Management Glossary

Accounts Payable (A/P): is the monies the company owes for goods or services received, but not yet paid for.

Accounts Receivable (A/R): is the monies due to the company for goods sold or services rendered for which payment has not yet been received.

Assets: are all of a company's physical or intellectual property that has financial value.

Balance Sheet: is a financial document showing the assets and liabilities of an organization.

Barriers to Entry: are those things that make it difficult for a new company to compete against companies already established in the field. Examples include such things as patents, trademarks, copyrighted technology, and a dominant brand.

Bottom Line: refers to the bottom line of an Income Statement. The bottom line shows the Net Income Available To Shareholders. When a company talks about increasing the bottom line, they mean doing things to either increase the revenue or decrease expenses so the company's income increases.

Break-Even Point: is the point at which income matches expenditures. Typically, initial expenditures are high. It takes time for the income to reach the same level. The break-even point can apply to a product, an investment, or the entire company's operations.

Capital: is the financial investment required to start and/or run a business.

Cash Flow: is the movement of money into and out of a company. When more comes in than goes out, it is said to be a positive cash flow. A negative cash flow is when more goes out than comes in.

Company Culture: is the term give to the shared values and practices of the employees. Note that the actual culture may not match the published culture.

Continuous Improvement Plan (CIP): is a set of activities designed to bring gradual, but continual improvement to a process through constant review. The Shewhart Cycle is among the best known.

Cost of Goods Sold (CGS): are the costs directly related to the purchase or production of whatever the company sells.

Cost of Sales: are the costs directly related to the purchase or production of whatever the company sells.

Deming Cycle: is a set of activities (Plan, Do, Check, Act) designed to drive continuous improvement. Initially implemented in manufacturing, it has broad applicability in business. First developed by Walter Shewhart, it is more commonly called the Deming cycle in Japan where it was popularized by Edwards Deming.

Earnings Statement: is a standard financial document that summarizes a company's revenue and expenses for a specific period of time, usually one quarter of a fiscal year and the entire fiscal year.

EBITDA: is an abbreviation for Earnings before Interest, Tax, Depreciation and Amortization. It reports what the company would have earned during the period if it did not have to pay interest on its debt; didn't have to pay taxes; and had depreciated the full value of all assets at their acquisition. It is roughly equivalent to the Operating Income line in the Income Statements.

The services are usually provided by a third-party, rather than the company itself, and the company receives only summary statistical data from the service provider. Employee's names and services received are kept confidential.

Expenses: are the costs of doing business that result from generating revenue. They include parts, salaries, utilities, etc.

The FASB is a private body whose mission is to "establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors and users of financial information." The FASB publishes GAAP.

Fiscal Year (FY): is a twelve-month accounting period that usually, but not necessarily, starts on January 1.

Fixed Assets are the non-liquid assets that are required for the company's day-to-day operations. They include facilities, equipment, and real property.

Fixed Costs: are expenses that don't change based on production or sales volumes. They include salaries, rent, insurance, etc.

Generally Accepted Accounting Principles (GAAP): refers to a set of widely accepted accounting standards, set by the FASB, and used to standardize financial accounting of public companies.

Goals: are objective, measurable expectations set to measure progress toward desired results.

Gross Profit: equals sales revenue minus the cost of goods sold.

Gross Revenue: is money generated by all of a company's operations, before deductions for expenses.

H1: is a shorthand expression for the first half of a company's fiscal year. For a fiscal year that starts in January, H1 is January through June. The US Government's fiscal year starts in October, so H1 there refers to October through March.

H2: is a shorthand expression for the second half of a company's fiscal year. For a fiscal year that starts in January, H2 is July through December. The US Government's fiscal year starts in October, so H2 there refers to April through September.

Income Statement: is a standard financial document that summarizes a company's revenue and expenses for a specific period of time, usually one quarter of a fiscal year and the entire fiscal year.

Insider: is someone who has access to the important information about a company that affects its stock price or might influence investors decisions.  People who are not employees of the company may be company insiders. Auditors, outside counsel, brokers and analysts may fit the definition.

Insider Trading: is the trading in a security (buying or selling a stock) based on material information that is not available to the general public.  It is prohibited by the US Securities and Exchange Commission (SEC) because it is unfair and would destroy the securities markets by destroying investor confidence.

Intellectual Property (IP): is all of a company's patents, trademarks, service marks, trade names, trade secrets, and copyrights. It is distinguished from capital property.

Key Performance Indicators (KPI): are quantifiable measurements, agreed to beforehand, that reflect the critical success factors (of the company, department, project, etc.)

Key Success Indicators (KSI): are quantifiable measurements, agreed to beforehand, that reflect the critical success factors (of the company, department, project, etc.)

KSA: is Human Resources (HR) shorthand for Knowledge, Skills and Abilities. These attributes can be used to describe an individual, a position, or both

Liabilities: are all of a company's financial obligations that have a negative value.

Long Term Assets: are the non-liquid assets that are required for the company's day-to-day operations. They include facilities, equipment, and real property.

Market Share: a company's market share is the percentage of any of its markets that it holds. Companies will often discount their products in order to saturate the marketplace with them and thereby gain a bigger market share.

Metrics: are a set of measurements that quantify results. Performance metrics quantify the units performance. Project metrics tell you whether the project is meeting its goals. Business metrics define the business' progress in measurable terms.

Non-Disclosure Agreement (NDA): is a legal contract that allows a company to share its intellectual property (IP) with others, whose input it needs, without unduly jeopardizing that information.

