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64 Business Terms to have on the Tip of Your Tongue

They are some of the most useful terms to store in your mental management dictionary


To write off an expenditure by spreading the cost out over time

Balanced Scorecard

The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.


Comparing the practices within your company to the very best practices in some of the very best companies inside or outside your industry.

Bottom Line

Derived from the bottom-most figure on a profit and loss statement, it refers to an organization’s most important measure of success: profit, service, productivity, expense reduction, quality, or some other.

Break Even Quantity

The number of units that must be sold in order to cover the costs of producing those units.

Cash Cow

Any highly profitable product or service.

Cash Flow

The movement of money into and out of a company; not the same as profit and loss.


Maintaining power and decision making at the headquarters or the top management levels of an organization. Highly centralized companies often have several layers of management between the CEO and front-line employees. See decentralization.

Cost-Benefit Analysis

A method for analyzing alternative courses of action by comparing their costs with their benefits.

Cost Center

A department or function within a company that consumes revenue. See profit center.

Corporate Culture

The values, beliefs, norms, and rituals characterizing practices within a given corporation.

Current Assets

The assets that will be used up, sold, or converted to cash within one year.

Current Liabilities

The debts that must be paid within one year. 14. Decentralization: Decentralized organizations have relatively few layers of management between the CEO and front-line employees and are often called “fiat” organizations.


The process of using up or receiving the benefits of a durable asset, which must be shown on the balance sheet. 16. DIRFT: “Do it right the first time.” One of the essential philosophies of total quality management.

Distributed Processing

System in which computers store and manipulate data at multiple locations. The main purpose is to keep the computing function close to the end user.

Focus Group

A small group of managers, employees, customers, or shareholders, brought together for the purpose of revealing their insights concerning a company-related problem, challenge, or opportunity.

Fixed Costs

Costs incurred no matter how many units of a product are manufactured or sold or how many customers are served.

Inventory Turnover

Number of times a firm sells and replaces its merchandise inventory in one year. Called “turn” for short.

Just-in-Time (JIT)

An inventory system designed to minimize inventory control costs. Based on the principle that supplies arrive just before they are needed and goods are produced and delivered just in time to be sold.

Learning Curve

The amount of time its takes to become proficient at a given task.


Borrowing funds so that the return on the borrowed dollars is higher than the interest paid to the lenders for those dollars.

Line vs. Staff

Line employees are directly involved in producing the product or delivering the service, staff employees provide support to line employees ing the personnel department)

Liquidity Ratio

Calculated by dividing the value of current assets by the value of current liabilities. The greater this number exceeds one, the better.

Long Term Capital

Funding invested in fixed assets that determine the future direction of the company.

Loss Leader

An item sold at cost or below cost to attract customers.

MBO (Management by Objectives)

A management philosophy based on the nation that employees should be evaluated more in response to their results than on how they attain those results.

MBWA (Managing by Wandering Around)

Getting out of your office to encounter employees where they work.

Marketing Mix

The combination of product or service, price, distribution, and promotion used to reach a given market segment.

MIS (Management Information System)

Any system that gives decision makers access to information (typically involving computers).

Mission Statement

A written document specifying the purposes of the organization, its reason for existence.

Net Income

The difference between the inflow of revenue and the outflow of Expenses

Open Door Policy

A practice enabling and encouraging employees to communicate to upper management on any issues of concern to them.

Operating Expenses

Costs that don’t result directly from a firm’s purchase or manufacture of the products it sells


Hiring temporary employees or outside contractors to perform tasks previously performed by permanent, full-time employees.


The costs of running a business that go on regardless of level of activity and that do not contribute directly to productivity (eg, rent, property taxes, insurance, utilities, salaries of those in staff positions).

Pareto’s Law (180/20 Rule)

The majority of outcomes stem from a significant minority of sources.

Parkinson’s Law

Work expands to meet the time allotted to it. In other words, tell people they have five days to complete a project and it will take them finished it in four had that been their goal.


Development of an image for a product or service that differentiates it from its competition

Product Life Cycle

The theory that all products and services pass through four stages: Introduction, growth, maturity and decline.

Profit Center

A department within a company that generates revenue.


A person appointed to represent and vote for a stack holder at a stockholders meeting.

Physical Distribution

Those activities required to move products from the manufacture to the consumer.

Pygmalion Effect

High expectation for another’s performance tend to result in high performance; low expectations encourage low performance

Quality Circle

A group of employees who meet on company time to discuss strategies for improving company performance.

Real Time

Pertaining to processes that keep pace with an actual occurrence.


Process of designing organizations so that they focus on processes rather than function.

Retained Earnings

Portion of profits not distributed to stock-holders.

ROE (Return on Equity)

Calculated by dividing profits by the investments made to generate those profits.

Self-Directed Team

Group of employees assigned to a give function or project who complete the task with a minimum of day-to-day supervision. The team is given its goals by upper management and is granted a great deal of discretion in how it will achieve those goals.

SPC (Statistical Process Control)

Use of statistical analysis to assure that manufacturing or delivery doesn’t deviate from desired levels of quality.

Strategic Plan

Strategic plans are often renewed yearly by the senior management team of the organization.

Stock Option

Legal contract that gives the holder the right to buy or sell a given stock at a given price within a stated period of time.

SBU (Strategic Business Unit)

Separate business units within one organization run as if they were independent companies.


Combination of telephone and computer technology for a common communications system.

360-Degree Feedback

Managers receive feedback on a survey of their leadership abilities from their bosses, their peers, their employees, and themselves. Results are often used as input to a plan for professional development rather than for evaluation purposes.


Time-sharing is typically found in mainframe and minicomputer environment, permitting the computing resources of these systems to be shared.

TOM (Total Quality Management)

TOM is driven by a belief in the eternal opportunity for continuous improvement in the products and processes of an organization.

Variable Costs

Expenses that fluctuate depending on the number of units produced.

Virtual Corporation

Conducting business with a minimum of full-time employees through a combination of outsourcing and computer networking.

Vision Statement

A document of the aspirations and desirable future state of an organization, communicated to all those people, who are expected to take a part in its realization. It includes a statement of the values and beliefs that will guide the organization.

288 Zero Base Budgeting

A method of budgeting that requires managers of departments or programs to justify them and their expenses every year.

Zero Defects

Production standards based on total conformity to quantifiable levels of performance.

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