Accounting, Business Studies and Economics Dictionary

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Machine hour - Cost allocation base that provides a systematic and contemporaneous method of applying overhead costs to work in process Inventory. An overhead rate of cost per hour of work expended by a machine is applied to the work in process.

Macroeconomic equilibrium - A situation in which the quantity of real GNP demanded equals the quantity of real GNP supplied.

Macroeconomics - The study of the determination of economic aggregates, such as total output, total employment, the price level, and the rate of economic growth.

Macros - Technique that allows the user to combine several keystrokes into one.

Maintenance - Periodic expenditures undertaken to preserve or retain an asset's operational status for its originally intended use.

Maintenance of accounts - Accounting, means to ensure that all the transactions and other accounting records are kept or recorded in accordance with the GAAP (generally accepted accounting principles) and any other applicable laws.  Further to this the records must be in sufficient detail to allow an effective annual audit to be conducted.

Make or buy (outsource) decision – The determination whether to produce a component part internally or to buy it from an outside supplier. This decision involves both qualitative and quantitative factors. Qualitative considerations include product quality and the necessity for long-run business relationships with subcontractors. quantitative factors deal with cost.

Maker - 1. the producer of a specific product. Or 2. the person who is the signatory of a cheque/promissory note, which means they are the responsible  individual for payment.

Malpractice insurance Is a from of liability insurance professionals against legal action in connection with professional services rendered.

Managed earnings - Manipulating (raising or lowering) earnings to shed a more favorable light on companies.

Managed exchange rates - A system of exchange rates where governments intervene in the foreign exchange market to fix the value of their national currency in terms of other national currencies.

Managed float - In the context of flexible exchange rates, intervention in the form of buying and selling currency to affect the exchange rate.

Management accounting- Accounts and reports are tailor made for the use of the managers and directors of a business (in any form they see fit - there are no rules) as opposed to financial accounting which are prepared for the Inland Revenue and any other parties not directly connected with the business. See cost accounting.

Management audit - The examination and appraisal of the efficiency and effectiveness of management in carrying out its activities.

Management buy-in - The sale of a business to an outside management team.

Management buy-out - The sale of a business to the existing management team.

Management by Objectives (MBO)  - A management theory which suggests that managers set goals and communicate them to subordinates.

Management control system - A strategic tool/plan for holding the specific managers accountable and also responsible for their individual performance.  It aims to ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation's goals.

Management decision cycle – This cycle involves five steps managers take in making decisions and following up on them. The five steps are: (1) the discovery of a problem or need; (2) alternative courses of action to solve the problem or meet the need are identified; (3) a complete analysis to determine the effects of each alternative on business operations is prepared; (4) with the supporting data, the decision maker chooses the best alternative; and (5) after the decision has been carried out, the accountant conducts a post decision review to see if the decision was correct or if other needs have arisen.

Management information system (MIS) - Is a computer based or manual system that transforms data into information useful in the support of decision making.

Manager - An individual who is accountable for more work than he or she could undertake alone.

Manipulating or window dressing – Where accounts are presented in such a way that the financial business appears to be different than it really is.

Manufacturing account - An account used to show what it cost to produce the finished goods made by a manufacturing business.

Manufacturing concern An organisation that gets the products or items it sells,  through the direct manufacturing of those specific products or items.

Manufacturing costs - Expenses associated with the manufac­turing activities of the company. They consist of three categories: direct materials, direct labour, and factory overhead.

Manufacturing overhead - The total cost of indirect materials, indirect labour, and any other indirect expenses that arise in manufacturing the firms products.

Margin - 1. see gross margin; profit margin. Or 2. partial payment made by an investor to a broker for securities purchased, with the remainder on credit.  Or 3. in commodities trading, deposits required by commodities exchanges. Or 4. in accounting, a reference to revenue or profitability. Examples are gross profit margin(gross profit/sales) and profit margin (net income/sales).

