Solutions And Mannuals For Business Administration

Thursday, December 13, 2018

Glossary of Financial Management

Glossary of Financial Management

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A

Adjusted Gross Income (AGI): An interim calculation in the computation of income tax liability. It is computed by subtracting certain allowable adjustments from gross income.
Administrator: A person appointed by the court to settle an estate when there is no will.
After-Tax Return: The return from an investment after the effects of taxes have been taken into account.
Aggressive Growth Fund: A mutual fund whose primary investment objective is substantial capital gains. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Investments seeking to achieve higher returns also involve a higher degree of risk. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Alternative Minimum Tax: A method of calculating income tax that disallows certain deductions, credits, and exclusions. This was intended to ensure that individuals, trusts, and estates that benefit from tax preferences do not escape all federal income tax liability. People must calculate their taxes both ways and pay the greater of the two.
Annuity: An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Annuity contracts are usually purchased from banks, credit unions, brokerage firms, or insurance companies. Any guarantees are contingent on the claims-paying ability of the issuing company.
Asset: Anything owned that has monetary value.
Asset Allocation: The process of repositioning assets in a portfolio to maximize potential return for a particular level of risk. This process is usually done using the historical performance of the asset classes within sophisticated mathematical models. Asset allocation does not guarantee against loss; it is a method used to help manage investment risk.
Asset Class: A category of investments with similar characteristics.
Audit: The examination of the accounting and financial documents of a firm by an objective professional. The audit is done to determine the records' accuracy, consistency, and conformity to legal and accounting principles.
B
Balanced Mutual Fund: A mutual fund whose objective is a balance of stocks and bonds. Balanced funds tend to be less volatile than stock-only funds. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Bear Market: When the stock market appears to be declining overall, it is said to be a bear market.
Beneficiary: A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner. A beneficiary can be an individual, company, organization, and so on.
Blue Chip Stock: The common stock of a company with a long history of profitability and consistent dividend payments.
Bond: A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity. Bonds are usually issued in multiples of $1,000.
Book Value: The net value of a company's assets, less its liabilities and the liquidation price of its preferred issues. The net asset value divided by the number of shares of common stock outstanding equals the book value per share, which may be higher or lower than the stock's market value.
Bull Market: When the stock market appears to be advancing overall, it is said to be a bull market.
Buy-Sell Agreement: A buy-sell agreement is an arrangement between two or more parties that obligates one party to buy the business and another party to sell the business upon the death, disability, or retirement of one of the owners.
C
Capital Gain or Loss: The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss.
Cash Alternatives: Short-term investments, such as U.S. Treasury securities, certificates of deposit, and money market fund shares, that can be readily converted into cash.
Cash Surrender Value: The amount that an insurance policyholder is entitled to receive when he or she discontinues coverage. Policyholders are usually able to borrow against the surrender value of a policy from the insurance company. Policy loans that are not repaid will reduce the policy's death benefit and cash value by the amount of any outstanding loan balance plus interest.
CERTIFIED FINANCIAL PLANNER^® Practitioner: A credential granted by the Certified Financial Planner Board of Standards, Inc. (Denver, CO) to individuals who complete a comprehensive curriculum in financial planning and ethics. CFP^®, CERTIFIED FINANCIAL PLANNER^® and federally registered CFP (with flame logo)^® are certification marks owned by the Certified Financial Planner Board of Standards. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification.
Certified Public Accountant (CPA): A professional license granted by a state board of accountancy to an individual who has passed the Uniform CPA Examination (administered by the American Institute of Certified Public Accountants) and has fulfilled that state's educational and professional experience requirements for certification.
Charitable Lead Trust: A trust established for the benefit of a charitable organization. A grantor who places money, securities, property, and other assets in a charitable remainder trust can designate an income beneficiary, even if it is the grantor herself, to receive payment of a specified amount (at least annually) from the trust. You may also qualify for an income tax deduction on the estimated present value of the remainder interest that will eventually go to charity.
Charitable Remainder Trust: A trust established for the benefit of a charitable organization. A grantor who places money, securities, property, and other assets in a charitable remainder trust can designate an income beneficiary, even if it is the grantor herself, to receive payment of a specified amount (at least annually) from the trust. You may also qualify for an income tax deduction on the estimated present value of the remainder interest that will eventually go to charity.
Chartered Financial Consultant (ChFC): A professional financial planning designation granted by The American College (Bryn Mawr, PA) to individuals who complete a comprehensive curriculum in financial planning. Prerequisites include passing a series of written examinations, meeting specified experience requirements and maintaining ethical standards. The curriculum encompasses wealth accumulation, risk management, income taxation, planning for retirement needs, investments, estate and succession planning.
Chartered Life Underwriter (CLU): A professional designation granted by The American College to individuals who complete a comprehensive curriculum focused primarily on risk management. Prerequisites include passing a series of written examinations, meeting specified experience requirements, and maintaining ethical standards. The curriculum encompasses insurance and financial planning, income taxation, individual life insurance, life insurance law, estate and succession planning, and planning for business owners and professionals.
COBRA: The Consolidated Omnibus Budget Reconciliation Act is a federal law requiring employers with more than 20 employees to offer terminated or retired employees the opportunity to continue their health insurance coverage for 18 months at the employee's expense. Coverage may be extended to the employee's dependents for 36 months in the case of divorce or death of the employee.
Coinsurance or Co-Payment: The amount an insured person must pay for a covered medical and/or dental expense if his or her insurance doesn't provide 100 percent coverage.
Commodities: The generic term for goods such as grains, foodstuffs, livestock, oils, and metals which are traded on national exchanges. These exchanges deal in both "spot" trading (for current delivery) and "futures" trading (for delivery in future months).
Common Stock: A unit of ownership in a corporation. Common stockholders participate in the corporation's profits or losses by receiving dividends and by capital gains or losses in the stock's share price.
Community Property: State laws vary, but generally all property acquired during a marriage -- excluding property one spouse receives from a will, inheritance, or gift -- is considered community property, and each partner is entitled to one half. This includes debt accumulated. There are currently nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Compound Interest: Interest that is computed on the principal and on the accrued interest. Compound interest may be computed continuously, daily, monthly, quarterly, semiannually, or annually.
Consumer Price Index: The U.S. Department of Labor's main indicator of inflation. The Consumer Price Index is calculated each month from the cost of some 400 retail items in urban areas throughout the United States.
D
Deduction: An amount that can be subtracted from gross income, from a gross estate, or from a gift, thereby lowering the amount on which tax is assessed.
Defined Benefit Plan: A qualified retirement plan under which a retiring employee will receive a guaranteed retirement fund, usually payable in installments. Annual contributions may be made to the plan by the employer at the level needed to fund the benefit. The annual contributions are limited to a specified amount, indexed to inflation.
Defined Contribution Plan: A retirement plan under which the annual contributions made by the employer or employee are generally stated as a fixed percentage of the employee's compensation or company profits. The amount of retirement benefits is not guaranteed; rather, it depends upon the investment performance of the employee's account.
Diversification: Investing in different companies, industries, or asset classes in an attempt to limit overall risk. Of course, diversification does not guarantee against loss; it is a method used to help manage investment risk. Diversification may also mean the participation of a large corporation in a wide range of business activities.
Dividend: A pro rata portion of earnings usually distributed in cash by a corporation to its stockholders. In preferred stock, dividends are usually fixed; with common shares, dividends may vary with the fortunes of the company.
Dollar Cost Averaging: A system of investing in which the investor buys a fixed dollar amount of securities at regular intervals. The investor thus buys more shares when the price is low and fewer shares when the price rises, and the average cost per share is lower than the average price per share. Dollar cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of fluctuating prices. You should consider your financial ability to continue making purchases during periods of low and high price levels. However, this can be an effective way for investors to accumulate shares to help meet long-term goals.
Durable Power of Attorney for Finances (DPOA): A durable attorney for finances (DPOA) enables you to authorize someone to act on your behalf in financial and legal matters. Your agent could pay everyday expenses, watch over your investments, and file taxes, among other tasks. A DPOA may become effective immediately or when a triggering event occurs, such as a doctor certifying that you are physically or mentally incapacitated.
