ICAI Notes- Other Business Terminology | Business and Commercial Knowledge (Old Scheme) - CA Foundation PDF Download

OTHER BUSINESS TERMINOLOGY

Acquisition: When one organization takes over the other organization and controls all its business operations, it is known as acquisitions. In this process of acquisition, one financially strong organization overpowers the weaker one.

Bankruptcy: A bankruptcy refers to economic insolvency, wherein the person’s assets are liquidated, to pay off all liabilities with the help of a bankruptcy trustee or a court of law.

Bottom-Line: In plain english bottom line means the most important fact or aspect of anything. In BCK, it may be defined as the firm’s income after all expenses have been deducted from revenues. These expenses include interest charges paid on loans, general and administrative costs and income taxes. In simpler words, it is the same thing as Net Profits for these mattered the most for the owners of the firm. In today’s context, a firm’s performance is evaluated not on the basis of such an economic performance as net profits alone but also on the basis of contribution to the communities and the conservation of the environment. See, Triple Bottom Line.

Business Environment: It is a set of all the variables external to the firm but influence its decision-making and in turn are also influenced by it.

Business Facilitators: These are individuals, organisations/ institutions and all other arrangements that ease the setting up of, operating and exiting from business.

Corporate Forms of Business Organisation: These are the forms of business organisation where in the eyes of law the business entity is distinct from its owners. It can own the assets and owe to others as an artificial legal person. Thus, the liability of business owners can be limited to a predetermined amount. Company is the ideal representation of the corporate forms of business organisation.
Corporate Governance: It is a system of overseeing the affairs of a corporation to ensure that they are conducted in an ethical manner and as per provisions of law. The mechanism of corporate governance includes (a) the board of directors who appoint, oversee and reward the management team; (b) independent audit of the accounts of the company; (c) reporting of the performance to the markets (stock exchanges) and business media. All these are examples of the system of corporate governance.

Electronic Commerce: It broadly refers to the Internet and mobile telephony based applications for conducting business and commerce. The latter more precisely is known as mobile commerce. It includes not only such pure e-commerce businesses as Amazon but also includes such business functions as E-marketing, Internet Marketing, etc. Usually a typical e-commerce retailing will have an order placement, tracking and delivery end as well as on-line payment end.

Electronic Filing: Electronic filing is system of filing information required by regulators, government and others electronically. In taxation, it is a method of filing of tax returns and tax forms on the Internet.

Globalisation: It is a systematic process of removing the barriers to international trade in goods and services and the international flows of capital. Some people argue that it should include barrier free movement of labour as well. Collectively all this results in the greater integration of a country’s economy with the economy  of the Rest of the World.

Goodwill: Goodwill in accounting is the difference between what a company pays when it buys the assets of another company and the book value of those assets. Sometimes, real goodwill is a company’s good reputation, the loyalty of its customers, and so on.

Infrastructure: It means the basic facilities e.g. buildings, roads, power supplies needed for the operation of a society or enterprise. For example, the firm infrastructure would comprise its factories, offices, warehouses etc.

Joint Products and By-Products: Joint products represent “two or more products separated in the course of the same processing operation, usually requiring further processing each product being in such proportion that no single product can be designed as a major product”. For example: In the oil industry, gasoline, fuel oil lubricants, paraffin, coal tar, asphalt and kerosene are all produced from crude petroleum. By-products are defined as “products recovered from material discarded in a main process, or from the production of some major products, where the material value is to be considered at the time of severance from the main product”. Thus, by-products emerge as a result of processing operation of another product or they are produced from the scrap or waste of materials of a process. For example, molasses in sugar industry.

Liberalisation: It refers to a systematic process of easing of government’s control over the private business activity. It is often contrasted with the license and permit era where the businesses had to obtain government licences and permissions (permits) to start or grow a business. Liberalisation is one of three pillars of the New Economic Policy (NEP) of the Government of India since 1990s. The other two pillars are privatisation and globalisation. That is why the NEP is also known as LPG or GPL where G, L, and P respectively imply globalisation, liberalisation and privatisation.
Logistics: It is a commercial activity implying moving of supplies to the production facilities and goods and services to their respective markets. Inbound logistics imply the movement of inputs and the outbound logistics means the movement of outputs.

Merger: When two or more companies come together to increase their strength and financial gains along with breaking the trade barriers in a newly created entity.

Mission: A company’s Mission statement is typically focused on its present business scope – “who we are and what we do”; mission statements broadly describe an organizations present capabilities, customer focus, activities, and business makeup.

PESTLE: It is a mnemonic i.e. a pattern of letters that helps in remembering the various elements of the macro environment of business. In its expanded form, it denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environment (natural environment).

Proprietary Forms of Business Organisations: These are the forms of business organisation where the law does not distinguish between the business as a separate entity distinct from its owners. Consequently, the liabilities of the business are considered as the personal liabilities of the owners. Sole-proprietorship and partnership may be cited as the best representative examples of the proprietary form of business organisation.

Privatisation: It is a systematic process of dispensing with the state ownership of business enterprises. One way of doing this could be by way of listing the shares of public corporations on the stock exchanges.
Returns and Risks: These are the two sides of the business’s outcomes particularly for its owners and generally for all investments. Individuals and businesses invest their resources in expectation of the returns or rewards, that may be simply called profits. However, these expectations may not always realise at all or fully. The non/ partial realisation of expectations is called risk. In certain investments, such risks are nonexistent or so low as to label these as risk free investments. For example, if a person deposits her /his savings in a savings banks account of recurring deposit account or a fixed deposit account of a bank, the returns are almost assured. But most other investments, more so investment in business entail risks. Thus, those who undertake the risks expect commensurate returns as well. Thus, the cliché higher the risk-higher the returns.

Sustainable Development: Sustainable development (SD) is a broader measure of the development of a country that includes economic parameters such as income and non-economic parameters such as social equity and ecological balance. It emphasises simultaneous attention to economic growth, social equity and environmental conservation. It is the macro context of business’s Triple Bottom Line. In another sense, it also

used at individual business organisations.
Term Insurance: It is the insurance for a certain time period which provides for no defrayal to the insured individual, excluding losses during the period, and that becomes null upon its expiration.

Triple Bottom Line (TBL): It is the BCK philosophy that promotes the belief and evaluates the business’s performance on the basis that attainment of profit, care for people and care for the planet are equally important. The equal emphasis on these triple Ps, viz., Profits, People and Planet is known as the TBL. This idea at the macro level corresponds to the more evolved notion of the development of a country’s economy, society and ecology. See sustainable development.

Turnaround: A turnaround is the financial recovery of a company that has been performing poorly for an extended time. To effect a turnaround, a company must acknowledge and identify its problems, consider changes in management, and develop and implement a problem-solving strategy.

Vision: A Strategic vision is a road map of a company’s future – providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create.
Whole Life Insurance: A whole life insurance is a contract between the insurer and the policy owner, that the insurer will pay the sum of money on the occurrence of the event mentioned in the policy to the insured. It’s a concept wherein the insurer mitigates the loss caused to the insured on the basis of certain principles.