Earnest Money A term used to describe money that one contracting party gives to another at the time of entering into the contract in order to bind the bargain, and which will be forfeited by the donor if he fails to carry out the contract.
Earnings Per Share (EPS) The profitability ratio of net income available to common stockholders to the number of common shares outstanding.
Earnings Report A profit and loss statement showing earnings or losses for a given period.
EBCDIC Extended Binary Coded Decimal Interchange Code, a standard code for representing letters, digits, and other characters on computer systems.
Economic Alliances Agreements among independent nations to promote trade.
Economic Order Quantity (EOQ) Compares the cost of buying an item in various quantities with the cost of carrying those units in stock, and identifies the point at which the cost of the item and the cost to store it are equal.
Economic Order Quantity Model (EOQM) A technique for balancing purchase, ordering, carrying, and stock-out costs to derive the optimum quantity for a purchase order.
Economic Profit A firm’s total revenue minus its explicit and implicit costs.
Economic Regulations Government measures aimed at controlling prices, output, market entry and exit, and product quality in situations in which because of economies of scale average production costs are lowest when the market is served by only one or a few firms.
Economic Rent The portion of a resource’s total earnings above its opportunity cost; earnings above the amount necessary to keep the resource in its present use.
Economic System The method society uses to allocate its resources (land, labor, capital, and entrepreneurship) to satisfy its needs.
Economic Theory A simplification of reality designed to capture the important elements of the relationship under consideration.
Economics The study of how people choose to use their scarce resources in an attempt to satisfy unlimited wants.
Economies of Scale Forces that cause reduction in a firm’s average cost as the scale of operations is increased in the long run.
Economies of Scope Forces that make it cheaper for a firm to produce two or more different products.
Effective Rate The market rate of interest at the time bonds are issued.
Effectiveness Lag The time necessary for changes in monetary or fiscal policy to have an effect on the economy.
Efficiency The condition that exists when there is no way resources can be reallocated to increase the production of one more good without decreasing the production of another.
Efficiency Ratios Ratios used to measure how efficiently a business uses and controls its assets.
Efficiency Wage Theory The idea that keeping wages above the level required to attract a sufficient pool of workers makes workers compete to keep their jobs and results in greater productivity.
Elastic Demand The type of demand that exists when a change in price has a relatively large effect on quantity demanded; the percentage change on quantity demanded, exceeds the percentage change in price.
Electronic Data Interchange (EDI) The transmission of business data from one firm’s computer to another firm’s computer. Also referred to as Electronic Business Data Interchange (EBDI).
Electronic Funds Transfer (EFT) The payment system that uses computerized electronic impulses rather than paper to effect a cash transaction.
Electronic Hand-Off The ability to transmit completed work in an electronic form and format that makes it immediately usable by subsequent work processes.
Electronic Mail (E-Mail) The use of a computerized network to create, transmit, store, and display messages.
Electronic Market The use of computers and telecommunications to create direct links between multiple buyers and sellers.
Embargo Legislation that prohibits firms from importing some or all the products made in a given country.
Embezzlement The fraudulent appropriation by one person, acting in a fiduciary capacity, of the money or property of another.
Eminent Domain The power of the sovereign government to take private property for public purposes.
Empirical Relationship In a mathematical model, an equation or graph that summarized historical relationships between variables.
Employee Stock Ownership Plan (ESOP) A stock bonus plan whereby employees gain ownership in the firm for which they work.
Employee-Assistance Program (EAP) Provides counseling and other help to employees having emotional, physical, or other personal problems. Usually a crisis intervention situation which gets referred to professionals in the field.
Empowerment Increasing the decision-making discretion of workers.
Encoding The process of converting data from an original form to a form for transmission.
Encumbrance (Incumbrance) A burden on either the title to land or thing or upon the land or thing itself.
Encryption The process of coding data to make it meaningless to anyone who steals it.