Margin requirement - The fraction of the price of a stock, that must be paid in cash when the stock is posted as security against a loan for the balance.

Marginal 1. (Accounting) Barely adequate or within a lower limit. Or 2. (Economics) The last unit under consideration.

Marginal benefit - The additional benefit of doing a little bit more (or 1 unit more if a unit can 1 measured) of an activity.

Marginal changes - Small incremental adjustments to a plan of action.

Marginal consumer surplus - The excess of utility from the consumption of one more unit of good.

Marginal cost (MC) - The increase in total cost resulting from raising the rate of production by one unit. Mathematically, the rate of change of cost with respect to output. Also called incremental cost.

Marginal cost (of an activity) - The additional cost of doing a little bit more (or 1 unit more if a un can be measured) of an activity.

Marginal cost (of production) - The cost of producing one more unit of output.

Marginal costing - The process of costing the production of one more unit of output.

Marginal cost pricing - Setting price equal to marginal cost so that buyers are just willing to pay for the last unit bought the amount that it cost to make that unit.

Marginal efficiency of capital (MEC) - The marginal rate of return on a nation's capital stock; the rate of return on one additional dollar of net investment, that is, an addition of one dollar's worth of new capital to capital stock.

Marginal efficiency of investment (MEI)function - The function that relates the quantity of investment to the rate of interest.

Marginal disutility of work - The extra sacrifice or hardship to a worker of working an extra unit ( time in any given time period (e.g. an extra hour. per day).

Marginal physical product - The extra output gained by the employment of one more unit of the variable factor.

Marginal private cost - The marginal cost directly incurred by the producer of a good or service.

Marginal product (MP) - The change in quantity of total output that results from using one unit more of a variable factor. Mathematically, the rate of change of out­put with respect to the quantity of the variable factor. Also called incremental product or marginal product (MPP).

Marginal product of labour - The increase in the amount of output from an additional unit of labour.

Marginal productivity theory of distribution - The theory that factors are paid the value of their marginal product so that the total earnings of  each type of factor of production equals the value of the marginal product of that factor multiplied by the number of units of that factor that are employed.

Marginal profit - The change in the total profit that is a direct results from the sale of one more unit of an item.

Marginal propensity to consume (MPC) - The change in consumption divided by the change in disposable income that brought it about; mathematically, the rate of change of consumption with respect to disposable income.

Marginal propensity to import - The proportion of an increase in income which is spent on imports.

Marginal propensity to save (MPS) - The change in total desired saving related to the change in disposable income that brought it about.

Marginal propensity to withdraw - The propor­tion of an increase in national income that is withdrawn from the circular flow.

Marginal rate of income tax - The income tax rate. The rate paid on each additional dollar earned.

Marginal rate of substitution (MRS)-  (1) In consumption, the slope of an indifference curve, showing how much more of one product must be provided to compensate for the giving up of one unit of another product if the level of satisfaction is to be held constant. (2) In production, the slope of an isoquant, showing how much more of one factor of production must be used to compensate for the use of one less unit of another factor of production if production is to be held constant.

Marginal revenue (MR) - The change in a firm's total revenue resulting from a change in its rate of sales by one unit. Mathematically, the rate of change of revenue with respect to output. Also called incremental revenue.

Marginal revenue product (of a factor) - The addition of revenue attributable to the last unit of a variable factor (MRP = MP x MR). Mathematically, the rate of change of revenue with respect to quantity of the variable factor.

Marginal social benefit - The total value of the benefit from one additional unit of consumption. This includes the benefit to the buyer and any indirect benefits to other members of society.

Marginal social cost - The total cost of producing one additional unit of output. This includes the costs borne by the producer and any indirect costs indirectly incurred by any other member of society. It is the marginal private cost incurred by the producer plus any marginal costs imposed as an externality on others.

Marginal tax propensity - The proportion of an increase in national income paid in tax.

Marginal tax rate - The amount of tax that a taxpayer would pay on an additional dollar of income; the fraction of an additional dollar of income that is paid in taxes.

