Section 138 of
AND PENALTY the Negotiable Instruments
Act, 1881 where any cheque
drawn by a person on an
account maintained by him
with a bank for payment of
any amount of money to
another person for
discharging any debt or
liability, is dishonored by the
bank on grounds of
insufficiency of funds, then
such person shall be deemed
to have committed an offence
and shall be criminally liable.
INFLATION A sustained, rapid increase in
prices, as measured by some
broad index (such as
Consumer Price Index) over
months or years, and mirrored
in the correspondingly
decreasing purchasing power
of the currency. It has its
worst effect on the fixed-wage
earners, and is a disincentive
to save.There is no one single,
universally accepted cause of
inflation, and the modern
economic theory describes
three types of inflation: (1)
 Cost-push inflation is due to
wage increases that cause
businesses to raise prices to
cover higher labor costs,
which leads to demand for
still higher wages (the wage-
price spiral), (2) Demand-pull
inflation results from
increasing consumer demand
financed by easier availability
of credit; (3) Monetary
inflation caused by the
expansion in money supply
(due to printing of more
money by a government to
cover its deficits).
SLR OR STATUTORY Besides the CRR, banks are
LIQUIDITY RATIO required to invest a portion of
their deposits in government
securities as a part of their
statutory liquidity ratio (SLR)
requirements. It restricts the
bank’s leverage in pumping
more money into the
economy.
IFS Code (Indian Finance The Indian Financial System
System Code) Code, better known as the
IFSC code, is an alphanumeric
code. This code innovatively
identifies a bank branch that
participates in two of the
major electronic funds
settlement in the country,
RTGS and NEFT. The IFS Code
is an 11-character code with
the first four characters being
alphabetic representing the
bank name, the fifth character
being 0 (zero) and reserved
for future use and the last six
characters are usually
numeric, but can also be
alphabetic representing the
branch of the bank.
EITHER OR SURVIVOR In case of joint accounts when
the option exercised by the
joint account holders is
“Either or Survivor”, the
balance in the bank
automatically gets transferred
to the survivor or to any one
 of them without the need for
all the joint holders to sign the
document. In other words,
any one of the joint holders
can get the balance in the
account without the necessity
of ratification by the other
joint holders. This is most
prevalent when the joint
account holders and husband
– wife, father – son etc.
LETTER OF CREDIT A letter of credit is a letter
issued by a bank to another
bank (especially one in a
different country) to serve as
a guarantee for payment on
behalf of the person specified
therein on the fulfillment of
certain conditions. Letters of
credits are a common banking
facility in international trade
and enable the importer to
import goods without having
to pay cash upfront but only
on receipt of the goods in
India. The title to the goods
are sent by the foreign
supplier to the bank which has
issued the Letter of Credit or
LC as it is called, and when the
importer makes the payment
to the bank, the title deeds
are handed over to him and
money is remitted to the
foreign supplier thereby
settling the transaction. The
bank charges an LC opening
fee from the importer. This is
a route by which the risk of
both the importer and the
exporter is minimized.
CALL MONEY RATE This is the interest rate on a
type of short-term loan that
banks give to brokers who in
turn lend the money to
investors to fund margin
accounts. For both brokers
and investors, this type of
loan does not have a set
repayment schedule and must
be repaid on demand.
REPO (REPURCHASE) RATE Repo rate is the rate at which
banks borrow funds from the
RBI to meet the gap between
the demands they are facing
for money (loans) and how
much they have on hand to
lend. If the RBI wants to make
it more expensive for the
banks to borrow money, it
increases the repo rate;
similarly, if it wants to make it
cheaper for banks to borrow
money, it reduces the repo
rate.

REVERSE REPO RATE The rate at which RBI borrows

money from the banks (or
banks lend money to the RBI)
is termed the reverse repo
rate. The RBI uses this tool
when it feels there is too
much money floating in the
banking system and needs to
tighten the liquidity of
banks.If the reverse repo rate
is increased, it means the RBI
will borrow money from the
bank and offer them a
lucrative rate of interest. As a
result, banks would prefer to
keep their money with the RBI
(which is absolutely risk free)
instead of lending it out (this
option comes with a certain
amount of risk).
Consequently, banks would
have lesser funds to lend to
their customers. This helps
stem the flow of excess
money into the economy.
Reverse repo rate signifies the
rate at which the central bank
absorbs liquidity from the
banks, while repo signifies the
rate at which liquidity is
injected.

PRODUCTION POSSIBILITY A graphical representation of

CURVE the alternative combinations
 of the amounts of two goods
or services that an economy
can produce by transferring
resources from one good or
service to the other. This
curve helps in determining
what quantity of a
nonessential good or a service
an economy can afford to
produce without jeopardizing
the required production of an
essential good or service. It is
also called transformation
curve.
CONSUMER SURPLUS The difference between the
price the consumer is willing
to pay and the price they
actually pay. It measures the
utility the consumer receives
but does not pay for .For e.g. I
am willing to pay 10 Rs for ice-
cream but got it at 7 Rs
because of any reason the
difference of Rs.3 is known as
consumer surplus.
EQUILIBRIUM State of stable conditions in
which all significant factors
remain more or less constant
over a period, and there is
little or no inherent tendency
for change. For example, a
market is said to be in
equilibrium if the amount of
goods that buyers wish to buy
at the current price is
matched by the amount the
sellers want to sell at that
price. It is also called steady
state.