(J-P) marketing and finance glossary J-P

Marketing:-

New product	A new product can be defined as a good, service or idea that is “perceived” by some potential customers as new. It may have been available for some time, but many potential customers have not yet adopted the product nor decided to become a regular user of the product.
Niche marketing	Niche marketing refers to the exploitation of comparatively small market segments by businesses that decide to concentrate their efforts. Niche segments exist in nearly all markets – for example the self-build sports car segment of the motor industry
Non-personal communication	Methods of promotion that do not generate any personal feedback. Advertising is the best example of this
Normal goods	Normal goods have a positive income elasticity of demand so as income rise more is demand at each price level

Objectives	Measurable aims of a business set for a given period (e.g. marketing objectives for the next year)
Occasion segmentation	A basis of segmenting a market based on occasions when buyers get the idea to make a purchase, actually buy, or use a purchased item.
Opportunities	Opportunities are any feature of the external environment which creates conditions that a business can exploit to its advantage. If the business is successful in exploiting opportunities, then it will be better placed to achieve its objectives.
Own-label brand	Own-label brands are created and owned by businesses that operate in the distribution channel – often referred to as “distributors”. Often these distributors are retailers, but not exclusively. Sometimes the retailer’s entire product range will be own-label. However, more often, the distributor will mix own-label and manufacturers brands

Packaging	The activities of designing and producing the container or wrapper for a product
Penetration pricing	Penetration pricing involves the setting of lower, rather than higher prices in order to achieve a large, if not dominant market share
Penetration strategy	A marketing strategy based on low prices and extensive advertising to increase a product's market share. For penetration strategy to be effective the market will have to be large enough for the seller to be able to sustain low profit margins.
Personal selling	Oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to "close the sale
Porter’s Five Forces Model	An analytic model developed by Michael E. Porter. The five forces in terms of which the model analyses businesses and industries are: Buyers, Suppliers, Substitutes, New Entrants and Rivals
Portfolio planning	Portfolio planning is the process of managing groups of brands and product lines
Positioning	Positioning is how a product appears in relation to other products in the market
Pre-emptive pricing	Pre-emptive pricing is a strategy involves setting low prices in order to discourage or deter potential new entrants to the suppliers market. It is especially suited to markets in which the supplier does not hold a patent, or other market privilege and entry to the market is relatively straightforward.
Prestige pricing	Prestige pricing refers to the practice of setting a high price for an product, throughout its entire life cycle – as opposed to the short term ‘opportunistic’, high price of price ‘skimming’. This is done in order to evoke perceptions of quality and prestige with the product or service
Price	The price of a product may be seen as a financial expression of the value of that product
Price discrimination	Price discrimination occurs when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs
Price elasticity of demand	Price elasticity of demand measures the responsiveness of a change in demand for a product following a change in its own price
Price sensitivity	Price sensitivity is the effect a change in price will have on customers
Price skimming	Price skimming involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market
Primary research data	Primary market data is data collected specifically for the market research project and obtained directly from the relevant source
Problem/Need recognition	The first stage in the buying process where the potential customer recognises that a problem or a need can be met by buying a product or a service
Product	A product is defined as anything that is capable of satisfying customer needs
Product class	Product class is a broad category of product such as cars, washing machines, newspapers.
Product form	Within a product class, there are different forms that the product can take. For example, people carriers or two-seater sports cars are product forms within the motor cars product class
Product group	A product group (or product line) is a group of brands that are closely related in terms of their functions and the benefits they provide
Product life cycle	The course of a product's sales and profitability over its lifetime. The model describes five stages, each of which represents a different opportunity for the marketer: - Development - Introduction - Growth - Maturity - Decline
Product map	A product map defines the market in terms of the way buyers perceive key characteristics of competing products
Product mix	The set of all product lines and items that a particular business offers for sale to buyers
Product quality	The ability of a product to perform its functions (“fit for purpose”). Quality is a function of several factors including reliability and ease of use
Promotion	One of the four “P’s” of the marketing mix. Promotion is all about businesses communicating with customers
Promotional mix	The promotional mix consists of a blend of five main kinds of promotional tools: advertising; direct marketing; personal selling; sales promotion and public relations
Psychographic segmentation	Psychographic (or “lifestyle”) segmentation seeks to classify people accordingly to their values, opinions, personality characteristics and interests.
Public relations	The planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics
Publicity	Promotional activities designed to promote a business and its products by obtaining media coverage not paid for by the business
Pull promotion	Pull promotion, in contrast to Push promotion, addresses the customer directly with a view to getting them to demand the product, and hence “pull” it down through the distribution chain. It focuses on advertising and above the line activities. See also 'push promotion'
Purchase decision	The stage in the customer buying process when the purchase decision is actually made
Push promotion	Push promotion relies on the next link in the distribution chain - e.g. a wholesaler or retailer - to “push” out products to the customer. It revolves around sales promotions - such as price reductions and point of sale displays - and other below the line activities. See also 'Sales Promotion'

Finance :-

J

Junk bond A bondwith a credit rating of BB+ or lower. These debts are considered very risky by the ratings agencies. Typically the bonds are traded in markets at a price that offers a very high yield(return to investors) as compensation for the higher risk of default.

K

Keynesian economics The economic theories of John Maynard Keynes. In modern political parlance, the belief that the state can directly stimulate demand in a stagnating economy, for instance, by borrowing money to spend on public works projects such as roads, schools and hospitals.