Marginal utility - The additional satisfaction obtained by a consumer from consuming one unit more of a good or service; mathematically, the rate of change of utility with respect to consumption.

Margin analysis - The approach utilising such concepts as marginal revenue, marginal cost, and marginal profit for economic decision making

Margin call (Stocks) - A demand for an individual investor to supply additional funds that has resulted from of adverse price movement in the particular investment item.

Margin of safety - The range of output between the break-even level and the current level of output, over which a profit is made.

Markdown -  1. reduction of the original selling price. It may be due to any of sev­eral reasons, such as a decline in overall prices of goods, excessive competition, special sale, damaged merchandise, or excess supply. In markdown cancellation, the markdown is partially offset at a subsequent date by increases in the prices of goods that had been marked down below the original selling price. Or 2. dealer markdowns in securities trading.

Market - An abstract concept concerning all the arrangements that individuals have for exchanging with one a place where goods and services are exchanged.

Market capitalisation - The value of determined by multiplying the share of shares in an issue. It is calculated by the multiplication of the number of shares multiplied by the current market price. Also known as “market cap”.

Market-clearing (or equilibrium) price -The price at which quantity demanded equals quantity supplied so that there are neither unsatisfied buyers nor unsatisfied sellers; the equilibrium price.

Market economic system - A system in which individuals own the factors of production and decide individually how to use them; a system with completely decentralised economic decision making.

Market economy or capitalist economy or free enterprise economy - An economic system which allows the market mechanism to allocate resources.

Market failure - Failure of the unregulated market system to achieve optimal allocative efficiency or social goals. A situation in which a market leads to either an under, or over allocation of resources to a specific economic activity. 

Market for loanable funds - The market for loans from and deposits into the banking system.

Market imperfection - Any factor which hinders the free operation of markets, such as where one firm dominates resulting in exploitation.

Marketing - The management process which identifies customer wants and anticipates their future wants.

Marketing budget - A financial plan for the marketing of a product or product range for a specified period of time.

Market loans - Short-term loans (e.g. money at call and short notice).

Market-orientated - A description applied to a business in which market research is carried out to find out consumer wants before the product is developed and produced.

Market orientated pricing - Methods of pricing based, upon the pricing conditions in the market at which a product is aimed.

Market orientated supply-side policies - Polices to increase aggregate supply by freeing up the market.

Market orientation - An approach to business which places the requirements of consumers at the centre of the decision making process.

Market position - The strength (relative strength) of an firm or a particular product within a specific target market. investment, refers to the amount and/or breadth and depth of an individual holding within the identified sectors of the specific market.

Market positioning - The view consumers have about the quality, value for money and image of a product relative to those of its competitors.

Market power – Where a firm is said to be a price setter. Market power benefits the powerful at the expense of others. When firms have market power over prices, they can use this to raise prices and profits above the perfectly competitive level. Other things being equal, the firm will gain at the expense of the consumer. Similarly, if consumers or workers have market power, they can use this to their own benefit.

Market rate of interest - The actual interest rate in effect at a given moment.

Market research - Finds out consumer wants before a product is developed and produced.

Market sector - The portion of an economy in which commodities are bought and sold and in which producers

Market segmentation - Breaking down a market into sub groups which share similar characteristics.

Market share - The proportion of total sales in a particular market for which one or more firms are responsible. It is usually expressed as a percentage.

Market structure – All features of a market that affect the behaviour and performance of firms in that market, such as the number and size of sellers, the extent of knowledge about one another's actions, the degree of freedom of entry, and the degree of product differentiation.

Market value - The price at which sellers and buyers trade items in the open marketplace.

Marketable security - A readily tradable equity or debt security with quoted prices; to include commercial paper and Treasury bills. It is a "close to cash" asset which is classified as a current asset.

Marketing audit - An analysis of the internal and external factors which may affect a business's performance.

