MBA Flashcards
Acid-Test Ratio (Quick Ratio)
The ratio of current assets and current liabilities.
When equal to one it indicates the most liquid assets of a business are equal to its total debts and will just manage to repay all its debts by using its cash
marketable securities
Action-Centered Leadership (John Adair’s Model)
Represents 3 key balanced activities
Activity-Based Costing (ABC)
Accounting system that recognizes a business firm’s relationship between costs
Actual Cash Value
The amount of money
Advanced Planning and Scheduling Software (APS)
A type of system that tracks costs based on the activities that are responsible for driving costs in the production of manufactured goods.
Keeping a close eye on its data allows teams to know whether or not they need to order more supplies
they can track how much of their budget they have used on the project and they can
Adverse Selection
The theory that poor quality goods are more likely to sell than good ones because some sellers want to get rid of products
Affiliative Leadership
Leadership style focusing on renewing a sense of kinship and building trust among various factions whose cooperation is desirable for promoting the goals of the organization.
However
in an effort to appease people and help them realize their true potential
Agile Manufacturing
Flexible manufacturing practices utilizing processes
Alpha Rating
The return a security or portfolio would be expected to earn if the market’s rate of return were zero.
Anti-trust Laws
Laws that prevent monopolies in the USA.
Ask
The net asset value of a mutual fund plus any sales charges
Asymmetric Information
Information that differs between parties; results in situation where consumers
Attention Management
Management method of ensuring that employees are focused on their work and on organizational goals since inattentiveness results in wasted time.
Attitude Survey
A series of marketing questions that tap into people’s feelings toward a firm or product.
Used for research to assess the feelings of a target audience toward a product
brand
Autocrat Leadership
Leadership style of taking total authority and control over decision-making.
By virtue of their position
an autocratic leaders not only control the efforts of the team
Average Up
To purchase additional shares of a security whose price is rising at intervals during the price rise period.
Averaging
Buying or selling of stocks at different times and at different prices to establish an average price.
Back Office
Refers to general management or administrative staff who do not have direct dealings with the company’s customers.
Balanced Scorecard
A strategic management planning system aligning business activities to the vision and strategy of the organization
Balance Sheet
An income statement summarizing the financial affairs of a firm for a given period of time
Describes the financial conditions at one point in time
such as the last day of the year.
Shows the worth of the business at a particular time by listing its assets (things owned such as property
equipment) and money owned to the business
Below-the-line
Used to describe a country’s capital transactions
Benchmark
A point of reference
Originally used for a set of computer programs to measure the performance of a computer against similar models
it is now used more generally to describe a measure identified in the context of a program.
Beta
Represents an estimate of the fluctuations in value of a stock in relation to the market as a whole.
When below 1 can indicate either an investment with lower volatility than the market
or a volatile investment whose price movements are not highly correlated with the market.
Beta Rating
Utilities have a beta of less than 1.
Conversely
most high-tech NASDAQ-based stocks have a beta greater than 1 since they offer a higher rate of return
Board of Directors
Governing body of incorporated firm.
Board of Trustees
Governing body of a non-profit organization such as a charity
Their roles are essentially to set the policies of the organization
and appoint (or fire) senior management personnel.
Bond
A person who invests in one of these is lending money to a company or government for a specified time with understanding it will be paid back with a fixed interest.
Bond Discount
The difference between the face value of a bond and the lower price at which it was issued.
Bond Rating
The rating of the reliability of a company
Bottleneck
An activity within an organization that has a lower capacity than preceding or subsequent activities
Bottom-up approach
Leadership approach that is consultative promoting employee participation at all levels in the decision making and problem solving process.
Brand Loyalty
A result of consumer behavior affected by preferences.
Customers will consistently purchase products from their preferred brands
regardless of convenience or price.
Brand positioning
The strategic development of a brand’s position in the market by heightening customer perception of the brand’s superiority over other brands of a similar nature.
Break-even
The point at which revenue from a product cancels out its costs.
Break-even chart
A management aid used in conjunction with break-even analysis to calculate the point at which fixed and variable production costs are met by incoming revenue.
Break-even point
The cost of an item plus the operating expenses associated with the item.
Above this amount a profit is made
below it
Capital Flow
The movement of investments from one country to another.
Capitalization
A firm’s value measured in its worth of stock and bonds issued.
Cash in
Selling stock or other property for cash
Cash management
Strategy used by businesses to manage their cash flow in order to have more cash available for short-term investment.