L

Lehman Brothers A US investment bank, whose collapse in September 2008 sparked the most intense phase of the financial crisis.

Leverage Leverage, or gearing, means using debt to supplement investment. The more you borrow on top of the funds (or equity) you already have, the more highly leveraged you are. Leverage can increase both gains and losses. Deleveraging means reducing the amount you are borrowing.

Liability A debt or other form of payment obligation, listed in a company's accounts.

Libor London Inter Bank Offered Rate. The rate at which banks in London lend money to each other for the short-term in a particular currency. A new Libor rate is calculated every morning by financial data firm Thomson Reuters based on interest rates provided by members of the British Bankers Association.

Limited liability Confines an investor's loss in a business to the amount of capital they invested. If a person invests £100,000 in a company and it goes under, they will lose only their investment and not more.

Liquidation A process in which assets are sold off for cash. Liquidation is often the outcome for a company deemed irretrievably loss-making. In that case, its assets are sold off individually, and the cash proceeds are used to repay its lenders. In liquidation, a company's lenders and other claimants are given an order of priority. Usually the tax authorities are the first to be paid, while the company's shareholders are the last, typically receiving nothing.

Liquidity How easy something is to convert into cash. Your current account, for example, is more liquid than your house. If you needed to sell your house quickly to pay bills you would have to drop the price substantially to get a sale.

Liquidity crisis A situation in which it suddenly becomes much more difficult for banks to obtain cash due to a general loss of confidence in the financial system. Investors (and, in the case of a bank run, even ordinary depositors) may withdraw their cash from banks, while banks may stop lending to each other, if they fear that some banks could go bust. Because most of a bank's money is tied up in loans, even a healthy bank can run out of cash and collapse in a liquidity crisis. Central banks usually respond to a liquidity crisis by acting as "lender of last resort" and providing emergency cash loans to the banks.

Liquidity trap A situation described by economist John Maynard Keynesin which nervousness about the economy leads everybody to cut back on their spending and to hold cash, even if the cash earns no interest. The widespread fall in spending undermines the economy, which in turn makes households, banks and companies even more nervous about spending and investing their money. The problem becomes particularly intractable when - as in Japan over the last 20 years - the weak spending leads to falling prices, which creates a stronger incentive for people to hold onto their cash, and also makes debts more difficult to repay. In a liquidity trap, monetary policy can become useless, and Keynes said that the onus is on governments to increase their spending.

Loans-to-deposit ratio For financial institutions, the sum of their loans divided by the sum of their deposits. It is used as a way of measuring a bank's vulnerability to the loss of confidence in a liquidity crisis. Deposits are typically guaranteed by the bank's government and are therefore considered a safer source of funding for the bank. Before the 2008 financial crisis, many banks became reliant on other sources of funding - meaning they had very high loan-to-deposit ratios. When these other sources of funding suddenly evaporated, the banks were left critically short of cash.

M

Mark-to-market (MTM) Recording the value of an asseton a daily basis according to current market prices. So for a Greek governmentbond, the MTM is how much it could be sold for today. Banks are not required to mark to market investments that they intend to hold indefinitely (in what is called the "banking book" in accounting jargon). Instead, these investments are valued at the price at which they were originally purchased, minus any impairment charges - which might arise following a defaultby the borrower.

Monetary policy The policies of the central bank. A central bank has an unlimited ability to create new money. This allows it to control the short-term interest rate, as well as to engage in unorthodox policies such as quantitative easing - printing money to buy up government debts and other assets. Monetary policy can be used to control inflation and to support economic growth.

Money markets Global markets dealing in borrowing and lending on a short-term basis.

Monoline insurance Monolines were set up in the 1970s to insure against the risk that a bondwill default. Companies and public institutions issue bonds to raise money. If they pay a fee to a monoline to insure their debt, the guarantee helps to raise the credit rating of the bond, which in turn means the borrower can raise the money more cheaply.

Mortgage-backed securities (MBS) Banks repackage debts from a number of mortgages into MBS, which can be bought and traded by investors. By selling off their mortgages in the form of MBS, it frees the banks up to lend to more homeowners.

MPC The Monetary Policy Committee of the Bank of England is responsible for setting short-term interest rates and other monetary policy in the UK, such as quantitative easing.

N

Naked short selling A version of short selling, illegal or restricted in some jurisdictions, where the trader does not first establish that he is able to borrow the relevant asset before selling it on. The aim with short selling is to buy back the asset at a lower price than you sold it for, pocketing the difference.

Nationalisation The act of bringing an industry or assetssuch as land and property under state control.

Negative equity Refers to a situation in which the value of your house is less than the amount of the mortgage that still has to be paid off.

O

OECD The Organisation for Economic Co-operation and Development is an association of industrialised economies, originally set up to administer the Marshall Plan after World War II. The OECD provides economic research and statistics, as well as policy recommendations, for its members.

Options A type of derivativethat gives an investor the right to buy (or to sell) something - anything from a share to a barrel of oil - at an agreed price and at an agreed time in the future. Options become much more valuable when markets are volatile, as they can be an insurance against price swings.

P

Ponzi scheme Similar to a pyramid scheme, an enterprise where funds from new investors - instead of genuine profits - are used to pay high returns to current investors. Named after the Italian fraudster Charles Ponzi, such schemes are destined to collapse as soon as new investment tails off or significant numbers of investors simultaneously wish to withdraw funds.