Durable Power of Attorney for Health Care (HPOA): A durable power of attorney for health care (HPOA), also known as a health-care proxy, enables you to appoint a representative to make medical decisions for you if you become unable to do so yourself. You can appoint anyone to be your agent as long as the individual is of legal age (usually 18 or older), and you can decide how much power your representative will have. An HPOA should be HIPAA compliant so your representative can access your private medical information.
E
Efficient Frontier: A statistical result from the analysis of the risk and return for a given set of assets that indicates the balance of assets that may, under certain assumptions, achieve the best return for a given level of risk.
Employer-Sponsored Retirement Plan: A tax-favored retirement plan that is sponsored by an employer. Among the more common employer-sponsored retirement plans are 401(k) plans, 403(b) plans, simplified employee pension plans, and profit-sharing plans.
Enrolled Agent (EA): An enrolled agent is a person who has passed the appropriate examination in order to represent taxpayers before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants, are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.
Equity: The value of a person's ownership in real property or securities; the market value of a property or business, less all claims and liens against it.
ERISA: The Employee Retirement Income Security Act is a federal law covering all aspects of employee retirement plans. If employers provide plans, they must be adequately funded and provide for vesting, survivor's rights, and disclosures.
ESOP (employee stock ownership plan): A defined contribution retirement plan in which company contributions must be invested primarily in qualifying employer securities.
Estate Conservation: Activities coordinated to provide for the orderly and cost-effective distribution of an individual's assets at the time of his or her death. Estate conservation often includes the use of wills and trusts.
Estate Tax: Upon the death of a decedent, federal and state governments impose taxes on the value of the estate left to others (with limitations).
Executive Bonus Plan: The employer pays for a benefit that is owned by the executive. The bonus could take the form of cash, automobiles, life insurance, or other items of value to the executive.
Executor: A person named by the probate courts or the will to carry out the directions and requests of the decedent.
F
Federal Income Tax Bracket: The range of taxable income that is taxable at a certain rate. Currently, there are seven federal income tax brackets: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent.
Fixed Income: Income from investments, such as CDs, Social Security benefits, pension benefits, some annuities, or most bonds, that is the same every month.
401(k) Plan: A defined contribution plan that may be established by a company for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 401(k) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59½.
403(b) Plan: A defined contribution plan that may be established by a nonprofit organization or school for retirement. Employees may allocate a portion of their salaries into this plan, and contributions are excluded from their income for tax purposes (with limitations). Contributions and earnings will compound tax deferred. Withdrawals from a 403(b) plan are taxed as ordinary income, and may be subject to an additional 10 percent federal tax penalty if withdrawn prior to age 59½.
Fundamental Analysis: An approach to the stock market in which specific factors - such as the price-to-earnings ratio, yield, or return on equity - are used to determine what stock may be favorable for investment.
G
Gift Taxes: A federal tax levied on the transfer of property as a gift. This tax is paid by the donor. Currently, the first $14,000 a year from a donor to each recipient is exempt from tax. Most states also impose a gift tax. The gift tax exemption is indexed for inflation.
H
Holographic Will: A will entirely in the handwriting of the testator. Without witnesses, holographic wills are valid and enforceable only in some states.
I
Individual Retirement Account (IRA): Contributions to a traditional IRA are deductible from earned income in the calculation of federal and state income taxes if the taxpayer meets certain requirements. The earnings accumulate tax deferred until withdrawn, and then the entire withdrawal is taxed as ordinary income. Individuals not eligible to make deductible contributions may make nondeductible contributions, the earnings on which would be tax deferred.
Inflation: An increase in the price of products and services over time. The government's main measure of inflation is the Consumer Price Index.
Intestate: A person who dies without leaving a valid will. State law then determines who inherits the property or serves as guardian for any minor children.
Investment Category: A broad class of assets with similar characteristics. The five investment categories include cash alternatives, fixed principal, equity, debt, and tangibles.
Irrevocable Trust: A trust that may not be modified or terminated by the trustor after its creation.
J
Joint and Survivor Annuity: Most pension plans must offer this form of pension plan payout that pays over the life of the retiree and his or her spouse after the retiree dies. The retiree and his or her spouse must specifically choose not to accept this payment form.
Joint Tenancy: Co-ownership of property by two or more people in which the survivor(s) automatically assumes ownership of a decedent's interest.
Jointly Held Property: Property owned by two or more persons under joint tenancy, tenancy in common, or, in some states, community property.
L
Liability: Any claim against the assets of a person or corporation: accounts payable, wages, and salaries payable, dividends declared payable, accrued taxes payable, and fixed or long-term obligations such as mortgages, debentures, and bank loans.
Limited Partnership: Limited partnerships pool the money of investors to develop or purchase income-producing properties. When the partnership subsequently receives income from these properties, it passes the income on to its investors as dividend payments. Limited Partnerships are subject to special risks such as illiquidity and those risks inherent in the underlying investments. There are no assurances that the stated investment objectives will be reached. At redemption, the investor may receive back less than the original investment. Individuals must meet specific suitability standards. These standards, along with the risks and other information concerning the partnership, are set forth in the prospectus, which can be obtained from your financial professional. Please consider the investment objectives, risks, charges, and expenses carefully before investing. Be sure to read the prospectus carefully before deciding whether to invest.
Liquidity: How quickly and easily an asset or security can be converted into cash.
Living Trust: A trust created by a person during his or her lifetime.
Living Will: A living will, which is another type of advance medical directive, can be used to outline which medical procedures you want to be used to prolong your life, typically in the event of a terminal illness. It generally does not become effective until you become incapacitated. Even if your state does not authorize a living will, you may still want one as a way to document your wishes.
Lump-Sum Distribution: The disbursement of the entire value of an employer-sponsored retirement plan, pension plan, annuity, or similar account to the account owner or beneficiary. Lump-sum distributions may be rolled over into another tax-deferred account.
M
Marginal Tax Rate: The amount of tax paid on an additional dollar of income. As income rises, so does the tax rate.
Marital Deduction: A provision of the tax codes that allows all assets of a deceased spouse to pass to the surviving spouse free of estate taxes. This provision is also referred to as the "unlimited marital deduction." The marital deduction may not apply in the case of noncitizens.
Market Capitalization: Market Capitalization, or market cap, is the total value of the shares outstanding of a publicly traded company. It is calculated by multiplying a company’s number of shares outstanding by the current market price per share.
Money Market Fund: A mutual fund that specializes in investing in short-term securities and tries to maintain a constant net asset value of $1. Money-market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money when investing in a money market fund.
Municipal Bond: A debt security issued by municipalities. The income from municipal bonds is usually exempt from federal income taxes. It may also be exempt from state income taxes in the state in which the municipal bond is issued. Some municipal bond interest could be subject to the federal alternative minimum tax. If you sell a municipal bond at a profit, you could incur capital gains taxes. The principal value of bonds fluctuates with market conditions. Bonds sold prior to maturity may be worth more or less than their original cost.
Municipal Bond Fund: A mutual fund that specializes in investing in municipal bonds. Bond funds are subject to the same inflation, interest-rate, and credit risks associated with their underlying bonds. As interest rates rise, bond prices typically fall, which can adversely affect a bond fund's performance. The principal value of bond funds fluctuates with changes in market conditions. Shares, when sold or redeemed, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Mutual Fund: A collection of stocks, bonds, or other securities purchased and managed by an investment company with funds from a group of investors. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares when sold, or redeemed, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
N
Net Asset Value: The per-share value of a mutual fund's current holdings. The net asset value is calculated by dividing the net market value of the fund's assets by the number of outstanding shares.
P
Pooled Income Fund: A trust created by a charitable organization that combines the contributions of several donors and distributes income to those donors based on the earnings of the trust. The trust is managed by the charitable organization, and contributions are partially deductible for income tax purposes.
Portfolio: All the investments held by an individual or a mutual fund.
Preferred Stock: A class of stock with claim to a company's earnings, before payment can be made on the common stock, and that is usually entitled to priority over common stock if the company liquidates. Generally, preferred stocks pay dividends at a fixed rate.
Prenuptial Agreement: A legal agreement arranged before marriage stating who owns property acquired before marriage and during marriage and how property will be divided in the event of divorce. ERISA benefits are not affected by prenuptial agreements.