Strategy can include such things as accelerating cast receipts
prioritizing cash disbursements
Category Killer
A major company that is more efficient
Are a threat to smaller merchants because people tend to flock to the larger stores more often
based on their low cost strategies and wider distribution of stores.
Change Management
A systematic approach to dealing with change
Channel Management
A marketing process of identifying
Cognitive Dissonance
Marketing in a way to get customers to buy a product despite the fact that it may not necessarily be good for them and the ability to help them work through this condition.
Competitive Advantage
The advantage a firm has over its competitors
Includes cost structure
product offerings
Competitive Intelligence
Data gathered from rival companies in order to work on improving the organization’s competitive capacity.
Competitive Strategies
Attributes companies embrace in their attempt to out perform rivals.
Generic strategies are classified as differentiation
cost
Broad Differentiation Strategy
One in which a business seeks to differentiate its products or services from their competitors in ways that attract the broadest spectrum of customers in an established industry.
Low-Cost Strategy
Entails the process of appealing to the broad spectrum of potential buyers by being able to offer an overall low cost product or service.
Best-cost (provider) strategy
Offers customers more value for their dollar
A focused strategy on lower costs
a brand positioning strategy that concentrates on out competing rivals by offering customized products or services at a lower cost to a smaller portion of the established buyers.
A focused strategy based on differentiation
One in which the focus is on a narrow segment of buyers who are offered a product or service that has been customized to meet their exact tastes and demands and supersedes what competitors are offering.
Complementary Goods
Goods sold separately
Conflict Management
Management that aims to limit and control conflict in ways that will enhance effectiveness of the organization.
Integration Approach to Conflict Management
Involves openness
Contingency Theory
The theory that there is no single best way to organize or manage a company and that each company should be organized and structured to suit the technology used and the environment around it. The best way of organizing the company is contingent upon the internal and external situation of the company.
Corporation
A form of business organization offering limited liability to shareholders- no more money may be lost than has been invested.
Coupon Rate
This is basically the interest rate paid to the holder and is also called the nominal yield or yield rate.
Collaboration
Planning
The objective is to increase availability to the customer while reducing inventory
transportation and logistics costs.
Current Assets
Cash or items that can be converted into cash within a short period of time.
Types include actual cash
marketable securities
Actual Cash
Cash in checking and savings account
Marketable Securities
Stocks
Accounts Receivable
Funds owned by customers of the firm
Notes Receivable
Value of all notes owed to the firm
Inventory
Cost of merchandise that the firm has for sale
Customer order cycle
the time customers are willing to wait
Decision theory
encompasses both formal mathematical and statistical approaches to solving decision problems
Decentralization
Brings delegation of decision-making to sub-units of an organization rather that it being solely at the top.
Decision Tree
A schematic tree-shaped diagram used to determine a course of action or show a statistical probability. Each branch represents a possible decision or occurrence. Shows how one choice leads to the next
Deconstruction
Involves the breaking up of traditional business structures to meet the requirements of the modern economy. Necessary when systems are archaic and no longer effective.
Delphi technique
A widely used systematic forecasting method that involves structured interaction among a group of experts on a subject.
Typically includes rounds of experts answering questions and giving justification for their answers
providing the opportunity between rounds for changes and revisions. The multiple rounds
Delta
The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative.
One of 0.7 means that for every $1 the underlying stock increases
the call option will increase by $0.70.
Democratic Leadership
Leadership style where all individuals are involved in the decision-making process to determine what needs to be done and how it should be done
On the other hand
decision making and implementation are delayed compared to autocratic leadership because under this style more than one person is involved in decision making process.
Differential Pricing
Allows a company to adjust pricing based on various situations or circumstances.
The price variations come in different forms
from discounts for a particular group of people to coupons or rebates for a purchase.
Diffusion of innovation theory
for any new product to be successful
(bank) Discount
an amount subtracted from the price of a product or service which helps the buyer purchase at lower cost and increases profits.
Dividend
money designed by the board of directors to be distributed among stockholders usually stated as a dollar amount per share.
Dividend payout
the generated cash that a corporation issued to a shareholder as a dividend on the total number of shares.
Depending on the structure of the stock issue
this may involve all the net profit generated during the fiscal year
DuPont formula
Method for assessing a company’s return on equity breaking into 3 parts.
If ROE is unsatisfactory
the DuPont formula helps locate the part of the business that is under performing.
Early Adopter
minority group of population which
Earnings per share (EPS)
total earnings (minus dividends on preferred stock) divided by the number of shares outstanding.