Preference shares A class of shares that usually do not offer voting rights, but do offer a superior type of dividend, paid ahead of dividends to ordinary shareholders. Preference shareholders often also have somewhat better protection when a company is liquidated.

Prime rate A term used primarily in North America to describe the standard lending rate of banks to most customers. The prime rate is usually the same across all banks, and higher rates are often described as "x percentage points above prime".

Private equity fund An investment fund that specialises in buying up troubled or undervalued companies, reorganising them, and then selling them off at a profit.

PPI The Producer Prices Index, a measure of the wholesale prices at which factories and other producers are able to sell goods in an economy.

Profit warning When a company issues a statement indicating that its profits will not be as high as it had expected. Also profits warning.

The Product Development Process

 In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product or service to market. There are two parallel paths involved in the NPD process : one involves the idea generation, product design, and detail engineering ; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.

There are several stages in the new product development process...not always followed in order:

 

Evaluate Opportunities and Select the Best Product Idea

If you’re starting your first business, you might have only one product idea. But existing organizations often have several ideas for new products, as well as improvements to existing ones. Where do they come from? They can come from individuals within the organization or from outside sources, such as customers. Typically, various ideas are reviewed and evaluated by a team of individuals, who identify the most promising ideas for development. They may rely on a variety of criteria: Does the proposed product fill an unmet need of our customers? Will enough people buy our product to make it commercially successful? Do we have the resources and expertise to make it?

Get Feedback to Refine the Product Concept

From the selected product idea, the team generates an initial product conceptproduct conceptDescription of what a new product will look like and how it will work. that describes what the product might look like and how it might work. Members talk both with other people in the organization and with potential buyers to identify customer needs and the benefits that consumers will get from the product. They study the industry in which the product will be sold and investigate competing products. They brainstorm various product designs—that is, the specifications for how the product is to be made, what it’s to look like, and what performance standards it’s to meet.

Based on information gathered through this process, the team will revise the product concept, probably pinpointing several alternative models. Then they’ll go back to potential customers and get their feedback on both the basic concept and the various alternatives. Based on this feedback, the team will decide what the product will look like, how it will work, and what features it will have.

Make Sure the Product Performs and Appeals to Consumers

The team then decides how the product will be made, what components it will require, and how it will be assembled. It will decide whether the product should be made in-house or outsourced to other companies. For products to be made in-house, the team determines where parts will be obtained. During this phase, team members are involved in design work to ensure that the product will be appealing, safe, and easy to use and maintain.

Design with Manufacturing in Mind

As a rule, there’s more than one way to make any product, and some methods are more expensive than others. During the next phase, therefore, the team focuses its attention on making a high-quality product at the lowest possible cost, working to minimize the number of parts and simplify the components. The goal is to build both quality and efficiency into the manufacturing process.

Build and Test Prototypes

A prototypeprototypePhysical model of a new product. is a physical model of the product. In the next phase, prototypes are produced and tested to make sure that the product meets the customer needs that it’s supposed to. The team usually begins with a preliminary prototype from which, based on feedback from potential customers, a more sophisticated model will then be developed. The process of building and testing prototypes will continue until the team feels comfortable that it has fashioned the best possible product. The final prototype will be extensively tested by customers to identify any changes that need to be made before the finished product is introduced.

Ramp Up Production and Run Market Tests

During the production ramp-up stageramp-up stageStage in the product development process during which employees are trained in necessary production processes and new products are tested., employees are trained in manufacturing and assembly processes. Products turned out during this phase are carefully inspected for residual flaws. Samples are often demonstrated or given to potential customers for testing and feedback.

Launch the Product

In the final stage, the firm starts ongoing production and makes the product available for widespread distribution.

(G-I) marketing and finance glossary G-I

Marketing

Gender segmentation	The segmentation of markets based on the sex of the customer. The cosmetic industry is a good example of widespread use of gender segmentation
Geographic segmentation	Geographic segmentation divides markets into different geographical units
Going-rate pricing	A pricing strategy that sets price largely based on the prices of competitors
Growth stage	The stage at which a product's sales rise rapidly and profits reach a peak, before levelling off into maturity.

Harvest	A strategy based on the Boston Matrix. Here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows.
Hold	A strategy based on the Boston Matrix. Here the company invests just enough to keep the SBU in its present position

Impulse buying	Behaviour that involves no conscious planning but results from a powerful, persistent urge to buy something immediately
Income elasticity of demand	Income elasticity of demand measures the relationship between a change in quantity demanded and a change in income
Industrial buyers	Industrial buyers are those who purchase items on behalf of their business or organisation
Industrial market	Industrial markets involve the sale of goods between businesses. These are goods that are not aimed directly at consumers.
Inferior goods	Inferior goods have a negative income elasticity of demand. Demand falls as income rises
Influencer	A person in a group buying situation (e.g. a family) who exerts significant influence in the final buying decision
Initiator	A person in a group buying situation (e.g. a family) who first suggests buying a particular product or service
Innovators	Innovators are those who adopt new products first. They are usually relatively young, lively, intelligent, socially and geographically mobile. They are often of a high socioeconomic group (“AB’s”).
Intensive distribution	Intensive distribution aims to provide saturation coverage of the market by using all available outlets
Internal marketing	The process of eliciting support for a company and its activities among its own employees, in order to encourage them to promote its goals. This process can happen at a number of levels, from increasing awareness of individual products or marketing campaigns, to explaining overall business strategy.
Introduction stage	A product's first appearance in the marketplace, before any sales or profits have been made
Involvement	The level of interest, emotion and activity which the consumer is prepared to expend on a particular purchase

Finance :-

G7 The group of seven major industrialised economies, comprising the US, UK, France, Germany, Italy, Canada and Japan.

