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Top 25 Business Terms
Key Business Terms for Business Fundamentals
25
Business
Undergraduate 2
05/21/2009

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Term
Contribution Margin
Definition
CM = Sales - Variable Costs
CM = S - VC
Term
Margin Percentage
Definition
MP = Contribution Margin/Sales
MP = CM/S
Term
Variable Costs
Definition
expenses that are tied to the sale of each unit.
Term
Period Costs
Definition
people that are not tied directly to the cost of producing a unit — administration, salespeople, and managers, for example.
Term
Net Margin
Definition
Contribution Margin less Period Costs.
NM = CM - PC
(Put simply, it is what the product contributes towards profits.)
Term
Emergency Loans
Definition
Emergency Loans = In the real world emergency loans do not exist. When you run out of cash, you have "a liquidity crisis", "Chapter 11", or simply "Bankruptcy" on your hands
Term
Working Capital
Definition
WC = Current Assets - Current Liabilities
WC = CA - CL
Term
Current Ratio
Definition
CR = Current Assets/Current Liablities
CR = CA/CL =
CA =(cash+A/R+Inventory)
CL = (A/P + Current Debt)
Term
Days of Working Capital
Definition
DWC = Working Capital/(Sales/365)
DWC = WC/(S/365)
Term
Forecasting
Definition
Ability to forecast demand, build adequate inventories to satisfy demand, and yet not accumulate excessive inventory.
Term
Promotion
Definition
Driven by your promo budget, creates product awareness before customers shop. If customers are not aware of the product, they will not buy it.
Term
Place
Definition
Drive by your Sales budget. It examines the question, "How easy is it for customers to work with you during and after the sale?"
Term
Productivity
Definition
The productivity of your workforce through the course of the simulation.
Term
The Financial Structure category
Definition
The Financial Structure of your company- its relationship between Debt and Equity.
Term
Leverage
Definition
L = Total Assets/Total Equity
L = TA/TE
Term
The Assets
Definition
The PP&E, and they are listed on the left side of the Balance Sheet.
Term
The Liabilities and Owners Equity
Definition
The right side represent the people who paid for the Assets and their current stake.
Term
Sides of the Balance Sheet
Definition
Left = Whats owned
Right = Who owns it
Term
The Financial Structure of the firm
Definition
The Financial structure of the firm is the relationship between Debt and Equity.
Term
EBIT
Definition
Earnings Before Interest and Taxes
Term
ROE
Definition
=Profits/Equity
=Profits/Assets*Assets/Equity
=ROA*Leverage
Term
Cumulative Profits
Definition
The sum of all company profits.
Term
Cumulative Free Cash Flow
Definition
The sum of all the Free Cash Flows since you took over management of the company.
Term
Market Capitalization
Definition
Market Cap. = Stock Price*Shares Outstan..
The current value of your stock price times shares outstanding
Term
Earnings Per Share
Definition
EPS = Profits/Shares Outstanding
EPS = P/S.O.
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