Economy of scale
economic principal stating that as the volume of production increases
Engagement
human resource management approach designed to ensure that employees are sincerely committed to their organization’s goals and values
Equality
a principle of management where there is equal opportunity within the organization and avoidance of discrimination by age
Equilibrium Price
the price at which the supply of goods matches demand
Ex-coupon
a bond or preferred stock that does not include the interest payment or dividend when purchased or sold.
exporting
the act of producing goods or services in one country and then selling or trading them abroad
factors of production
inputs that are used in the production of goods or services in the attempt to make profit.
Include land
labor
fair trade
an international business system by which countries agree not to charge import duties on some items imported from their trading partners.
field trial
a process to test the physical or engineering properties of a product in order to identify and hash out any technical problems before marketing.
Test marketing
used to determine the likely market for
first in
first out (FIFO)
During periods of high inflation rates
this method yields higher value of the ending inventory
first mover advantage
the advantage gained by the initial significant occupant of a market segment.
Fishbone chart (cause and effect diagram)
Used to identify all possible causes of a problem. The beginning is the head of the fish. A horizontal line extends from the head with diagonal lines on each side of it to denote the fish bones.
Porters 5 forces
The forces that shape strategy are rivalry among competitors
Fixed cost
a cost that does not vary depending on production or sales levels such as rent
Flow line production
a production method in which successive operations are carried out on a product in such a way that it moves through the factory in a single direction.
Most widely used in mass production on production lines. Inventory is usually kept to the minimum necessary to ensure continued activity. Stoppages and interruptions to the flow indicate a fault
and corrective action can be taken.
flow theory
a theory of the way in which people become engaged with or disengaged from
Suggests that people harmonize in change situations
and open
focus group
a marketing process where selected representative consumers or employees are used for the purposes of providing feedback on preferences and responses to a selected range of issues.
forecasting
estimating future trends by examining and analyzing available information.
formal group
purposely designed group to accomplish an organizational objective or task
frequency analysis
a technique for comparing the number of opportunities to reach the same target audience in different media.
fringe benefits
rewards given or offered to employees in addition to their wages or salaries and included in their employment contract.
Range from share options
company cars
front office
the staff members in the business who deal directly with customers and clients.
game theory
used to represent conflicts and problems involved in formulating marketing and organizational strategy
Gamma
a measurement of how fast delta changes
In a delta-hedge strategy
this is sought to be reduced in order to maintain a hedge over a wider price range.
GAP analysis
the comparison of actual performance with potential performance in this way. 1. Listing of characteristic factors. 2. listing factors needed to achieve future objectives. 3. highlighting the gaps that exist and need to be filled.
Global marketing
the process of conceptualizing and conveying a final product or service worldwide with strategies of reaching the international marketing community.
Globalization
Denotes worldwide movement toward economic
Gross margin
in finance
In operations and production
it is the difference between the manufacturing cost of a unit of output and the price at which it is sold.
gross profit method
a method used to estimate inventory value at cost which utilizes cost amounts.
gross yield
the income return derived from securities before the deduction of tax
group-think
the tendency of members of a group to yield to the desire for consensus or unanimity at the cost of considering alternative courses of action.
harmonization
adjustment of differences and inconsistencies among different measurements
harvesting strategy
planned discontinuation of a product at the end of its life cycle
In this strategy
all marketing expenditure is gradually eliminated and the product is allowed to sell on its goodwill unit sales revenue falls below a cutoff point.
hedge
making an investment to reduce the risk of adverse price movements in an asset. Normally
horizontal integration
the acquisition of additional business activities that are at the same level of the value chain in similar or different industries.
If products offered by the companies are the same or similar
it is a merger of competitors.
If all producers of a particular good or service in a given market were to merge
it would result in the creation of a monopoly.
human capital
the employees of an organization.
human capital accounting
placing a financial figure on the knowledge and skills of an organization’s employees or human capital.
human resource accounting
the identification
Human resource forecasting
for the sake of HR planning this is the prediction of future levels of demand for
Human resource management
the function within an organization that focuses on recruitment of
human resource planning
the ongoing process of systematic planning to achieve optimum use of an organization’s most valuable asset - its human resources.
The objective is to ensure the best fit between employees and jobs
while avoiding manpower shortages or surpluses.
