IBP JAIBP Stage I flashcards

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

Communication Process

The sequence sender, encoding, message, channel, receiver, decoding, feedback, with noise possible at each stage; feedback confirms whether meaning was received as intended.

Channel Richness

The capacity of a medium to convey cues and give fast feedback. Face-to-face ranks highest; formal written reports and notices rank lowest because feedback is slow and cues are absent.

Grapevine

An informal communication network that spreads information rapidly through personal contact. It is largely oral and carries rumour, so managers should supply accurate facts rather than attempt to abolish it.

Memorandum Format

An internal document headed To, From, Date and Subject, followed by the body. It has no salutation or complimentary close, which distinguishes it from a formal business letter.

Active Listening

Concentrating fully on the speaker, resisting distraction, paraphrasing the message back, and asking clarifying questions so that feedback confirms accurate understanding before a reply is given.

Accounting Equation

Assets equal liabilities plus capital. Every transaction changes at least two elements but keeps the equality intact, forming the basis for the double-entry system and the balance sheet.

Double Entry Rule

Each transaction is recorded with equal debits and credits. Debits increase assets and expenses; credits increase liabilities, capital and income, so total debits always equal total credits.

Trial Balance Limitations

A trial balance proves arithmetic equality of debits and credits only. It fails to reveal errors of principle, complete omission, compensating errors, or transactions posted to the wrong account of the same class.

Accrual and Matching

Revenue is recognised when earned and expenses when incurred, regardless of cash timing. The matching principle charges each expense to the period whose revenue it helped generate.

Straight-Line Depreciation

An equal annual charge calculated as cost minus residual value, divided by useful life. It suits assets whose benefit is consumed evenly, such as furniture and fixtures.

Bank Reconciliation Statement

A schedule explaining differences between the cash book and bank statement, typically unpresented cheques, uncredited deposits, bank charges and interest, ending with equal adjusted balances.

Gross versus Net Profit

Gross profit equals sales less cost of goods sold. Net profit equals gross profit plus other income less operating expenses, interest and tax, and is transferred to the capital account.

Law of Demand

Other things equal, quantity demanded falls as price rises, giving a downward-sloping demand curve. Movement along the curve reflects price; a shift reflects income, tastes or substitutes.

Price Elasticity of Demand

Percentage change in quantity demanded divided by percentage change in price. Demand is elastic above one and inelastic below one; elastic demand raises revenue when price falls.

Market Equilibrium

The price at which quantity demanded equals quantity supplied. A ceiling below it creates shortage and queues; a floor above it creates surplus and unsold stock.

GDP versus GNP

GDP measures output produced within a country's borders. GNP adds net factor income from abroad, so it reflects income accruing to residents rather than location of production.

Demand-Pull Inflation

Inflation caused by aggregate demand growing faster than productive capacity. Cost-push inflation instead arises from rising wages or input prices and shifts the supply curve inward.

Open Market Operations

Central bank buying or selling of government securities to manage liquidity. Buying injects reserves and supports lower rates; selling absorbs reserves and tightens monetary conditions.

Money Supply M1

Currency held by the public plus demand deposits at banks. Broader measures add saving and time deposits, capturing money serving as a store of value rather than a medium of exchange.

Compound Interest Formula

Amount equals principal multiplied by one plus the periodic rate raised to the number of periods. Interest earned in each period is added to principal before the next calculation.

Present Value

The value today of a future cash flow, obtained by dividing that cash flow by one plus the discount rate raised to the number of periods. Used in NPV and loan valuation.

Mean, Median and Mode

The mean is the arithmetic average, the median the middle ordered value, and the mode the most frequent value. The median resists distortion by extreme observations.

Standard Deviation

The square root of variance, expressing dispersion in the same units as the data. Roughly two-thirds of observations in a normal distribution lie within one standard deviation of the mean.

Coefficient of Variation

Standard deviation divided by the mean, expressed as a percentage. Because it is unit-free, it compares variability between datasets measured on different scales or with different means.

Correlation Coefficient

A value between minus one and plus one measuring the strength and direction of a linear relationship. A value near zero means weak linear association, not necessarily independence.

Central Bank Functions

Issuing currency, acting as lender of last resort, conducting monetary policy, serving as banker to government and commercial banks, and managing foreign exchange reserves and payment systems.

Deposit Multiplier

The reciprocal of the reserve ratio. With a ten percent reserve ratio, an initial deposit can support credit and deposits up to ten times its size across the banking system.

Net Present Value Rule

Discount all project cash flows at the cost of capital and subtract the initial outlay. A positive NPV adds value and justifies acceptance; a negative NPV destroys value.

Capital Adequacy Ratio

Eligible regulatory capital divided by risk-weighted assets, expressed as a percentage. Riskier assets carry higher weights, so they require more capital to meet the minimum.

Non-Performing Loan

A loan on which principal or interest is overdue beyond the period set by the regulator. Deteriorating classification forces higher loan-loss provisions and reduces reported profit.

Mudarabah Contract

An Islamic finance arrangement where one party supplies capital and the other provides expertise, with profits shared by agreed ratio. Financial loss falls on the capital provider.

Money Market versus Capital Market

The money market trades short-term instruments such as treasury bills and certificates of deposit maturing within a year. The capital market handles long-term equity and debt securities.

Current Account Features

A bank account offering cheque and payment facilities with no interest, suited to businesses making frequent transactions. Balances are repayable on demand without notice.