Encumbrance A burden on either the title to land or thing or upon the land or thing itself.
End-of-Month Terms (EOM) Shipments during a month are invoiced in a single statement dated as of the last day of that month or the first day of the following month.
End-User Development The development of information systems by end-users rather than by information professionals.
End-User Software General purpose software tools designed for use by users without the assistance of programmers.
Endorsement (Indorsement) Writing one’s name upon paper for the purpose of transferring the title.
Endorsement (Types) See “blank endorsement, special endorsement restrictive endorsement, qualified endorsement and conditional endorsement”
Endorser A person placing his signature on an negotiable instrument otherwise than as maker, drawer or acceptor is deemed to be an endorser.
Endowment Life insurance that combines the characteristics of savings and insurance; the policy holder collects a stated sum if he or she is living when the policy matures.
Enjoin To require performance or abstention from some act through issuance of an injunction.
Entity The artificial person created when a corporation is organized for legal purposes.
Entrepreneur An individual who is willing to take risks in return for profits.
Entrepreneurial Ability Managerial and organizational skills combined with the willingness to take risk.
Entrepreneurship A process by which individuals pursue opportunities, fulfilling needs and wants through innovations without regard to the resources they currently control.
Equal Credit Opportunity Act (ECOA) Amendment to the Consumer Credit Protection Act, prohibiting creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age and receipt of public assistance.
Equal Protection A principle of the Fifth and Fourteenth Amendments to the Constitution, ensuring that individuals under like circumstances, shall be accorded the same benefits and burdens under the law of the sovereign.
Equilibrium The condition that exists in a market, when the plans of buyers match the plans of sellers.
Equilibrium Price The point where what the consumers are willing to pay is equal to what the producers are willing to accept for a product.
Equipment Goods that are used or bought for use primarily in business.
Equitable Action An action taken in a court of equity which gives the plaintiff what he bargains for. A suit for specific performance of a contract is an equitable action.
Equitable Conversion An equitable principal that, for certain purposes, permits real property to be converted to personal property.
Equitable Mortgage A written agreement to make certain property security for a debt, and upon the faith of which the parties have acted in making advances and loans, thus creating a debt.
Equity Also called net assets. It is the residual interest in the assets of an entity after its liabilities have been deducted.
Equity Court The laws of trust, divorce, rescission of contracts for fraud, injunction, and specific performance are enforced in the courts of equity.
Equity Capital The long-term capital raised by selling stock.
Equity Investors Investors who are owners of the business.
Equity Method A method of accounting for investments in common stock, by which the investment account is adjusted for the investor’s share of periodic net income and property dividends of the investee.
Equity of Redemption The right a mortgagor has to redeem his property after it has been forfeited for nonpayment of the debt it secured.
Equity Security A security that represents ownership in a business, such as stock in a corporation.
Equivalent Units of Production The number of units that could have been completed within a given accounting period with respect to direct materials and conversion costs. Equivalent units are used to allocate departmental costs incurred during the period between completed units and in process units at the end of the period.
Erasable Optical Disk An optical disk permitting users to read or modify data stored in any location.
Ergonomics The study of the interplay of human characteristics and the characteristics of the machines they use.
Escape Clause A provision in a contract allowing a party to withdraw from an agreement or change its terms.
Escrow An agreement under which a grantor, promissor or obligor places the instrument upon which he is bound with a third person called an escrow holder, until the performance of a contract or the happening of an event stated in the agreement permits the escrow holder to make delivery or performance to the grantee, promisee, or obligee.
Estate All the property of a living, deceased, bankrupt, or insane person.
Estoppel When one ought to speak the truth but does not, and by one’s acts, representations or silence intentionally or through negligence induces another to believe certain facts exist, and the other person acts to his detriment on the belief that such facts are true, the first person is estopped to deny the truth of the facts.
Et Al Any other persons.