The 3 key elements are forecasting labor demand
analyzing present labor supply
Import penetration
the degree to which one country’s imports dominate the market share of those from other industrialized countries.
is the relative share of imports in the supply of goods available for domestic consumption. It expresses imports as a percentage of domestic supply
which is shipments minus exports plus imports…
import quota
a limit on the quantity of a good that can be produced abroad and sold domestically. It is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time.
importing
the business of bringing goods or services into one country from another
The higher the value of the imports entering a country
compared to the value of exports
income bond
a bond that a company repays only from its profits
income fund
a fund that attempts to provide high income rather than capital growth.
incorporated
formed into a legal corporation
infinite capacity planning
a way of measuring potential future capacity whereby the actual capacity constraints of each individual workstation are not taken into account.
information management
is a discipline that governs accountability structure and design
innovators
first buyers of new technologies
inputs
resources such as people
insourcing
delegating a job to someone within a company as opposed to someone outside of the company (outsourcing).
Intellectual property
intangibles owned by the business such as ideas that are patent
interactive planning
approach that calls for actively involving all parties that are affected by the project at hand in the process of developing the steps and procedures that ultimately bring the plan to fruition.
internal growth
organic growth created within a business by inventing new products and so increasing its market share
internal marketing
involves the creation of an internal market by dividing departments into business units
issued shares
the number of authorized shares that are sold to and held by the shareholders of a company regardless of whether they are insiders
joint bond
a bond that is guaranteed by a party other than the company or government that issued it.
joint management
the overseeing and control of the affairs of an organization shared by two or more people.
key account management
the management of the customer relationships that are most important to a company.
knowledge management
the coordination and exploitation of an organization’s knowledge resources
laggards
the last buyers of technology
laissez faire leadership
a non-authoritarian leadership style. These leaders try to give the least possible guidance to subordinates and try to achieve control through less obvious means. they believe that people excel when they are left alone to respond to their responsibilities and obligations in their own ways.
lambda
a ration between the expected change in the price of an option and a one percent change in the expected volatility of the underlying asset.
last in
last out
lead time
the amount of time that elapses between when a process starts and when it is completed.
lean enterprise
an organizational model that strategically applies the key ideas behind lean production. Is viewed as a group of separate individuals
lean production
a methodology aimed at reducing waste in the form of overproduction
Lewin’s stages of change
a 3 stage theory of change commonly referred to as unfreeze
liquid assets
cash or items that can be converted to cash quickly
liquidity
a firm is liquid if it has the ability to pay its bills as they come due
manufacturing cost
cumulative total of resources that are directly used in the process of making various goods and products.
marginal pricing
the process of setting an item’s price at the same level as the extra expense involved in producing another item.
marginal revenue
the increase in revenue that results from the sale of one additional unit of output.
Can remain constant over a certain level of output
it follows the laws of diminishing returns and will eventually slow down
marketing mix
the marketing mix or 4 ps- product
marketing penetration pricing
the policy of pricing a product or service very competitively
market segmentation
a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and applications for the relevant goods and services. Depending on the specific characteristics of the product
market based pricing
setting a price based on the value of the product in the perception of the customer
market share
the proportion of the total market value of a product or group of products or services that a company
Maslow’s hierarchy of needs theory
People are motivated to achieve certain needs. When one need is fulfilled a person seeks to fulfill the next one
- Biological and physiological needs - air
food
- Safety needs- protection from elements
security
- social needs- belonging
affection and love from others.
- esteem needs- achievement
mastery
- Self-actualization needs- realizing personal potential
self-fulfillment
matrix management
a technique of managing an organization through a series of dual-reporting relationships instead of a more traditional linear management structure.
matrix organizational structure
an organizational structure that facilitates the horizontal flow of skills and information and the main idea is that the management of large projects or product developments processes
merchandizing
A branch of marketing theory and practice concerned with maximizing product sales by designing
merit pay
an approach to compensation that rewards the higher performing employees with additional pay or incentive pay. Unlike profit sharing or similar bonus pay schemes
Methods study
subjecting each part of a given piece of work to close analysis to eliminate every unnecessary element or operation
middle office
staff who do not interact directly with customers but are involved in making business decisions.
management information system (MIS)
methods of using technology to help organizations better manage people and make decisions. The five primary components 1. hardware. 2. software. 3. data 4. procedures 5. people.
nester
consumer who is not influenced by advertising hype but prefers value for money and traditional products.
net asset value
the value of a company’s stock assessed by subtracting any liabilities from the market value.
net asset value per share
the value of a company’s stock assessed by subtracting any liabilities from the market value and dividing the remainder by the number of shares of stock issued.
net investment
an increase in the total capital invested. It is calculated as gross capital invested less an estimated figure for capital consumption or depreciation.
net present value (NPV)
the difference between the present value of cash inflows and the present value of cash outflows. It is used in capital budgeting to analyze the profitability of an investment or project.
net price
the price paid for goods or services after all relevant discounts have been deducted
network management
top level administration and maintenance of large networks
network marketing
the selling of goods or services through a network of self-employed agents or representatives. Usually involves several levels of agents
network organization
where long term corporate partners supply goods and services to and through a central hub firm. Together a network of small companies can present the appearance of a large corporation.