Marketing lever - Anything that provides positional advantage or power to act effectively: Potential levers may be price, brand name, corporate image, broad distribution, effective advertising, etc.

Marketing mix - The elements of a business's marketing that are designed to meet the needs of its customers. The four elements are often called the 4 'Ps' - price, product, promotion and place.

Marketing objectives - Marketing goals that businesses try to achieve.

Marketing plan – A detailed plan of the companies  marketing at present, what it wants it to be in the future and how it intends to change it

Marketing planning – The process by which marketing  activities are identified and decided upon.

Marketing research – The collection, collation and analysis of data relating to marketing and the consumption of goods and services.

Marketing strategies - Approaches to marketing taken by a business which enable it to achieve its objectives.

Mark-up - That part of a price which seeks to provide business with profit as opposed to covering its costs. It is used in cost plus pricing. Or 2) A profit margin added to average cost or unit cost to arrive at price.

Marshalling - To prepare something for action and/or use, e.g., to marshal ones resources.

Mass production - Flow production.

Master budget - The plan of activities expressed in monetary terms of the assets, equities, revenues, and costs that will be involved in carrying out the plans. Simply put, a master budget is a set of projected or planned financial statements.

Matching - Accounting, is the matching of purchases orders and the delivery notes to invoices prior to the payment being made.

Matching principle- A method of analysing the sales and expenses which make up those sales to a particular period (e.g.. if a builder sells a house then the builder will tie in all the raw materials and expenses incurred in building and selling the house to one period - usually in order to see how much profit was made).

Material - 1. raw material, direct or indirect. An example is steel to make a car. Usually accounted for separately by a debit to materials (stores control) and a credit to accounts payable or cash. When materials are transferred to work in process, Inventory is credited. Or 2. relatively important and significant in dollar amounts.

Material control - Refers to the particular department that is responsible for the control of any specified materials within the manufacturing environment of a firm.

Materials price variance (MPV) - Difference between what is paid fora given quantity of materials and what should have been paid, multiplied by the actual quantity of materials used.

Materials quantity variance (MQV) - Difference between the actual quantity of materials used in production and the standard quantity of materials allowed for actual production, multiplied by the standard price per unit.

Materials variance (MV) - Difference between the actual and standard costs of materials.

Materiality - The importance of an event or other information that has an influence on a company's share price.

Materiality principle - Accountants should (GAAP) generally accepted accounting principles unless to do so would be to expensive and/or difficult, and further to this where it makes no real or material difference if the rules are not followed. If a rule is to be ignored, the principle states that the firms net income must not be in any way significantly affected. The principle also states the reader of the financial statements ability to judge the statements must not be impaired.

Materials - Is the physical items (cost of) used in the manufacture of  other products.  Under cost accounting these are often separated into direct material (that which goes directly into the item) and indirect material (that which is used in maintaining the manufacturing environment). Indirect materials are considered to bean overhead. The term material is mainly used to refer to the direct materials.

Matrix organisation - Where a firm superimposes a interdisciplinary team or group of project specialists on top of a functional organisational design.

Maturity date - Is the date at which a financial asset is converted into a money or other assets.

Maturity value - The (usually projected) value of an intangible asset on the date it becomes due.

Maximax - The strategy of choosing the policy that has the best possible outcome.

Maximin - The strategy of choosing the policy whose worst possible outcome is the least bad.

Maximin criterion - The claim that the government should aim to maximize the well-being of the worst-off person in society.

Maximum price - A price ceiling set by the government or some other agency. The price is not allowed to rise above this level (although it is allowed to fall below it).

Mean (or arithmetic mean) - The sum of the values of each of the members of the sample divided by the total number in the sample.

Mean deviation - The average deviation of all figures from the mean, which ignores plus or minus signs in its calculation.

Means - The methods of achieving one's goals.

Means-tested benefits - Benefits whose amount depends on the recipient's income or assets.