Price/Earnings Ratio (P/E Ratio): The market price of a stock divided by the company's annual earnings per share. Because the P/E ratio is a widely regarded yardstick for investors, it often appears with stock price quotations.
Principal: In a security, the principal is the amount of money that is invested, excluding earnings. In a debt instrument such as a bond, it is the face amount.
Probate: The court-supervised process in which a decedent's estate is settled and distributed.
Profit-Sharing Plan: An agreement under which employees share in the profits of their employer. The company makes annual contributions to the employees' accounts. These funds usually accumulate tax deferred until the employee retires or leaves the company.
Prospectus: A document provided by investment companies to prospective investors. The prospectus gives information needed by investors to make informed decisions prior to investing in a specific mutual fund, variable annuity, or variable universal life insurance. The prospectus includes information on the minimum investment amount, the investment company's objectives, past performance, risk level, sales charges, management fees, and any other expense information about the investment company, as well as a description of the services provided to investors in the investment company.
Q
Qualified Domestic Relations Order (QDRO): At the time of divorce, this order would be issued by a state domestic relations court and would require that an employee's ERISA retirement plan accrued benefits be divided between the employee and the spouse.
Qualified Retirement Plan: A pension, profit-sharing, or qualified savings plan that is established by an employer for the benefit of the employees. These plans must be established in conformity with IRS rules. Contributions accumulate tax deferred until withdrawn and are deductible to the employer as a current business expense.
R
Revocable Trust: A trust in which the creator reserves the right to modify or terminate the trust.
Risk: The chance that an investor will lose all or part of an investment.
Risk-Averse: Refers to the assumption that rational investors will choose the security with the least risk if they can maintain the same return. As the level of risk goes up, so must the expected return on the investment.
Rollover: A method by which an individual can transfer the assets from one retirement program to another without the recognition of income for tax purposes. The requirements for a rollover depend on the type of program from which the distribution is made and the type of program receiving the distribution.
Roth IRA: A nondeductible IRA that allows tax-free withdrawals when certain conditions are met. Income and contribution limits apply.
S
Security: Evidence of an investment, either in direct ownership (as with stocks), creditorship (as with bonds), or indirect ownership (as with options).
Self-Employed Retirement Plans: In the past, the terms “Keogh plan” and “H.R. 10 plan” were used to distinguish a retirement plan established by a self-employed individual from a plan established by a corporation or other entity. However, self-employed retirement plans are now generally referred to by the name of the particular type of plan used, such as SEP IRA, SIMPLE 401(k), or self-employed 401(k). The contribution amount is indexed annually for inflation.
Simplified Employee Pension Plan (SEP): A type of plan under which the employer contributes to an employee's IRA. Contributions may be made up to a certain limit and are immediately vested.
Single-Life Annuity: An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. Generally used as a supplement to retirement income and pays over the life of one individual, usually the retiree, with no rights of payment to any survivor.
Split-Dollar Plan: An arrangement under which two parties (usually a corporation and employee) share the cost of a life insurance policy and split the proceeds.
Spousal IRA: An IRA designed for a couple when one spouse has no earned income. The maximum combined contribution that can be made each year to an IRA and a spousal IRA currently is $11,000 or 100 percent of earned income, whichever is less, for the 2015 tax year. The total may be split between the two IRAs as the couple wishes, provided that the contribution to either IRA does not exceed the maximum annual contribution limit ($5,500 for 2015).
T
Tax Credit: Tax credits, the most appealing type of tax deductions, are subtracted directly, dollar for dollar, from your income tax bill.
Tax Deferred: Interest, dividends, or capital gains that grow untaxed in certain accounts or plans until they are withdrawn.
Tax-Exempt Bonds: Under certain conditions, the interest from bonds issued by states, cities, and certain other government agencies is exempt from federal income taxes. In many states, the interest from tax-exempt bonds will also be exempt from state and local income taxes. If you sell a tax-exempt bond at a profit, you could incur capital gains taxes. Some tax-exempt bond interest could be subject to the federal alternative minimum tax. The principal value of bonds fluctuates with market conditions. Bonds sold prior to maturity may be worth more or less than their original cost.
Taxable Income: The amount of income used to compute tax liability. It is determined by subtracting adjustments, itemized deductions or the standard deduction, and personal exemptions from gross income.
Technical Analysis: An approach to investing in stocks in which a stock's past performance is mapped onto charts. These charts are examined to find familiar patterns to use as an indicator of the stock's future performance.
Tenancy in Common: A form of co-ownership. Upon the death of a co-owner, his or her interest passes to the designated beneficiaries and not to the surviving owner or owners.
Term Insurance: Term life insurance provides a death benefit if the insured dies. Term insurance does not accumulate cash value and ends after a certain number of years or at a certain age.
Testamentary Trust: A trust established by a will that takes effect upon death.
Testator: One who has made a will or who dies having left a will.
Total Return: The total of all earnings from a given investment, including dividends, interest, and any capital gain.
Trust: A legal entity created by an individual in which one person or institution holds the right to manage property or assets for the benefit of someone else. Types of trusts include: Testamentary Trust – A trust established by a will that takes effect upon death; Living Trust – A trust created by a person during his or her lifetime; Revocable Trust – A trust in which the creator reserves the right to modify or terminate the trust; Irrevocable Trust – A trust that may not be modified or terminated by the trustor after its creation
Trustee: An individual or institution appointed to administer a trust for its beneficiaries.
Trustee-to-Trustee Transfer: A method of transferring retirement plan assets from one employer's plan to another employer plan or to an IRA. One benefit of this method is that no federal income tax will be withheld by the trustee of the first plan.
U
Universal Life Insurance: A type of life insurance that combines a death benefit with a savings element that accumulates tax deferred at current interest rates, subject to change, but with a guaranteed minimum. Under a universal life insurance policy, the policyholder can increase or decrease his or her coverage, with limitations, without purchasing a new policy.Universal life is also referred to as "flexible premium" life insurance. Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Policy loans or withdrawals will reduce the policy's cash value and death benefit. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than your basis in the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
V
Variable Universal Life Insurance: A type of life insurance that combines a death benefit with an investment element that accumulates tax deferred. The account value can be allocated into a variety of investment sub accounts. The investment return and principal value of the variable subaccounts will fluctuate; thus, the policy's account value, and possibly the death benefit, will be determined by the performance of the chosen subaccounts and is not guaranteed. Withdrawals may be subject to surrender charges and are taxable if the account owner withdraws more than his or her basis in the policy. Policy loans or withdrawals will reduce the policy's cash value and death benefit and may require additional premium payments to keep the policy in force. There may also be additional fees and charges associated with a VUL policy. Any guarantees are contingent on the claims-paying ability of the issuing company. Variable universal life is sold by prospectus. Please consider the investment objectives, risks, charges, expenses, and your need for death-benefit coverage carefully before investing. The prospectuses, which contains this and other information about the variable universal life policy and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Volatility: The range of price swings of a security or market over time.
W
Welfare Benefit Plan: An employee benefit plan that provides such benefits as medical, sickness, accident, disability, death, or unemployment benefits.
Whole Life Insurance: A type of life insurance that offers a death benefit and also accumulates cash value tax deferred at fixed interest rates. Whole life insurance policies generally have a fixed annual premium that does not rise over the duration of the policy. Whole life insurance is also referred to as "ordinary" or "straight" life insurance. Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Policy loans or withdrawals will reduce the policy's cash value and death benefit. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than your basis in the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
Will: A legal document that declares a person's wishes concerning the disposition of property, the guardianship of his or her children, and the administration of the estate after his or her death.
Y
Yield: Generally, the yield is the amount of current income provided by an investment. For stocks, the yield is calculated by dividing the total of the annual dividends by the current price. For bonds, the yield is calculated by dividing the annual interest by the current price. The yield is distinguished from the return, which includes price appreciation or depreciation.
Z
Zero-Coupon Bond: This type of bond makes no periodic interest payments but instead is sold at a steep discount from its face value. Because these bonds do not pay interest until maturity, their prices tend to be more volatile than bonds that pay interest regularly. Interest income is subject to ordinary income tax each year, even though the investor does not receive any income payments. Bonds sold prior to maturity may be worth more or less than their original cost.