G8 The G7 plus Russia.

G20 The G8 plus developing countries that play an important role in the global economy, such as China, India, Brazil and Saudi Arabia. It gained in significance after leaders agreed how to tackle the 2008-09 financial crisis and recession at G20 gatherings.

GDP Gross domestic product. A measure of economic activity in a country, namely of all the services and goods produced in a year. There are three main ways of calculating GDP - through output, through income and through expenditure.

Glass-Steagall A US law dating from the 1930s Great Depression that separated ordinary commercial banking from investment banking. Like the UK's planned ring-fence, the law was intended to protect banks which lend to consumers and businesses - deemed vital to the US economy - from the risky speculation of investment banks. The law was repealed in 1999, largely to enable the creation of the banking giant Citigroup - a move that many commentators say was a contributing factor to the 2008 financial crisis.

H

Haircut A reduction in the value of a troubled borrower's debts, imposed on, or agreed with, its lenders as part of a debt restructuring.

Hedge fund A private investment fund which uses a range of sophisticated strategies to maximise returns including hedging, leveraging and derivatives trading. Authorities around the world are working on ways to regulate them.

Hedging Making an investment to reduce the risk of price fluctuations to the value of an asset. Airlines often hedge against rising oil prices by agreeing in advance to to buy their fuel at a set price. In this case, a rise in price would not harm them - but nor would they benefit from any falls.

I

IIF The Institute of International Finance is a global trade association of the major banks.

IMF The International Monetary Fund is an organisation set up after World War II to provide financial assistance to governments. Since the 1980s, the IMF has been most active in providing rescue loans to the governments of developing countries that run into debt problems. Since the financial crisis, the IMF has also provided rescue loans, alongside the European Union governments and the ECB, to Greece, the Irish Republic and Portugal. The IMF is traditionally - and of late controversially - headed by a European.

Impairment charge The amount written off by a company when it realises that it has valued an asset more highly than it is actually worth.

Independent Commission on Banking A commission chaired by economist Sir John Vickers set up in 2010 by the UK government in order to make recommendations on how to reform the banking system. The commission reported back in September 2011, and called for:

• a ring-fence, to separate and safeguard the activities of banks that were deemed essential to the UK economy
• measures to increase the transparency of bank accounts and competition among banks, including the creation of a new major High Street bank
• much higher capital requirements for the big banks so that they can better absorb future losses

Inflation The upward price movement of goods and services.

Insolvency A situation in which the value of a borrower's assets is not enough to repay all of its debts. If a borrower can be shown to be insolvent, it normally means they can be declared bankrupt by a court.

Investment bank Investment banks provide financial services for governments, companies or extremely rich individuals. They differ from commercial banks where you have your savings or your mortgage. Traditionally investment banks provided underwriting, and financial advice on mergers and acquisitions, and how to raise money in the financial markets. The term is also commonly used to describe the more risky activities typically undertaken by such firms, including trading directly in financial markets for their own account.

marketing and finance glossary D-F

Marketing

Decline stage	The last stage of a product's life cycle, during which sales fall rapidly
Demographic segmentation	Demographic segmentation consists of dividing the market into groups based on variables such as age, gender family size, income, occupation, education, religion, race and nationality
Depth interview	A lengthy, one-to-one structured interview, examining in detail a consumer's views about a product
Differentiation	A marketing strategy aimed at ensuring that products and services have a unique element to allow them to stand out from the rest
Direct mail	The delivery of an advertising or promotional message to customers or potential customers by mail.
Direct marketing	The planned recording, analysis and tracking of customer behaviour to develop a relational marketing strategies
Direct response advertising	Direct response advertising is that which incorporates a contact method such as a phone number, address and enquiry form, web site URL or e-mail address. This is done with the intention of encouraging the recipient to respond directly to the advertiser by requesting more information, placing an order etc. The use of this technique on television is commonly referred to as DRTV advertising
Distribution channel	The network of organisations necessary to distribute goods or services from the manufacturers to the consumers; the distribution channel therefore potentially consists of manufacturers, distributors, wholesalers, and retailers.
Distributors	Companies that buy and sell on their own account but tend to deal in the goods of only certain specified manufacturers.
Divest	A strategy based on the Boston Matrix. Here the company can divest the SBU by phasing it out or selling it - in order to use the resources elsewhere (e.g. investing in the more promising "question marks").
Dogs	A term used in the Boston Group Matrix. Unsurprisingly, the term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in.

Early adopters	People who choose new products carefully and are often consulted by people from the remaining adopter categories
Early majority	People who adopt products just prior to the average person
E-commerce	The use of technologies such as the Internet, electronic data exchange and industry extranets to streamline business transactions
Endorsement	The promotion of some kind of product recommendation or affirmation, usually from a celebrity, implying to the potential customer that a product is good
Expansionistic pricing	Expansionistic pricing is a more exaggerated form of penetration pricing and involves setting very low prices aimed at establishing mass markets, possibly at the expense of other suppliers. Under this strategy, the product enjoys a high price elasticity of demand so that the adoption of a low price leads to significant increases in sales volumes
Extinction pricing	Extinction pricing has the overall objective of eliminating competition, and involves setting very low prices in the short term in order to ‘under-cut’ competition, or alternatively repel potential new entrants.