Median - The value within any set of data at which half of the observations are greater and half are less. Thus half of a population earns income above the median income, and half earns income below the median.

Median voter theorem - A mathematical result showing that if voters are choosing a point along a line and each voter wants the point closest to his most pre­ferred point, then majority rule will pick the most preferred point of the median voter.

Media plan - The plan that gives the details of how the media is to be used for a specific advertising campaign.  This would include costs, the running dates, target markets, expected reach, how frequent, the rationales, and different strategies to be employed.

Medium of communication - The method used to send a message.

Medium of Exchange - Anything that is generally acceptable in exchange of goods and services.

Memo billing (aka memo invoicing) - Goods ordered and invoiced on approval. There is no obligation to buy.

Memo entry -  Explanatory or supplemental information given on a reporting schedule. It is often used for the clarification of otherwise complex accounting entries.

Memorandum accounts - A name for the accounts held in a subsidiary ledger. E.g.. the accounts in a sales ledger.

Menu costs of inflation - The costs associated wit having to adjust the price lists or labels.

MER (Management Expense Ratio) - The proportion of the assets under management that were used to run a mutual fund.

Merchandise - The commodities that are being offered for sale.  May also mean to engage in the trade of commodities.

Merchandise exports - The goods a country produces and sells to other countries, they account for most of a developing country's exports.

Merger - The purchase of either the physical assets or the controlling share of ownership of one firm by another. In a horizontal merger, both firms are in the same line of business; in a vertical merger, one firm is a supplier of the other; if the two are in unrelated industries, it is a conglomerate merger.

Merit good - Goods that are held to be desirable for consumers, but are underprovided by the market.

Message - The information or instructions being passed by the sender to the receiver.

Microeconomic policy - Activities of governments designed to alter resource allocation and/or income distribution.

Microeconomics - The study of the allocation of resources and the distribution of income as they are affected bythe workings of the price system and by government policies.

Middle-income developing countries - Countries with. a slightly higher standard of living than low-income countries but in which many people still cannot meet their basic needs. Over a billion people live in such countries.

Minimum efficient scale (MES) - The smallest output at which long run average cost reaches its minimum be cause all available economies of scale in production and/or distribution have been realised. Also called minimum optimal scale.

Minimum payment - The minimum amount stipulated under the credit agreement that an individual or entity must pay (often monthly).

Minimum price - A price floor set by the government or some other agency. The price is not allowed to fall below this level (although it is allowed to rise above it).

Minimum reserve ratio - A minimum ratio of cash (or other specified liquid assets) to deposit (either total or selected) that the central bank requires banks to hold. 

Minimum wage law - A regulation making it illegal to hire labour below a specified wage.

Minimum wages - Legally specified minimum rate of pay for labour in covered occupations.

Minority interest - A minority interest represents a minority of shares not held by the holding company of a subsidiary. It means that the subsidiary is not wholly owned by the holding company. The minority shareholdings are shown in the holding company accounts as long term liabilities.

Misappropriation - The non-violent but criminal taking of some property. It may Includes theft, embezzlement, and fraud. Often it is used to refer to an employee taking the property of their employer.

Miscellaneous expenses - Incidental expense of a business, not classified as manufacturing, selling, or general and administrative expenses. It is presented on an income statement after operating income. Miscellaneous expenses are immaterial.

Miscellaneous income - That income that a firm earns that is not directly related to the main operations of the firm from the sale of its products and services e.g. bank interest

Misery index - An index that tracks economic conditions including inflation and unemployment.

Mission statement - A  brief statement of the purpose of a company.

Mixed economy - An economy in which some decisions about the allocation of resources are made by firms and households and some by the government.

Mixed market economy - A market economy where there is some government intervention.

Mode – The most commonly occurring item in a set of data.

Model (of competition) -  A simplified theory to explain the types of competition between businesses.

Models, or Theories - Simplified representations of the real world, used to better understand the real world or to make predictions.