Saturday, December 26, 2015

Glossary Principles of Management

Glossary Principles of Management

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A

Administrative management is the use of institutions and order rather than relying on personal qualities to get things done.

The administrative model of decision making describes how people make decisions in uncertain, ambiguous situations.

Ambiguity is when people are uncertain about their goals and how best to achieve them.

Applied ethics is the application of moral philosophy to actual problems, including those in management.

Assessment centres are multi-exercise programmes designed to identify the recruitment and promotion potential of personnel.

Assets are the property, plant and equipment, vehicles, stocks of goods for trading, money owed by customers and cash: in other words, the physical resources of the business.

Authority refers to the rights inherent in a position to give instructions and to expect others to follow those instructions.

The Balanced Scorecard is a performance measure that looks at four areas: financial, customer, internal processes and people/innovation/growth that contribute to organisational performance.

Balance sheet shows the assets of the business and the sources from which finance has been raised.

Behaviour is something a person does that can be directly observed.

Behaviour models of leadership attempt to identify the behaviours that effective managers use to influence subordinates.

Behaviour modification is a general label for attempts to change behaviour by using appropriate and timely reinforcement.

Benchmarking is a process of comparing organisational performance and practices with others (preferably leaders).

Bounded rationality is behaviour that is rational within a decision process, which is limited (bounded) by an individual's ability to process information.

Bureaucracy is a system in which people are expected to follow precisely defined rules and procedures rather than to use personal judgement.

A business plan is a document which sets out the markets the business intends to serve, how it will do so and what finance they require.

