ECONOMICS DEFINTION OF TERMS

1. Accounting – is the process recording all the transactions of the company which affect any
investment of capital, so that at any time the results of the investments may be known.

2. Acid – Test Ratio – an index of short term paying ability.

3. Amortization – is any method of repaying a debt, the principal and interest included by a series
of equal payments at equal interval of time.

4. Amortization Loan – a loan that is discharge or repaid by a uniform series of payments

extending over its duration.

5. Annuity – is a series of equal payments occurring at equal period of time.

6. Annuity Due – is one where the payments are made at the start of its period, beginning from the
first period.

7. Appraiser – the person engaged in the task of valuation.

8. Assets – anything on value that is owned by an enterprise.

9. Authorized Capital – grand total of the assests and operational capability of the corporation.

10. Benefit Cost Ratio – it is the ration of the difference between the benefits and the disbenefits to
the cost associated with the particular project.

11. Bid Bulletin – additional information of perspective bidders on contract documents issued prior
to the bidding date.

12. Bilateral Monopoly – a market situation where there is one seller and one buyer.

13. Bilateral Oligopoly – a market situation where there are few sellers and few buyers.

14. Bond – it is the certificate of indebtedness of a corporation usually for a period and less than 10
years and GUARANTEED by mortgage on certain assets of a corporation of subsidiaries.

15. Bookkeeping – is the systematic recording of all business transactions.

16. Book Value – it is worth the property which is listed on the book of accounts of an enterprise. It
is original cost minus the total depreciation.

17. Borrowed Funds or Capital – are those capital supplied by others on which fixed interest must
be paid and debt must be replied at a specific time.

18. Breakeven Point – it is the point in economic studies whereby there is no profit.

19. Callable Bond – a bond that contains clauses permitting repayment before maturity.

20. Capacity of Plant Factor – it is the ratio between the average load and the total available
capacity.

21. Capital Gain – an increase in the value of a capital asset.

22. Capital Loss – the reduction in the money value of a capital asset.

23. Capitalized Cost – is the sum of the first cost and the present worth of all costs of replacement,
operation and maintenance for a long time or forever.

24. Cash Flow Diagram – it is the graphical representation of cash flows which are drawn in time
scale.

25. Certificate of Deposit – a negotiable claim issued by a bank of lieu of term deposit.

26. Chairman of the Board – highest position in the corporation.

27. Collateral Bond – a type of bond whose security is the stocks or bonds of a well-established
subsidiary of the corporation.

28. Commodity – any particular raw material or primary product.

29. Common Stock – it represents ordinary ownership without special guarantees of return.

30. Construction Cost – it is the sum of all cost necessary to prepare a construction project for
operation.
31. Corporation – an aggregation of individuals formed for the purpose of conducting a business
and recognized by law as fictitious person.

32. Coupon – a document that shows proof of legal ownership of a financial security.

33. Coupon Cond – a type of bond having a coupon attached to the bond for each interest payment
that will come due during life of the bond.

34. Currency Depreciation – it denotes the fall in the exchange rate of one currency in terms of
others. The usually applies to floating exchange rates.

35. Currency Devaluation – the deliberate lowering of the price of the nation’s currency in terms of
the accepted standard.

36. Current Assets – this consist of cash and account receivable during the next period or any other
material which will be sold.

37. Current Liabilities – represents claim against owners which must be paid in the near future.

38. Debenture Bond – a bond without any security behind it except a promise to pay on a certain
date by issuing corporation.

39. Declining Balance Method – a method of computing depreciation in which the annual charge is
a fixed percentage of the depreciated book value at the beginning of the year to which the
depreciation applies.

40. Deferred Annuity – it is a series of equal payments occurring at equal interval of time where the
first payment is made after several periods, after the beginning of the period.

41. Deflation – reduction in the level of national income and output usually accompanied by the fall
in the general price level.

42. Demand – it is the quantity of certain commodity that is brought at a certain price at a given
place and time.

43. Demand Factor – it is the ratio between the maximum power demand and the sum of the
connected loads of the system.
44. Demented Persons – parties whose consent or signature in a contract is not considered
intelligent.

45. Depletion – it is the decrease in the worth or value of the property due to the gradual extraction
of its contents.

46. Depletion Cost – annual charge that is made for the maintenance of investment in wasting assets
such as gas wells, oils, mines.

47. Depreciation – it is decrease in value of the physical property due to the passage of time.

48. Depreciation Cost – annual charge that is made during the period of the useful life for the
services rendered by the investment in the building, machinery and equipment in producing the
products.

49. Depreciation Recovery – the present worth of all the depreciation over the economic life of the
item.

50. Development Cost – it is the sum of all cost incurred by an investor of a project up to the time
that the project is accepted by those who will promote it.

51. Differential Cost – it is the ratio of a small increment of cost and a small increment of output.

52. Direct Labor – it is the actual work applied directly in the process of manufacturing a certain
product.

53. Direct Materials – these are the materials which are included in the financial product itself.

54. Discount – it is the difference between the present worth and the future worth of a negotiable
paper.

55. Diversity Factor – is the ration between the sum of the maximum demands of the separate parts
of the system and the maximum demand of the entire system.

56. Dividends – profit earned by a corporation, which is periodically distributed to the stockholders.

57. Duopsony – a market station where there are only two buyers with many sellers.
58. Economics – it is the study of the wealth, its value, creation and distribution.

59. Economic life – the length of time which the property may be operated at a profit.

60. Economic return – the profit derived from a project or business enterprise without consideration
of obligations to financial contributions or claims of other based on profit.

61. Effective Interest – the true value of interest rate computed by equations for compound interest
for a one-year period.

62. Effective Rate of Interest – it is the actual rate of interest on the principal for one year.

63. Elastic Demand – it occurs when a decrease in selling price will cause a greater than
proportionate increase in the volume of sales.

64. Engineering Economy – it is the analysis and evaluation of the factors that will affect the
economic success of engineering projects to the end that a recommendation can be made which
will ensure the best use of capital.

65. Equipment Obligations Bond – a type of bond whose guaranty is in lien on railroads
equipments.

66. Equity – is the claims of anyone against the assets of the enterprise.

67. Escalatory Clause – the provision in the contract that indicates the possible adjustments of
material cost and labor cost.

68. Exact Simple Interest – an interest based on the number of days, 365 for an ordinary year and
366 days for a leap year.

69. Face of Par Value – it is the amount stated in the bond.

70. Fair Value – it is the value which is disinterested third party, different from buyer or seller, will
determine in order to establish a price that is fair and acceptable to both the buyer and the seller.