Modern team management practices- Is usually referring to the process of organising large groups in smaller teams which work on the individual parts of a project simultaneously. 

Monetary  - Anything having to do with or pertaining to money,money supply,  money creation, and the government's management of the money supply.

Monetary assets - Are measured at the assets collectible amount. Non-monetary assets though are measured at the assets historical costs.

Monetary neutrality - The proposition that changes in the money supply do not affect real variables.

Monetarists- Economists who stress monetary causes of cyclical fluctuations and inflation and believe that an active stabilisation policy is not normally required.

Monetary base - Notes and coin outside the central bank.

Monetary equilibrium - A situation in which the demand for money equals the supply of money.

Monetary policy - An attempt to influence the economy by operating on such monetary variables as the quantity of money and the rate of interest.

Monetary union - The proposed replacement of the currencies of the EU member countries by a single EU currency, an arrangement which would require a European Central Bank to regulate the supply of the new European currency.

Monetary unit - The unit used to measure economic activity (e.g., U.S. $).

Monetary unit assumption - Assumes that values can be relevantly measured in current monetary units.

Money - A medium of exchange that can also serve as a store of value, a unit of account and a standard of deferred payment.

Money illusion - Where people mistake changes in nominal values for changes in real values i.e. failing to allow for inflation.

Money income - Income measured in monetary units per period of time.

Money market - The market for short-term loans and deposits.

Money measurement principle (concept) - States that all business transactions should be expressed in their money terms, i.e. If something has no monetary value it should not be included in the firms accounts.

Money multiplier - The number of times greater the expansion of money supply is than the expansion of the monetary base that caused it.

Money substitute - Something that serves as a temporary medium of exchange but is not a store of value.

Money supply – The total quantity of money in an economy at a point in time. Also called the supply of money.

Monitor - To keep under surveillance or keep an eye on.

Monopolist  - The single supplier that comprises the entire industry.

Monopolistic competition - 1. market structure of an in­dustry in which there are many firms and freedom of entry and exit but in which each firm has a product somewhat differentiated from the others, giving it some control over its price. Or 2. any industry in which more than one firm sells differentiated products.

Monopoly - A market structure where there is one firm who dominates the industry. In the UK a monopoly is defined as when a firm controls more than 25% of the market.

Monopsony - A market with a single buyer or employer.

Moral hazard - A situation in which an individual or a firm takes advantage of special knowledge while engaging in socially uneconomic behavior.

Moratorium The legally authorised postponement prior to a particular obligation being discharged.

Mortgage - A conditional conveyance of a specific piece of property which has been used as security or collateral for of a loan. e.g. A mortgage on a home loan.

Mortgage bond - A bond where the issuer has given the bondholder/s a claim against specific pledged assets.

Motivated - Being encouraged to do something.

Motivation - Why employees want to work effectively for the business.

Motivators - Those things that can lead to workers being satisfied.

MOU - Memorandum of Understanding.

Moving average- A time series derived from another by the calculation of a sequence of averages.  Is is used to remove or flatten out cyclical or seasonal fluctuations from a series of data.

Moving average inventory method - A method used under  a perpetual inventory system, which requires that a new weighted average cost must be calculated after each purchase

Multi-national companies (MNCs) also Trans national companies (TNCs) - Companies with headquarters in one country but production units in one or more foreign countries.

Multiplier - The ratio of the change in national income to the change in autonomous expenditure that brought it about. It is given by the equation 1/1-MPC (marginal propensity to consume)

Multiplier effect - An initial increase in aggregate demand of $xm leads to an eventual rise in national income that is greater than $xm.

Multi-skilling - The processes of enhancing the skills of employees.

Mutual agency - The right of all the partners in a partnership to act as the agents for the partnerships normal business activities, with the authority to bind the partnership it to business agreements which have been entered into.

Mutual fund - An institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds.

Mutual organisation - Businesses owned by members who are customers, rather than shareholders.

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The world is a stage, but the play is badly cast.
Oscar Wilde