The business process view puts satisfying customer's requirements at the heart of a design process to develop a supply system that will operate without waste. The orientation is towards speed of response and two-way flow of information and other resources.

The capital market comprises all the individuals and institutions that have money to invest, including banks, life assurance companies and pension funds and, as users of capital, business organisations, individuals and governments.

Cash flow statement shows the sources from which cash has been generated and how it has been spent during a period of time.

A cell layout creates multiple cells dedicated to producing families of output types.

Centralisation is when a relatively large number of decisions are taken by management at the top of the organisation.

Certainty describes the situation when all the information the decision maker needs is available.

A channel is the medium of communication between a sender and a receiver.

Coding is translating information into symbols for communication.

Coercive power is the ability to obtain compliance through fear of punishment.

Collectivism 'describes societies in which people, from birth onwards, are integrated into strong, cohesive in-groups which ... protect them in exchange for unquestioning loyalty.' (Hofstede, 1991, p. 51).

Communication is the exchange of information through written or spoken words, symbols and actions to reach a common understanding.

Competence (1) Competence concerns the actions and behaviours identified by change agents as contributing in their experience to the perceived effectiveness of change implementation. (2) Competences are those behaviours required for satisfactory ('threshold competence') or excellent ('superior competence') performance in a job.

Competitive advantage 'arises from discovering and implementing ways of competing that are unique and distinctive from those of rivals, and that can be sustained over time' (Porter, 1994).

A competitive environment is the industry-specific environment comprising the organisation's customers, suppliers and competitors.

Competitive or business strategy 'is concerned with the firm's position relative to its competitors in the markets which it has chosen' (Kay, 1996).

Complementarities Practices are said to be complementary when doing more of one increases the returns from doing more of another.

Concentric layout occurs in, for example, shipbuilding where the product is so large that it remains static while labour and materials come to the centre to assemble the ship.

Consideration is a pattern of leadership behaviour that demonstrates sensitivity to relationships and to the social needs of employees.

Consumer-centred organisation is focused upon and structured around the identification and satisfaction of the demands of its consumers.

Consumers are individuals, households, organisations, institutions, resellers and governments that purchase the products offered by other organisations.

Content is the specific substantive task that the group is undertaking.

Contingencies are factors such as uncertainty, interdependence and size that reflect the situation of the organisation.

Contingency approaches to organisational structure are based on the idea that performance depends on having a structure that is appropriate to the environment.

Core competencies are an organisation's major value-creating skills, capabilities and resources that shape its choice of strategy.

Corporate responsibility is the awareness, acceptance and management of the implications and effects of all corporate decision making.

Corporate strategy 'is concerned with the firm's choice of business, markets and activities' (Kay, 1996), and thus it defines the overall scope and direction of the business.

Cost expresses in money units the effect of activating or consuming resources. It is an internal control process of the producing organisation and is not visible to outside parties.

A cost leadership strategy is one in which a firm uses low price as the main competitive weapon.

Counterimplementation refers to attempts to block change without displaying overt opposition.

Craft production refers to a system in which the craft producers do everything. With or without customer involvement they design, source materials, make, display, sell, perhaps service and do the accounts.

A critical perspective is one which evaluates an institution or practice in terms of its contribution to human autonomy, responsibility, democracy and ecologically sustainable activity.

Critical success factors are those aspects of a strategy that must be achieved to secure competitive advantage.

Current assets can be expected to be cash or to be converted to cash within a year.

Data are raw, unanalysed facts, figures and events.

A database consists of items of data stored in a way that enables them to be organised and retrieved in many ways.

Decentralisation is when a relatively large number of decisions are taken lower down the organisation in particular operating units.

A decision is a specific commitment to action (usually a commitment of resources).

Decision criteria define the factors that are relevant in making a decision.

Decision making is the process of identifying problems and opportunities and then resolving them.

A decision support system is a computer-based system, almost interactive, designed to assist managers in making decisions.

Decoding is the interpretation of a message into a form with meaning.

Delegating occurs when one person gives another the authority to undertake specific activities or decisions.

Delivery relates to the achievement of all promises made by any supplier to a customer.

Demand lead time is the elapsed time that a customer is prepared to allow between placing an order for a product or service and actually receiving it; in certain situations this time is effectively zero.

Determinism is the view that an organisation's structure is determined by its environment.

Differentiation (1) consists of offering a product or service that is perceived as unique or distinctive on a basis other than price. (2) The state of segmentation of the organisation into subsystems, which develop attributes relevant to their external environment.

A divisional structure is when tasks are grouped in relation to their outputs, such as products or the needs of different types of customer.

Emergent models of change emphasise that in uncertain conditions a project will be affected by unknown factors, and that planning has little effect on the outcome.

Enlightened self-interest is the practice of acting in a way that is costly or inconvenient at present, but which is believed to be in one's best interest in the long term.

Equity theory argues that perception of unfairness leads to tension, which then motivates the individual to resolve that unfairness.

Escalation of commitment is an increased commitment to a previous decision despite evidence that it may have been wrong.

Ethical audits are the practice of systematically reviewing the extent to which an organisation's actions are consistent with its stated ethical intentions.

Ethical consumers are those who take ethical issues into account in deciding what to purchase.

Ethical decision-making models examine the influence of individual characteristics and organisational policies on ethical decisions.

Ethical investors are people who only invest in businesses that meet specified criteria of ethical behaviour.

Ethical relativism is the principle that ethical judgements cannot be made independently of the culture in which they are made.

Existence needs reflect a person's requirement for material and energy.

Expectancy theory argues that motivation depends on a person's belief in the probability that effort will lead to good performance, and that good performance will lead to them receiving an outcome they value (valence).

Expertise power is evident when a person's knowledge of the topic enables them to influence decisions.

The external context consists of elements beyond the organisation such as competitors, or the wider PESTEL factors.

External fit is when there is a close and consistent relationship between an organisation's competitive strategy and its HRM strategy.

An extranet is a version of the Internet that is restricted to specified people in specified companies – such as major customers or suppliers.

Extrinsic rewards are valued outcomes or benefits provided by others, such as promotion, a pay increase or a bigger car.

Factory production broke down the integrated nature of the craftworker's approach and made it possible to increase the supply of goods by dividing tasks into simple and repetitive sequences.

Feedback (in communication) occurs as the receiver expresses his or her reaction to the sender's message.

Feedback (in a system) refers to the extent to which people receive information about performance.

Femininity pertains to societies in which social gender roles overlap.

Five forces analysis is a technique for identifying and listing those aspects of the five forces most relevant to the profitability of an organisation at that time.