Family brand name	A family brand name is used for all products. By building customer trust and loyalty to the family brand name, all products that use the brand can benefit.
Family life cycle	The stages of family life based on demographic data that are useful in defining the markets for certain goods and services. Each group has its own specific and distinguishable needs and interests.
Fast-moving consumer goods	Fast-moving consumer goods are those that sell in high volumes, with low unit value, and have fast consumer repurchase. Good examples include ready meals, baked beans, newspapers etc
Focus group	A small group of sample customers who are brought together into a group discussion to measure their response to a marketing stimulus such as a new brand or product
Forecasting	The process of estimating future demand by anticipating what buyers are likely to do under a given set of marketing conditions (e.g. economic confidence, disposal income, pricing levels)
Franchising	The selling of a licence by the owner (franchisor) to a third party (franchisee) permitting the sale of a product or service for a specified period. In business format franchising the agreement will involve a common brand and marketing format. Many service businesses are operated under franchise include well-known brands such as Burger King, KFC and KwikPrint
Full cost pricing	Full cost plus pricing seeks to set a price that takes into account all relevant costs of production

Finance

Dead cat bounce A phrase long used on trading floors to describe the small rebound in market prices typically seen following a sharp fall. 

Debt restructuring A situation in which a borrower renegotiates the terms of its debts, usually in order to reduce short-term debt repayments and to increase the amount of time it has to repay them. If lenders do not agree to the change in repayment terms, or if the restructuring results in an obvious loss to lenders, then it is generally considered a default by the borrower. However, restructurings can also occur through a debt swap - a voluntary agreement by lenders to switch existing debts for new debts with easier easier repayment terms - in which case it can be very hard to determine whether the restructuring counts as a default. 

Default Strictly speaking, a default occurs when a borrower has broken the terms of a loan or other debt, for example if a borrower misses a payment. The term is also loosely used to mean any situation that makes clear that a borrower can no longer repay its debts in full, such as bankruptcy or a debt restructuring.

A default can have a number of important implications. If a borrower is in default on any one debt, then all of its lenders may be able to demand that the borrower immediately repay them. Lenders may also be required to write off their losses on the loans they have made.

Deficit The amount by which spending exceeds income over the course of a year.

In the case of trade, it refers to exports minus imports. In the case of the government budget, it equals the amount the government needs to borrow during the year to fund its spending. The government's "primary" deficit means the amount it needs to borrow to cover general government expenditure, excluding interest payments on debts. The primary deficit therefore indicates whether a government will run out of cash if it is no longer able to borrow and decides to stop repaying its debts.

Deflation Negative inflation - that is, when the prices of goods and services across the whole economy are falling on average.

Deleveraging A process whereby borrowers reduce their debtloads. Primarily this occurs by repaying debts. It can also occur by bankruptcies and debt defaults, or by the borrowers increasing their incomes, meaning that their existing debtloads become more manageable. Western economies are experiencing widespread deleveraging, a process associated with weak economic growth that is expected to last years. Households are deleveraging by repaying mortgage and credit card debts. Banks are deleveraging by cutting back on lending. Governments are also beginning to deleverage via austerity programmes - cutting spending and increasing taxation.

Derivative A financial contract which provides a way of investing in a particular product without having to own it directly. For example, a stock market futures contract allows investors to make bets on the value of a stock market index such as the FTSE 100 without having to buy or sell any shares. The value of a derivative can depend on anything from the price of coffee to interest rates or what the weather is like. Credit derivatives such as credit default swaps depend on the ability of a borrower to repay its debts. Derivatives allow investors and banks to hedge their risks, or to speculate on markets. Futures, forwards, swaps and options are all types of derivatives.

Dividends An income payment by a company to its shareholders, usually linked to its profits.

Dodd-Frank Legislation enacted by the US in 2011 to regulate the banks and other financial services. It includes:

• restrictions on banks' riskier activities (the Volcker rule)
• a new agency responsible for protecting consumers against predatory lending and other unfair practices
• regulation of the enormous derivatives market
• a leading role for the central bank, the Federal Reserve, in overseeing regulation
• higher bank capital requirements
• new powers for regulators to seize and wind up large banks that get into trouble

Double-dip recession A recession that experiences a limited recovery then dips back into recession. The exact definition is unclear, as the definition of what counts as a recession varies between countries. A widely-accepted definition is one where the initial recovery fails to take total economic output back up to the peak seen before the recession began.

E

EBA The European Banking Authority is a pan-European regulator responsible created in 2010 to oversee all banks within the European Union. Its powers are limited, and it depends on national bank regulators such as the UK's Financial Services Authority to implement its recommendations. It has already been active in laying down new rules on bank bonuses and arranging the European bank stress tests.

Ebitda Earnings (or profit) before interest payments, tax, depreciation and amortisation. It is a measure of the cashflow at a company available to repay its debts, and is much more important indicator for lenders than the borrower's profits.