Ethics 1. The standards that govern moral conduct;
2. Rules and principles that define right and wrong conduct;
3. The branch of philosophy dealing with principles of right or wrong related to other people.
Eviction An action to expel the tenant from the estate of the landlord.
Evidence 1. Testimony of witnesses and facts presented to the court and jury by way of writings and exhibits, which impress the minds of the court and jury, to the extent that an allegation has been proven;
2. The rules of law, called the law of evidence, that determines what evidence shall be introduced in a trial.
Exchange The market place in which shares, options and futures on stock, bonds, commodities and indices are traded. The principal U.S. stock exchanges are the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and the National Association Of Securities Dealers (NASDAQ).
Exchange Functions Buying and selling activities; complimentary activities that relay products to their intended users.
Exchange Rate The rate at which one currency can be converted into another currency.
Exclusive Dealing The situation that occurs when a producer inhibits customers from purchasing from other sellers.
Exclusive Dealing Contract A contract under which a buyer agrees to purchase a certain product exclusively from the seller or in which the seller agrees to sell all his products to the buyer.
Exclusive Distribution Limiting distribution to one retailer or wholesaler in a geographic area.
Exculpatory Clause A provision in a contract whereby one of the parties attempts to relieve itself of liability for breach of a legal duty.
Executed Applies to contracts or other written instruments, means signed, sealed and delivered. Effective legal obligations have thus been created.
Execution The process of doing work rather than planning work or performing control activities related to work that has occurred.
Execution (legal definition) Execution of a judgment is the process by which the court, through the sheriff, enforces the payment of the judgment received by the successful party.
Executive Information System (EIS) An interactive system providing flexible access to information for monitoring operating results and business conditions.
Executor The person appointed to administer the estate upon the death of a party and to dispose of it according to the parties intentions.
Executory Until the performance required in a contract is completed, it is said to be executory as to that part not executed. A lease is an executory contract.
Exemplary Damages A sum assessed by the jury in a tort action, over and above the compensatory damages, as punishment, in order to make an example of the wrongdoer, and to deter like conduct by others.
Exempt Employees Those who are not required to be paid overtime under the Fair Standards Act.
Exemption The condition of a person who is free or excused from a duty imposed by some rule of law, statutory or otherwise.
Expedited Check Processing Speedier check clearing provided by the clearing bank if the depositor is willing to pay the bank the extra charge involved.
Expense The amount of assets or services used in the process of earning revenue.
Expense Budget A budget that lists the primary activities undertaken by a unit and allocates a dollar amount to each.
Expert System (ES) 1. An information system that supports the work of professionals in complex situations requiring expert knowledge in a well defined area;
2. Software programs that encode the relevant experience of a human expert.
Expiration Date The date a legal document or contract legally expires and is no longer legally effective.
Explanation Module The part of an expert system available to the user to explain how a particular fact was inferred or why a particular question is being asked.
Export-Import Bank Attempts to promote international trade by lending money to importers and exporters who have not been able to obtain funds from other sources and by lending money to foreign governments to help with the development of international trade.
Exporting Selling goods and services abroad.
Express Warranty When a seller makes some positive representation concerning the nature, quality, character, use, and purpose of goods, which induces the buyer to buy; and the seller intends the buyer to rely thereon, the seller has made an express warranty.
Extended Terms May be regarded as a change in price favoring a particular customer. If extended terms are granted to one customer, they should be available to others under comparable circumstances.
Extension The debtor promises to pay his creditors in full over a period of time.
External Specification The document explaining the results of a detailed requirements analysis.
Externally A cost or benefit that falls on a third party and is therefore ignored by those who take part in the transaction.
Extortion An attempt by threat, force, or fear or under the guise of official right to collect money or property which is not legally due.
Extra Dating An extension of normal terms granted by the credit manager for the purpose of assisting a customer in difficult times. Considered an after the sale event. see “additional dating”
Extraordinary Items Events or transactions that are unusual and infrequent.

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