Fixed assets are the physical properties that the company possesses – such as land, buildings, production equipment and vehicles – and which are likely to have a useful life or more than one year. There may also be intangible assets such as patent rights or copyrights.

Flexible manufacturing is a manufacturing technology using computers to automate and integrate manufacturing components such as robots, machines, design and engineering.

A focus strategy is when a company competes by targeting very specific segments of the market.

Formal authority is the right that a person in a specified role has to make decisions, allocate resources or give instructions.

Formal structure is the official guidelines, documents or procedures setting out how the organisation's activities are divided and coordinated.

A formal team is one that management has deliberately created to perform specific tasks to help meet organisational goals.

Formalisation is the practice of using written or electronic documents to direct and control employees.

Functional managers are responsible for the performance of a common area of technical or professional work.

A functional layout groups similar physical processes together and brings materials and/or customers to these areas.

A functional structure is when tasks are grouped into departments based on similar skills and expertise.

The general environment (sometimes known as the macro-environment) includes economic, political, social and technological factors that generally affect all organisations.

General managers are responsible for the performance of a distinct unit of the organisation.

Global companies work in many countries, securing resources and finding markets in whichever country is most suitable.

Globalisation refers to the increasing integration of internationally dispersed economic activities.

A goal is a desired future state for an activity or organisational unit.

Goal-setting theory argues that motivation is influenced by goal difficulty, goal specificity and knowledge of results.

Groupthink is 'a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' striving for unanimity overrides their motivation to realistically appraise alternative courses of action' (Janis, 1972).

Groupware systems provide electronic communication between members of geographically dispersed teams.

Growth needs are those which impel people to be creative or to produce an effect on themselves or their environment.

High-context cultures are those in which information is implicit and can only be fully understood by those with shared experiences in the culture.

A high-performance team is one that meets all the requirements of a real team, but in addition shows commitment to the personal growth of members and performs beyond expectations.

Horizontal specialisation is the degree to which tasks are divided among separate people or departments.

Human relations approach is a school of management which emphasises the importance of social processes at work.

Human resource management is the effective use of human resources in order to enhance organisational performance.

Hygiene factors (or maintenance factors) are those aspects surrounding the task which can prevent discontent and dissatisfaction but will not in themselves contribute to psychological growth and hence motivation.

People use an incremental model of decision making when they are uncertain about the consequences. They search for a limited range of options, and policy unfolds from a series of cumulative small decisions.

Individualism pertains to societies in which the ties between individuals are loose.

Influence is the process by which one party attempts to modify the behaviour of others by mobilising power resources.

An informal group is one that emerges when people come together and interact regularly.

Informal structure is the undocumented relationships between members of the organisation that inevitably emerge as people adapt systems to new conditions and satisfy personal and group needs.

Information comes from data that has been processed so that it has meaning for the person receiving it.

Information overload arises when the amount of information a person has to deal with exceeds their capacity to process it.

Information richness refers to the amount of information that a communication channel can carry, and the extent to which it enables sender and receiver to achieve common understanding.

An information system is a set of people, procedures and resources that collects and transforms data into information and disseminates this information.

Information systems management is the planning, acquisition, development and use of these systems.

Initiating structure is a pattern of leadership behaviour that emphasises the performance of the work in hand and the achievement of production or service goals.

Innovation covers incremental and/or step (breakthrough) changes in products and/or processes which change function, form, performance or resource use in an advantageous way.

Institutional advantage 'is when a not-for-profit body performs its tasks more effectively than other comparable organisations' (Goold, 1997).

Instrumentality is the perceived probability that good performance will lead to valued rewards, measured on a scale from 0 (no chance) to 1 (certainty).

Integration is the process of achieving unity of effort amongst the various subsystems in accomplishing the organisation's task.

The interaction model is a theory of change which stresses the continuing interaction between the internal and external contexts of an organisation, making the outcomes of change hard to predict.

Interdependence is the extent to which departments depend on each other for resources or materials to accomplish their tasks.

The internal context consists of elements within the organisation such as its technology, structure or business processes.

Internal fit is when the various components of the HRM strategy support each other and consistently encourage certain attitudes and behaviour.

International management is the practice of managing business operations in more than one country.

Internationalisation is the increasing geographical dispersion of economic activities across national borders.

The Internet is a web of hundreds of thousands of computer networks linked together by telephone lines through which data can be carried.

An inter-organisational system is a computer system that enables data and information to pass between organisations, such as electronic orders or invoices.

An intranet is a version of the Internet that only specified people within an organisation can use.

Intrinsic rewards are valued outcomes or benefits that come from the individual, such as feelings of satisfaction, achievement and competence.

Inventory consists of materials and part or finished goods that are held in anticipation of need by customers along a chain of supply from raw materials through to final consumption (and recycling?).

Job analysis is the process of determining the characteristics of an area of work according to a prescribed set of dimensions.

A job enrichment model represents the idea that managers can change specific job characteristics to promote job satisfaction and so motivate employees.

Knowledge builds on information and embodies a person's prior understanding, experience and learning.

A knowledge system is a system that incorporates the decision-making logic of a human expert.

Leadership refers to the process of influencing the activities of others towards high levels of goal setting and achievement.

Legitimate power flows from the person's formal position, which gives them authority over defined matters.

Liabilities of a business as reported in the balance sheet are the debts and financial obligations of the business to all those people and institutions that are not shareholders, e.g. a bank, suppliers.

Life cycle models of change are those that view change as an activity which follows a logical, orderly sequence of activities that can be planned in advance.

A limited liability company has an identity and existence in its own right as distinct from its owners (shareholders in Europe, stockholders in North America). A shareholder has an ownership right in the company in which the shares are held.

Line layout is completely specified by the sequence of activities needed to perform a given transformation.

Line managers are responsible for the performance of activities that directly meet customers' needs.

Low-context cultures are those where people are more psychologically distant so that information needs to be explicit if members are to understand it.

Management is the activity of getting things done with the aid of people and other resources.

Management as a general human activity occurs whenever people take responsibility for an activity and consciously try to shape its progress and outcome.

Management as a specialist occupation develops when activities previously embedded in the work itself become the responsibility not of the employee but of owners or their agents.

Management role is the sum of the expectations which others have of a manager.

Management tasks are those of planning, organising, leading and controlling the use of resources to add value to them.

A manager is someone who gets things done with the aid of people and other resources.

Market segmentation is the process of dividing markets comprising the heterogeneous needs of many consumers into segments comprising the homogeneous needs of smaller groups.

Marketing is a management process that identifies, anticipates and supplies consumer requirements efficiently and effectively.