EBRD The European Bank for Reconstruction and Development is a similar institution to the World Bank, set up by the US and European countries after the fall of the Berlin Wall to assist in economic transition in Eastern Europe. Recently the EBRD's remit has been extended to help the Arab countries that emerged from dictatorship in 2011.

ECB The European Central Bank is the central bank responsible for monetary policy in the eurozone. It is headquartered in Frankfurt and has a mandate to ensure price stability - which is interpreted as an inflation rate of no more than 2% per year.

EIB The European Investment Bank is the European Union's development bank. It is owned by the EU's member governments, and provides loans to support pan-European infrastructure, economic development in the EU's poorer regions and environmental objectives, among other things.

ESM The European Stability Mechanism is a 500bn-euro rescue fund that will replace the EFSF and the EFSM from June 2013. Unlike the EFSF, the ESM is a permanent bail-out arrangement for the eurozone. Unlike the EFSM, the ESM will only be backed by members of the eurozone, and not by other European Union members such as the UK.

EFSF The European Financial Stability Facility is currently a temporary fund worth up to 440bn euros set up by the eurozone in May 2010. Following a previous bail-out of Greece, the EFSF was originally intended to help other struggling eurozone governments, and has since provided rescue loans to the Irish Republic and Portugal. More recently, the eurozone agreed to broaden the EFSF's mandate, for example by allowing it to support banks.

EFSM The European Financial Stability Mechanism is 60bn euros of money pledged by the member governments of the European Union, including 7.5bn euros pledged by the UK. The EFSM has been used to loan money to the Irish Republic and Portugal. It will be replaced by the ESM from 2013.

Equity The value of a business or investment after subtracting any debts owed by it. The equity in a company is the value of all its shares. In a house, your equity is the amount your house is worth minus the amount of mortgage debt that is outstanding on it.

Eurobond A term increasingly used for the idea of a common, jointly-guaranteed bond of the eurozone governments. It has been mooted as a solution to the eurozone debt crisis, as it would prevent markets from differentiating between the creditworthiness of different government borrowers.

Confusingly and quite seperately, "Eurobond" also refers to a bond issued in any currency in the international markets.

Eurozone The 17 countries that share the euro.

F

Federal Reserve The US central bank.

Financial Policy Committee A new committee at the Bank of England set up in 2010-11 in response to the financial crisis. It has overall responsibility for ensuring major risks do not build up within the UK financial system.

Financial transaction tax See Tobin tax.

Fiscal policy The government's borrowing, spending and taxation decisions. If a government is worried that it is borrowing too much, it can engage in austerity; raising taxes and/or cutting spending. Alternatively, if a government is afraid that the economy is going into recession it can engage in fiscal stimulus, which can include cutting taxes, raising spending and/or raising borrowing.

Freddie Mac, Fannie Mae Nicknames for the Federal Home Loans Mortgage Corporation and the Federal National Mortgage Association respectively. They don't lend mortgages directly to homebuyers, but they are responsible for obtaining a large part of the money that gets lent out as mortgages in the US from the international financial markets. Although privately-owned, the two operate as agents of the US federal government. After almost going bust in the financial crisis, the government put them into "conservatorship" - guaranteeing to provide them with any new capital needed to ensure they do not go bust.

FTSE 100 An index of the 100 companies listed on the London Stock Exchange with the biggest market value. The index is revised every three months.

Fundamentals Fundamentals determine a company, currency or security's value in the long-term. A company's fundamentals include its assets, debt, revenue, earnings and growth.

Futures A futures contract is an agreement to buy or sell a commodity at a predetermined date and price. It could be used to hedge or to speculate on the price of the commodity. Futures contracts are a type of derivative, and are traded on an exchange.

Greece crisis in short

Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.

Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.

The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.

Greece's economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the government's coffers.

There have been demonstrations against the government's austerity measures to deal with its debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.

The EU and IMF have agreed 229bn euros of rescue loans for Greece plus a 50% cut in its debts. PM George Papandreou quit in November after trying to call a referendum on the latest deal.

Eurozone leaders are worried that if Greece were to default, and even leave the euro, it would cause a major financial crisis that could spread to much bigger economies such as Italy and Spain.

Step taken to save Greece:-

glossary ''B & C" (marketing and finance)