Objective: a business objective is something the business is aiming toward or a strategic position it is working to attain. Usually it is a step in the strategy. Objectives are similar to goals, but often have success/failure rather than quantifiable metrics.

Opportunities: A company's opportunities are the gains it has the potential to realize. It may have the potential to gain market share, the ability to raise cash by divesting of less-profitable units, etc. Opportunities are also part of a SWOT analysis, the abbreviation for strengths, weaknesses, opportunities, and threats.

Paradigm: is a pattern or example. In business it is a framework of behaviors or set of rules action governing people's actions and assumptions.

Plan, Do, Check, Act (PDCA): is a cycle of activities designed to drive continuous improvement. Initially implemented in manufacturing, it has broad applicability in business. First developed by Walter Shewhart, it was popularized by Edwards Deming.

Profit and Loss Statement: is a standard financial document that summarizes a company's revenue and expenses for a specific period of time, usually one quarter of a fiscal year and the entire fiscal year.

Q1: is a shorthand expression for the first quarter of a company's fiscal year. For a fiscal year that starts in January, Q1 is January through March. The US Government's fiscal year starts in October, so Q1 there refers to October through December.

Q2: is a shorthand expression for the second quarter of a company's fiscal year. For a fiscal year that starts in January, Q2 is April through June. The US Government's fiscal year starts in October, so Q2 there refers to January through March.

Q3: is a shorthand expression for the third quarter of a company's fiscal year. For a fiscal year that starts in January, Q3 is July through September. The US Government's fiscal year starts in October, so Q3 there refers to April through June.

Q4: is a shorthand expression for the fourth quarter of a company's fiscal year. For a fiscal year that starts in January, Q4 is October through December. The US Government's fiscal year starts in October, so Q4 there refers to July through September.

Request for Proposal (RFP): is a document issued when an organization wants to buy something and chooses to make the specifications available to many other companies so they can submit competitive bids.

Request for Quotation (RFQ): is a document issued when an organization wants to buy something and chooses to make the specifications available to many other companies so they can submit competitive bids.

Research and Development: refers to the line on an income statement showing the amount of money a company has re-invested during the period to find and develop new products.

Restricted Stock: Units of stock with restrictions on when they can be sold. Usually issued as partial compensation for employees and directors. The restriction usually lifts in 3 to 5 years when the stock vests.

Return on Assets (ROA): is a measure of a company's profitability. It is calculated as earnings divided total average assets and is expressed as a percentage.

Return on Investment (ROI): is a measure of a company's ability to use its assets to generate additional value for shareholders. It is calculated as Net Profit divided by Net Worth, and expressed as a percentage.

Revenue: is money generated by a company's operations, before deductions for expenses.

Sales Revenue: is money generated by a company's sales operations, before deductions for expenses.

Shewhart Cycle: Named for Walter Shewhart who discussed the concept in his 1939 book, "Statistical Method From the Viewpoint of Quality Control", it is the continuous improvement cycle of Plan, Do, Check, Act.

Strategy: is the plan you develop to help you achieve your vision. It requires an evaluation of your organization internally, but also of the external and environmental factors, especially competitors, that can impact you.

Strengths: A company's strengths are the things it does well. It may have a dominant market share or have a low turnover rate, etc. Strengths are also part of a SWOT analysis, the abbreviation for strengths, weaknesses, opportunities, and threats.

Subject Matter Expert (SME): is an individual who understands a business process or area well enough to answer questions from people in other groups who are trying to help. It is most commonly used to describe the people who explain the current process to IT and then answer their questions as they try to build a technology system to automate or streamline the process.

SWOT: is the abbreviation for strengths, weaknesses, opportunities, and threats. These four factors provide a framework which an organization can use to conduct a structured analysis of its operations.

Tactics: are the specific actions, sequences of actions, and schedules you use to fulfill your strategy. If you have more than one strategy you will have different tactics for each.

Theory X: Douglas McGreagor's Theory X states that some people have an inherent dislike for work and will avoid it whenever. These people need to be controlled and coerced by their managers to achieve production. See Theory Y for the opposite.

Theory Y: Douglas McGreagor's Theory Y states that some people see work as natural will be self-directing if they are committed to the objectives. The manager's role with these people is to help them achieve their potential. See Theory X for the opposite.

Threats: A company's threats are the dangers it faces, either from within or from outside. Threats can be things like a new low-cost competitor, possible new government regulations, etc. Threats are also part of a SWOT analysis, the abbreviation for strengths, weaknesses, opportunities, and threats.

TLA: is the abbreviation for three letter acronym. TLA is itself a TLA.

Top Line: refers to the top line of an Income Statement. The top line shows the Total Sales Revenue. When a company goal is to increase the top line, it means to concentrate on increasing gross sales.

Variable Costs: are expenses that vary based on production volumes. They include material, labor, production utilities, etc.

Vesting: to give someone control over their stock or stock options.  When employees are given stock options or restricted stock, they often do not gain control over the stock or options for a period of time. This period is known as the vesting period and is usually 3 to 5 years. During the vesting period the employee cannot sell or transfer the stock or options.  Typically, a quarter of the options in a stock option grant, for example, will vest each year for a four-year period.

Vision: Your organization's Vision is the over-riding principle that guides the organization. It defines what you want the organization to be. The vision is often the dream of the founder or leader.

Weaknesses: A company's weaknesses are the things it does not do well or that others do better. It may have a high turnover, be more concerned about processes than progress, etc. Weaknesses are also part of a SWOT analysis, the abbreviation for strengths, weaknesses, opportunities, and threats.