The marketing environment consists of the actors and forces outside marketing that affect the marketing manager's ability to develop and maintain successful relationships with its target consumers.

A marketing information system is the systematic process for the collection, analysis and distribution of marketing information.

The marketing mix is the mix of decisions about product features, prices, communications and distribution of products used by the marketing manager to position products competitively within the minds of consumers.

Marketing orientation is an organisational orientation that believes success is most effectively achieved by satisfying consumer demands.

Masculinity pertains to societies in which social gender roles are clearly distinct.

A matrix structure is when those doing a task report both to a functional and a project or divisional boss.

A mechanistic structure means there is a high degree of task specialisation, people's responsibility and authority are closely defined and decision making is centralised.

The message is what the sender communicates.

A metaphor is an image used to signify the essential characteristics of a phenomenon.

A mission statement is a broad definition of an organisation's operations and scope, aiming to distinguish it from similar organisations.

A model represents a complex phenomenon by identifying the major elements and relationships.

A monitoring system is a computer-based system that processes data to provide information about the performance of a business process.

Motivator factors are those aspects of the work itself that Herzberg found influenced people to superior performance and effort.

Motivation refers to the forces within or beyond a person that arouse and sustain their commitment to a course of action.

Multinational companies are based in one country, but have significant production and marketing operations in many others.

A network structure is when tasks required by one company are performed by other companies with expertise in those areas.

Networking refers to 'individuals' attempts to develop and maintain relationships with others (who) have the potential to assist them in their work or career' (Huczynski, 2004, p. 305).

Noise is anything that confuses, diminishes or interferes with communication.

Non-linear systems are those in which small changes are amplified through many interactions with other variables so that the eventual effect is unpredictable.

A non-programmed decision is a unique decision that requires a custom-made solution when information is lacking or unclear.

Non-receptive contexts are those where the combined effects of features of the organisation (such as culture or technology) tend to hinder change.

Non-verbal communication is the process of coding meaning through behaviours such as facial expression, gestures and body postures.

Observation is the activity of concentrating on how a team works rather than taking part in the activity itself.

An open system is one that interacts with its environment.

Operational plans detail how the overall objectives are to be achieved, by specifying what senior management expects from specific departments or functions.

Operational research attempts to solve complex problems by developing mathematical models to analyse the many variables.

Operational strategies are those deployed by the different functions of the organisation, such as manufacturing, marketing, finance and human resource management, and which contribute to the achievement of corporate strategy.

An operational system is a computer application that processes transactions in an orderly and efficient way to provide a desired output.

An opportunity is the chance to do something not previously expected.

An order qualifier is a necessary but not sufficient requirement to be considered by a customer.

An order winner is some feature of the product that so positively differentiates it that customers want to buy it in preference to competing products.

An organic structure is one where people are expected to work together and to use their initiative to solve problems; job descriptions and rules are few and imprecise.

An organisation is a social arrangement for achieving controlled performance towards goals that create value.

An organisation chart shows the main departments and senior positions in an organisation and the reporting relations between them.

Organisation culture is the collection of relatively uniform and enduring values, beliefs, customs and practices that are uniquely shared by an organisation's members and which are transmitted from one generation of employees to the next.

Organisation Development (OD) is a systematic process in which applied behavioural science principles and practices are introduced with the goal of increasing individual and organisational performance.

Organisation structure 'The structure of an organisation [is] the sum total of the ways in which it divides its labour into distinct tasks and then achieves co-ordination among them' (Mintzberg, 1989).

An organisational capability is an activity that an organisation can perform better than its competitors.

Organisational change is a deliberate attempt to improve performance by changing one or more aspects of the organisation, such as its technology, structure or business processes.

An organisational system is a computer system that enables data and information to pass between units of an organisation.

Outer context of change relates to environmental factors, such as competitor behaviour, customer demands or other factors in the external environment.

The participative perspective is the belief that if people are able to take part in planning a change, they will be more willing to accept and implement the change.

Partnering describes a business relationship based on taking a long-term view that the partners wish to work together to enhance customers' satisfaction.

A perceived performance gap arises when people believe that the actual performance of a unit or business is out of line with the level they desire.

Perception is the active psychological process in which stimuli are selected and organised into meaningful patterns.

Performance appraisal is a systematic review of a person's work and achievements over a recent period, usually leading to plans for the future.

Performance imperatives are those aspects of performance which are especially important for an organisation to do well, such as flexibility and innovation.

Performance-related pay refers to payment systems in which a percentage of pay depends on the assessed performance of individuals, groups or the organisation as a whole.

A person culture is one in which activity is strongly influenced by the wishes of the individuals who are part of the organisation.

PESTEL analysis is a technique for identifying and listing the political, economic, social, technological environmental and legal factors in the general environment most relevant to an organisation.

Philanthropy is the practice of contributing personal wealth to charitable or similar causes.

Planning is the task of setting objectives, specifying how to achieve them, implementing the plan and evaluating the results.

A policy is a guideline that establishes some general principles for making a decision.

Political behaviour is 'the practical domain of power in action, worked out through the use of techniques of influence and other (more or less extreme) tactics' (Buchanan and Badham, 1999).

The political model is a model of decision making that reflects the view that an organisation consists of groups with different interests, goals and values.

Political models of change emphasise that change is likely to affect the interests of stakeholders unevenly and that those who see themselves losing will resist the change despite the rationality of the arguments or invitations to participate.

The political perspective reflects the view that organisations are made up of groups with separate interests, goals and values, and that these affect how they respond to change.

Power concerns 'the capacity of individuals to exert their will over others' (Buchanan and Badham, 1999).

A power culture is one in which people's activities are strongly influenced by a dominant central figure.

Power distance is the extent to which the less powerful members of organisations within a country expect and accept that power is distributed unevenly.

Preferred team roles are the types of behaviour that people display relatively frequently when they are part of a team.

A problem is a gap between an existing and a desired state of affairs.

A procedure is a series of related steps to deal with a structured problem.

A process is the way people interact with each other in performing a task, such as how they make decisions.

Process consultation is an OD intervention in which an external consultant facilitates improvements in an organisation's diagnostic, conceptual and action planning skills.

Product is a generic term used to identify both tangible goods and intangible services.

The product life cycle suggests that products pass through the stages of introduction, growth, maturity and decline.

Product position is the position in which consumers place a product relative to that of an alternative supplier.

Profit and loss statement reflects the benefits derived from the trading activities of the business during a period of time.

A programmed decision is a repetitive decision that can be handled by a routine approach.

A project manager is someone who is responsible for managing a project, usually intended to change some aspects of an organisation.