MARKETING

Behavioural segmentation	Behavioural segmentation divides customers into groups based on the way they respond to, use or know of a product.
Below the line	“Below the line” is a term commonly used to refer to non-media advertising or promotion when no commission has been paid to the advertising agency. This includes direct mail, point of sale displays, and other sales promotions.
Benchmarking	The process of comparing the products and services of a business against those of competitors in a market, or leading businesses in other markets, in order to find ways of improving quality and performance
Benefit segmentation	Benefit segmentation relates to the process of dividing a market based on the specific benefits consumers seek from a product. For example, some car buyers want safety and security from their car, while others look for comfort or speed. A car manufacturer, therefore, has to decide which benefits to offer – and how these benefits should be communicated to the customer
Boston Group Matrix	A means of analysing and categorizing the performance of business units in large diversified firms by reference to market share and growth rates. It was developed by the Boston Consultancy Group (BCG)
Brand	A brand is the specific type of the product form. A brand – represented by a brand name, symbol, design, logo, packaging – is the identity of a particular product form that customers recognise as being different from others.
Brand building	Developing a brand's image and standing with a view to creating long term benefits for brand awareness and brand value
Brand equity	Brand equity refers to the value of a brand. Brand equity is based on the extent to which the brand has high brand loyalty, name awareness, perceived quality and strong product associations. Brand equity also includes other “intangible” assets such as patents, trademarks and channel relationships.
Brand extension	Brand extension refers to the use of a successful brand name to launch a new or modified product in a new market. Virgin is perhaps the best example of how brand extension can be applied into quite diverse and distinct markets.
Brand image	Brand image refers to the set of beliefs that customers hold about a particular brand. These are important to develop well since a negative brand image can be very difficult to shake off.
Brand loyalty	A strongly motivated and long standing decision to purchase a particular product or service
Brand recognition	A customer's awareness that a brand exists and is an alternative to purchase
Breakeven	Breakeven is achieved when total contribution is equal to total fixed costs. Addition contribution earned after this point becomes profit
Break-even pricing	Setting a price to achieve break-even on the costs of making and marketing a product (direct costs). Breakeven is achieved when the total contribution from sales priced in this way at least equal the fixed costs of the business
Build share	A strategy based on the Boston Matrix. Here the company can invest to increase market share (for example turning a "question mark" into a star)
Business portfolio	The business portfolio is the collection of businesses and products that make up the business.
Business to business	Marketing activity directed from one business to another (as opposed to a consumer). This term is often shortened to “B2B”
Buying behaviour	Buying behaviour concerns the process that buyers go through when deciding whether or not to purchase goods or services. Buying behaviour can be influenced by a variety of external factors and motivations, including marketing activity.

 

Cash Cows	A term used in the Boston Group Matrix. Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.
Channel conflict	Disagreement among members of a distribution channel about who should be paid what and what roles each should play. Channel conflict often occurs when a business uses a multi-channel approach to distribution
Cognitive dissonance	Cognitive dissonance is an customer effect commonly observed after a major purchase whereby the customer feels uncertainty about whether the purchase should have been made. Post-purchase promotion (particularly advertising) has a role to play to reduce the incidence and effect of cognitive dissonance
Combination brand	A combination brand name brings together a family brand name and an individual brand name. The idea here is to provide some association for the product with a strong family brand name but maintaining some distinctiveness so that customers know what they are getting
Competitive advantage	A competitive advantage is a clear performance differential over the competition on factors that are important to customers
Competitor benchmarking	Competitor benchmarking compares customer satisfaction with the products, services and relationships of the business with those of key competitors
Consumer buyers	Consumer buyers are those who purchase items for their personal consumption
Consumer durables	Consumer durables have low volume but high unit value. Consumer durables are often further divided into White goods (e.g. fridge-freezers; cookers; dishwashers; microwaves) and Brown goods (e.g. DVD players; games consoles; personal computers)
Consumer markets	Consumer markets are the markets for products and services bought by individuals for their own or family use
Continuous market research	Continuous research involves interviewing the same sample of people, repeatedly
Contribution	Contribution per unit can be defined as selling price less variable costs. Overall contribution is the difference between total sales revenues and variable costs
Core product	The set of problem-solving or need-meeting benefits that customers are buying when they purchase a product. Customers are rarely prepared to pay a premium for these elements of a product.
Cost leadership	A strategy of producing goods at a lower cost than the competition. This usually requires the business to enjoy higher economies of scale or have some kind of productivity advantage
Cross-selling	Using a customer’s buying history to select them for related offers, e.g. a car alarm for new car buyers.
Customer demand	Consumer demand is a want for a specific product supported by an ability and willingness to pay for it.
Customer loyalty	Feelings or attitudes that incline a customer either to return to a company, shop or outlet to purchase there again, or else to re-purchase a particular product, service or brand.
Customer need	A need is a basic requirement that an individual wishes to satisfy.
Customer satisfaction	The provision of goods or services which fulfil the customer’s expectations in terms of quality and service, in relation to price paid
Customer wants	A want is a desire for a specific product or service to satisfy the underlying need.

FINANCE :-

Bailout The financial rescue of a struggling borrower. A bailout can be achieved in various ways:

• providing loans to a borrower that markets will no longer lend to
• guaranteeing a borrower's debts
• guaranteeing the value of a borrower's risky assets
• providing help to absorb potential losses, such as in a bank recapitalisation

Bankruptcy A legal process in which the assets of a borrower who cannot repay its debts - which can be an individual, a company or a bank - are valued, and possibly sold off (liquidated), in order to repay debts.

Where the borrower's assets are insufficient to repay its debts, the debts have to be written off. This means the lenders must accept that some of their loans will never be repaid, and the borrower is freed of its debts. Bankruptcy varies greatly from one country to another, some countries have laws that are very friendly to borrowers, while others are much more friendly to lenders.

Basis point One hundred basis points make up a percentage point, so an interest rate cut of 25 basis points might take the rate, for example, from 3% to 2.75%.

BBA The British Bankers' Association is an organisation representing the major banks in the UK - including foreign banks with a major presence in London. It is responsible for the daily Liborinterest rate which determines the rate at which banks lend to each other. 

Bear market In a bear market, prices are falling and investors, fearing losses, tend to sell. This can create a self-sustaining downward spiral.

Bill A debt security- or more simply an IOU. It is very similar to a bond, but has a maturity of less than one year when first issued.

