ECONOMIC TERMS

Abandoned Option:

Means a share option not exercised because the price is against the buyer (or taker) om
declaration day i.e. , the situation has become profitable.

Absolute Monopoly:

Means the control of the entire output of a commodity or service, for which there exists no
substitute by a single producer or supplier. This kind of situation rarely arises in real life. It is also known
as pure monopoly or perfect monopoly.

Accommodation Bill:

A bill which is drawn, accepted or endorsed for the sole purpose of discounting it, no goods
being given or received for it, thus offering short-term cash accommodation.

Account:

Refers to a running record of transactions which are taking place between two transactors, who
may be in two departments of one business and a basic element in all systems of recording business
transactions. In retail trading it refers to the credit facility which is automatically extended to a customer
with whom an account is operated.

Accountabilty:

Accountability is a subordinate’s obligation to render an account or report his activities to his

superior.

Administered Prices:

A price set not by the force of demand and supply but by some authority like the government or
a regulatory authority.

Ad Valorem Tax:

A duty, which is imposed on commodities in proportion to their value i.e. , a duty, which is
expressed as a percentage and not a flat amount.

A.O.B:

Abbreviation of Any Other Business, as an item on the agenda of a meeting.

Appreciation:

An increase in the value:

1. Of stocks and shares when their prices rise on the stock exchange.
2. Of a currency when is value increases in terms of other currencies;
 3. Of stocks held by manufacturers and merchants during a period of rising prices.

Arbrirtage:

It is a speculative activity. It seeks to make profit out of differences in prices of security in two
markets. If the price of a certain share is higher than in another, the speculator will purchase them in the
cheaper market and sell in the dearer market.

Articles of Association:

The articles of association prescribe a set of rule to govern the internal working of the company.
They cover such things as the issue and transfer of the company’s shares, the procedure to be followed
in calling general meetings, shareholders voting rights and many other matters. Articles of Association
require to be registered with the Registrar of Companies.

Asset:

When the balance sheet of business is drawn up, everything which it owns at the time which has
a money value is listed as an asset. They may be classified as:

1. Current Assets: consisting of cash, stock and book debts.

2. Fixed Assets: consisting of buildings, plant and machinery.
3. Intangible Assets: being the value of goodwill, patents.

Asset / Employee ratio:

Refers to the ration which is used as an indication of the capital intensity of a company.

Authorized Capital:

When a new company is to be registered, its application for registration is accompanied by a

statement indicating the amount of the capital with which it proposes to be registered. This is known as
its nominal, registered, or authorized capital.

Authority:

Authority may be defines as the force to command others, to act or not to act in a manner
deemed by the possess of the authority to achieve organizational objectives. It creates a relationship
between the superior and the subordinate.

Average Cost:

Average cost is the cost per unit of output, where the cost of all inputs (factors of production)
are included.

Average Revenue:

Refers to revenue per unit output.

Backward Integration:

The expansion of business which takes the form of acquiring control over firms supplying it with
its raw materials.
Backward Linkage:

Refers to the relationship between an industry or firm and the suppliers of its inputs. A change
in the output of the industry will get transmitted backwards to the suppliers of its inputs by changing in
demand for inputs.

Bad:

Means a commodity or product which produces disutility for its consumer.

Balanced Budget:

A budget is said to be a balanced budget when current incomes equals to current expenditure.

Balanced Sheet:

This is an ordered statement of

1. The economic resources or assets of a company or other business organization, each item
having a value set upon on it;
2. The financial claims of persons or organizations upon the value of these assets.

Balance of Payments:

Refers to the relation between the payments of all kinds made from one country to the rest of
the world and its receipts from all others countries.

Balance of trade:

Refers to the relationship between yhe values of the country’s imports and exports, i.e. , the
visible balance. These items only form a part of the balance of payments, which also get influenced by

1. Invisible items and

2. Movement of the capital.

Blank Credit:

Refers to the lending by the banking system, by whatever means: bank advances, discounting
bills or purchasing securities.

Bandwagon Effect:

Refers to the effect whereby as the prices of the goods falls and demand by some sections or
individuals in the community expands, other individuals or sections imitate the reactions and expand
their demand also.

Bank Deposits:

The funds deposited in the bank accounts. In reality they are simple records of indebtedness of a
bank to the depositor and they arise from the character of banks as financial intermediaries.

Bank Note:

A note issued by a bank for a sum of money which it promises to pay the bearer on demand.