A pseudo-team is a collection of individuals who could perform more effectively but have shown no interest in developing the necessary skills and methods.

A psychological contract is the set of understandings people have regarding the commitments made between themselves and their organisation.

The quality of a product or service is the (often imprecise) perception of a customer that what has been provided is at least what was expected for the price he or she paid.

The rational model of decision making assumes that people make consistent choices to maximise economic value within specified constraints.

Real goals are those to which people give most attention.

Receptive contexts are those where features of the organisation (such as culture or technology) tend to help change.

Referent power (or charismatic power) arises when subordinates want to identify with the leader, on account of some personal characteristics of the leader.

Relatedness needs involve a desire for relationships with significant other people.

Relationship marketing is an approach that focuses on developing a series of transactions with consumers.

Responsibility refers to a person attempting to meet the expectations others have of them.

Reward power is the ability of someone to reward another through possessing resources the other values.

Risk refers to situations in which the decision maker is able to estimate the likelihood of the alternative outcomes.

A role is the sum of the expectations that other people have of a person occupying a position.

A role culture is one in which people's activities are strongly influenced by clear and detailed job descriptions and other formal signals as to what is expected of them.

A rule sets out what someone can or cannot do in a given situation.

Satisficing is the acceptance by decision makers of the first solution that is 'good enough'.

Scenario planning is an attempt to build plausible views of a small number of different possible futures for an organisation.

Scientific management The school of management called 'scientific' attempted to create a science of factory production.

Selection tests are formal, often psychologically based methods of assessing candidates' likely suitability for a job.

Selective attention is the ability, often unconscious, to choose from the stream of signals in the environment, concentrating on some and ignoring others.

Self-efficacy is an individual's belief that he or she is capable of performing a task.

A sensitivity analysis tests the effect on a plan of several alternative values of the key variables.

Sensitivity training is a technique for enhancing self-awareness and changing behaviour through unstructured group discussion.

Shareholders are the principal risk takers in a company. They contribute the long-term capital for which they expect to be rewarded in the form of dividends – a distribution from the profit of the business.

Shareholders' funds are the capital contributed by the shareholders plus profits that have not been distributed to the shareholders.

Situational models of leadership attempt to identify the contextual factors that affect when one style will be more effective than another.

Skill refers to a person's ability to perform various types of cognitive or behavioural activity effectively.

The social contract consists of the mutual obligations that society and business recognise they have to each other.

A sociotechnical approach is a systems development strategy that attempts to improve simultaneously the performance of the organisation and the quality of the working life of the workers.

A sociotechnical system is one in which outcomes depend on the interaction of both the technical and social subsystems.

A span of control is the number of subordinates reporting directly to the person above them in the hierarchy.

Staff managers are responsible for the performance of functions that provide support to line managers.

Stakeholder mapping is a means of identifying the expectations and power of different stakeholders.

Stakeholders are individuals, groups or other organisations with an interest in, or who are affected by, what the organisation does.

Stated goals are those which are prominent in company publications and websites.

Stereotyping is the practice of consigning a person to a category or personality type on the basis of their membership of some known group.

A strategic alliance is when firms agree to cooperate to achieve commercial objectives.

A strategic business unit consists of a number of closely related products for which it is meaningful to formulate a separate strategy.

Strategic management is an organisation-wide task involving both the development and implementation of strategy.

A strategic plan sets out the overall direction for the business, is broad in scope and covers all the major activities.

Strategy is concerned with deciding what business an organisation should be in, where it wants to be, and how it is going to get there.

Structural choice approaches emphasise the scope management has for deciding the form of structure, irrespective of external conditions.

Structure is the regularity in the way a unit or group is organised, such as the roles that are specified.

Subjective probability (in expectancy theory) is a person's estimate of the likelihood that a certain level of effort (E) will produce a level of performance (P) which will then lead to an expected outcome (O).

Subsystems are the separate but related parts that make up the total system.

Succession planning is the use of a deliberate process to ensure that staff are developed who are able to replace senior management as required.

Supply lead time is the total elapsed time between the decision to obtain the basic input resources to the final delivery of the product or service to the customer.

Survey feedback is an OD intervention in which the results of an opinion survey are fed back to respondents to trigger problem-solving on the issues which the survey identifies.

A SWOT analysis is a way of summarising the organisation's main strengths and weaknesses relative to external opportunities and threats.

A system is a set of interrelated parts designed to achieve a purpose.

A system boundary separates the system from its environment.

A system of supportive relationships refers to the interactions and experiences that build a person's sense of personal worth.

The systems approach looks at the different parts of an interacting set of activities as a whole and considers the best way for the whole to function.

A target market is the segment of the market selected by the organisation as the focus of its activities.

A task culture is one in which the focus of activity is towards completing a task or project using whatever means are appropriate.

A team is 'a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable' (Katzenbach and Smith, 1993b).

Team-based rewards are 'payments or non-financial incentives provided to members of a formally established team and linked to the performance of the group' (IPD, 1996).

Technology is the knowledge, equipment and activities used to transform inputs into outputs.

Teleology is the practice of evaluating a decision against the criterion of whether the outcome achieves the original goal.

Traits are a variety of individual attributes, including aspects of personality, temperament, needs, motives and values.

A transactional leader is one who treats leadership as an exchange, giving followers what they want if they do what the leader desires.

Transactional marketing is an approach that focuses upon one-off exchanges with consumers.

A transformational leader is one who treats leadership as a matter of motivation and commitment, inspiring followers by appealing to higher ideals and moral values.

Transnational companies operate in many countries and delegate many decisions to local managers.

Uncertainty is when people are clear about their goals, but have little information about which course of action is most likely to succeed.

Uncertainty avoidance is the extent to which members of a culture feel threatened by uncertain or unknown situations.

Utilitarianism is the practice of evaluating a decision against the criterion of its consequences for the majority of people.

Valence is the perceived value or preference that an individual has for a particular outcome.

Validity occurs when there is a statistically significant relationship between a predictor (such as a selection test score) and subsequent measures of on-the-job performance.

Value is added to resources when they are transformed into goods or services that are worth more than their original cost plus the cost of transformation.

A value chain 'divides a firm into the discrete activities it performs in designing, producing, marketing and distributing its product. It is the basic tool for diagnosing competitive advantage and finding ways to enhance it' (Porter, 1985).

A value for money service is one that is provided economically, efficiently and effectively.

Vertical specialisation refers to the extent to which responsibilities at different levels are defined.

Virtual organisations are those that deliver goods and services but have few, if any, of the physical features of conventional businesses.

A working group is a collection of individuals who work mainly on their own but interact socially and share information and best practices.