BIS The Bank for International Settlements is an international association of central banks based in Basel, Switzerland. Crucially, it agrees international standards for the capital adequacyof banks - that is, the minimum buffer banks must have to withstand any losses. In response to the financial crisis, the BIS has agreed a much stricter set of rules. As these are the third such set of regulations, they are known as "Basel III".

Bond A debt security, or more simply, an IOU. The bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. They can be issued by companies, banks or governments to raise money. Banks and investors buy and trade bonds.

BRIC An acronym used to describe the fast-growing economies of Brazil, Russia, India and China.

Bull market A bull market is one in which prices are generally rising and investor confidence is high.

C

Capital For investors, it refers to their stock of wealth, which can be put to work in order to earn income. For companies, it typically refers to sources of financing such as newly issued shares.

For banks, it refers to their ability to absorb losses in their accounts. Banks normally obtain capital either by issuing new shares, or by keeping hold of profits instead of paying them out as dividends. If a bank writes off a loss on one of its assets - for example, if it makes a loan that is not repaid - then the bank must also write off a corresponding amount of its capital. If a bank runs out of capital, then it is insolvent, meaning it does not have enough assets to repay its debts.

Capital adequacy ratio A measure of a bank's ability to absorb losses. It is defined as the value of its capital divided by the value of risk-weighted assets (ie taking into account how risky they are). A low capital adequacy ratio suggests that a bank has a limited ability to absorb losses, given the amount and the riskiness of the loans it has made.

A banking regulator - typically the central bank - sets a minimum capital adequacy ratio for the banks in each country, and an international minimum standard is set by the BIS. A bank that fails to meet this minimum standard must be recapitalised, for example by issuing new shares.

Capitulation (market). The point when a flurry of panic selling induces a final collapse - and ultimately a bottoming out - of prices.

Carry trade Typically, the borrowing of currency with a low interest rate, converting it into currency with a high interest rate and then lending it. The most common carry trade currency used to be the yen, with traders seeking to benefit from Japan's low interest rates. Now the dollar, euro and pound can also serve the same purpose. The element of risk is in the fluctuations in the currency market.

Chapter 11 The term for bankruptcy protection in the US. It postpones a company's obligations to its creditors, giving it time to reorganise its debts or sell parts of the business, for example.

Collateralised debt obligations (CDOs) A financial structure that groups individual loans, bonds or other assets in a portfolio, which can then be traded. In theory, CDOs attract a stronger credit rating than individual assets due to the risk being more diversified. But as the performance of many assets fell during the financial crisis, the value of many CDOs was also reduced.

Commercial paper Unsecured, short-term loans taken out by companies. The funds are typically used for working capital, rather than fixed assets such as a new building. The loans take the form of IOUs that can be bought and traded by banks and investors, similar to bonds.

Commodities Commodities are products that, in their basic form, are all the same so it makes little difference from whom you buy them. That means that they can have a common market price. You would be unlikely to pay more for iron ore just because it came from a particular mine, for example.

Contracts to buy and sell commodities usually specify minimum common standards, such as the form and purity of the product, and where and when it must be delivered.

The commodities markets range from soft commodities such as sugar, cotton and pork bellies to industrial metals such as iron and zinc.

Core inflation A measure of CPI inflation that strips out more volatile items (typically food and energy prices). The core inflation rate is watched closely by central bankers, as it tends to give a clearer indication of long-term inflation trends.

Correction (market) A short-term drop in stock market prices. The term comes from the notion that, when this happens, overpriced or underpriced stocks are returning to their "correct" values.

CPI The Consumer Prices Index is a measure of the price of a bundle of goods and services from across the economy. It is the most common measure used to identify inflation in a country. CPI is used as the target measure of inflation by the Bank of England and the ECB.

Credit crunch A situation where banks and other lenders all cut back their lending at the same time, because of widespread fears about the ability of borrowers to repay.

If heavily-indebted borrowers are cut off from new lending, they may find it impossible to repay existing debts. Reduced lending also slows down economic growth, which also makes it harder for all businesses to repay their debts. 

Credit default swap (CDS) A financial contract that provides insurance-like protection against the risk of a third-party borrower defaulting on its debts. For example, a bank that has made a loan to Greece may choose to hedge the loan by buying CDS protection on Greece. The bank makes periodic payments to the CDS seller. If Greece defaultson its debts, the CDS seller must buy the loans from the bank at their full face value. CDSs are not just used for hedging - they are used by investors to speculate on whether a borrower such as Greece will default.

Credit rating The assessment given to debts and borrowers by a ratings agency according to their safety from an investment standpoint - based on their creditworthiness, or the ability of the company or government that is borrowing to repay. Ratings range from AAA, the safest, down to D, a company that has already defaulted. Ratings of BBB- or higher are considered "investment grade". Below that level, they are considered "speculative grade" or more colloquially as junk.

Currency peg A commitment by a government to maintain its currency at a fixed value in relation to another currency. Sometimes pegs are used to keep a currency strong, in order to help reduce inflation. In this case, a central bank may have to sell its reserves of foreign currency and buy up domestic currency in order to defend the peg. If the central bank runs out of foreign currency reserves, then the peg will collapse.

Pegs can also be used to help keep a currency weak in order to gain a competitive advantage in trade and boost exports. China has been accused of doing this. The People's Bank of China has accumulated trillions of dollars in US government bonds, because of its policy of selling yuan and buying dollars - a policy that has the effect of keeping the yuan weak.