DSST Introduction to Business flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Opportunity cost

The value of the best alternative given up when a resource is committed to one use. It measures true economic cost and excludes alternatives that were never realistically available.

Price elasticity of demand

The percentage change in quantity demanded divided by the percentage change in price. Demand is elastic when the absolute value exceeds one, meaning buyers respond strongly to price changes.

Gross domestic product

The market value of all final goods and services produced within a nation's borders in a period. It equals consumption plus investment plus government spending plus net exports.

Comparative advantage

The principle that a country gains from trade by specializing in goods it produces at the lowest opportunity cost, even if it is less efficient than trading partners in absolute terms.

Balance of trade

The difference between a nation's exports and imports of goods and services. A surplus means exports exceed imports; a deficit means the reverse.

Foreign direct investment

Ownership or control of productive assets in another country, such as building a plant or acquiring a foreign subsidiary. It differs from portfolio investment, which buys securities without control.

Antitrust enforcement

Government action under competition law against monopolization, price fixing, bid rigging, and market allocation. Remedies include fines, divestiture, and blocking mergers that reduce competition.

Negative externality

A cost of production or consumption borne by third parties rather than the buyer or seller, such as pollution. Governments address it with taxes, regulation, or tradable permits.

Sole proprietorship

A business owned by one person, who receives all profits and bears unlimited personal liability for business debts. It is simple to form and taxed once on the owner's return.

Limited liability company

A hybrid ownership form giving owners limited liability while taxed as a partnership by default. It offers flexible management but restricts easy transfer of ownership interests.

Preferred stock

Corporate ownership with a stated dividend paid before common dividends and priority in liquidation, usually without voting rights. It behaves partly like debt and partly like equity.

Franchise disclosure document

A legally required document a franchisor gives prospective franchisees before signing. It discloses fees, royalties, territory, litigation history, and financial performance information.

Break-even point

The sales volume at which total revenue equals total cost, computed as fixed costs divided by contribution margin per unit. Below it the firm operates at a loss.

Venture capital

Professional investment of pooled funds in young, high-growth companies in exchange for equity ownership. Investors typically seek exit through acquisition or public offering.

Span of control

The number of subordinates reporting directly to one manager. A wide span produces a flat organization; a narrow span produces more management layers.

SWOT analysis

A planning tool that pairs internal strengths and weaknesses with external opportunities and threats. It guides strategy by matching capabilities to environmental conditions.

Job specification

A document listing the qualifications, skills, education, and experience required for a job. It complements the job description, which describes duties rather than requirements.

Collective bargaining

Negotiation between employer representatives and a union over wages, hours, benefits, and working conditions, resulting in a contract that governs the bargaining unit.

360-degree feedback

A performance appraisal method collecting ratings from supervisors, peers, subordinates, and sometimes customers. It gives a rounded view but requires careful design to avoid bias.

Economic order quantity

The order size that minimizes the combined cost of ordering and carrying inventory. Larger orders cut ordering costs but raise holding costs.

Just-in-time inventory

A production approach where materials arrive as needed rather than being stockpiled. It reduces holding costs but increases vulnerability to supply interruptions.

Statistical process control

Use of control charts to monitor whether a process stays within limits set at roughly three standard deviations. Points outside the limits signal special-cause variation.

Market segmentation

Dividing a market into groups with similar needs using demographic, geographic, psychographic, or behavioral bases. Selected segments become targets for tailored marketing.

Penetration pricing

Setting a low introductory price to win market share quickly and discourage entrants. It works best when demand is price sensitive and scale economies exist.

Marketing mix

The four controllable elements of product, price, place, and promotion that a firm combines to serve a target market. Services add people, process, and physical evidence.

Current ratio

Current assets divided by current liabilities, measuring short-term liquidity. A ratio near or above two is often considered comfortable, though norms vary by industry.

Net present value

The sum of a project's expected cash flows discounted at the cost of capital, minus the initial investment. Positive NPV means the project adds value.

Return on equity

Net income divided by average shareholders' equity, showing profit generated per dollar of owners' investment. It rises with leverage as well as with operating efficiency.

Actual cash value

Replacement cost of damaged property minus depreciation. It is the basis for many property claims and pays less than replacement cost coverage.

Coinsurance clause

A property insurance provision requiring the insured to carry a stated percentage of property value. Underinsurance reduces the claim payment proportionally.

Adverse selection

The tendency of those facing higher risk to seek insurance more eagerly, which can raise premiums. Insurers counter it with underwriting, exclusions, and group coverage.

Decision support system

An information system combining data and analytical models to help managers with semi-structured decisions. It supports rather than replaces managerial judgment.

Firewall

Hardware or software that filters network traffic against rules, blocking unauthorized access while permitting approved communication. It is a core perimeter security control.