Obsolescence
the decline of products in a market due to the introduction of better competitor products or rapid technology developments. Can be a planned process
offshoring
the relocation by a company of a business process from one country to another- typically an operational process
oligarchy
an organization in which a small group of managers exercises control. Within this
operating cost
expenses associated with administering a business on a day to day basis. Includes both fixed costs and variable costs. Fixed costs
opportunity cost
the cost of passing up the next best choice when making a decision.
overall rate of return
the aggregate of all the dividends received over an investment’s life together with its capital gain or loss at the date of its realization
Panel Study
study that provides longitudinal data on a group of people
Payout Ratio
also known as dividend payout ratio
P/E
the price of a security per share at a given time divided by its annual earnings per share.
Helps determine a security;s stock valuation
that is
personal brand
the public expression and projection of a person’s identity
PEST analysis
Systems that should be considered when planning a business as these van have impacts on business success or failure. Political
Price differentiation
pricing strategy in which a company sells the same product at different prices in different markets.
price learning ratio
a pricing strategy in which a company sells the same product at different prices in different markets.
price to books ratio
the ratio of the value of all of a company’s stock to its book value.
primary data
is original research conducted by you to collect data specifically for your current objective.
product abandonment
the ending of the manufacture and sale of a product. Products are abandoned for many reasons. The market may be saturated or declining
product concept
the notion that the integrity of the product supersedes all other considerations and that quality alone determines the fate of the product. Therefore no substantive marketing effort is required. A limit is people may not even realize it exists much less evaluate it for purpose.
Product Life Cycle
Introduction Stage- most expensive. Size of market is small. Sales are low but increasing (hopefully). Cost of R&D
Growth Stage- Strong growth in sales and profits. Company can start to benefit from economies of scale in production
the profit margins
product mix
number of products company offers. similar or different. 4 dimensions width
profit margin
net income divided by revenues or net profits divided by sales. measures how much out of every dollar of sales a company actually keeps in earnings. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.
pro forma
a projection showing a business’s likely financial statements after the completion of a planned transaction.
prospect theory
individuals make decisions that deviate from rational decision making by examining how the expected outcomes of alternative choices are perceived. Theory is based on the premise that people treat risks associated with perceived losses differently from risks associated with perceived gains.
pull system
in manufacturing: production is based on actual daily demand (sales) and where information flows from market to management in a direction opposite to that in traditional (push) systems.
in marketing
a pull strategy involved motivating customers to seek out your brand in an active process.
push and pull strategy
promotional strategies to get product or service to market roughly divided into two separate camsp
push system
promotional strategy that involves taking the product directly to the customer whatever means to make then aware of your brand at the point of purchase
qualitative research
Generally successful with short-term predictions where the scope of the forecast is limited. Can be thought of as expert driven
quantitative research
used with historical data is available. Two major categories: Time series or causal methods.
ratio of net income after taxes to average owner’s equity
net income divided by average owners equity
rebadge
when one company buys a product or service from another company and sells it as part of their own product range.
repositioning
a marketing strategy that changes aspects of a product or brand in order to change market position and alter consumer perceptions
return on investments (ROI)
the percentage return on a particular investment
sampling
process of selecting units from a population of interest so that by studying the sample we may fairly generalize the results back to the population from which they were chosen.
us securities and exchange commission (SEC)
agency established to protect investors. To maintain fair
secondary data
involves searching for existing data that was originally collected by someone else. Cheaper than primary data.
Selling concept
is predicated upon the notion that consumers will not make purchases in the absence of strong selling and promotional efforts.
selling cost variance
the difference in expected revenue and actual revenue when the price of a unit changes.
semi variable costs
the amount of money paid to produce a product
shareholder
one who owns shares of stock in a corporation or mutual fund. With it comes a right to declared dividends and the right to vote on certain company matters
stocks
common: carries the right to vote for the directors of the firm
preferred: has a claim on the firm’s earnings before dividends may be paid on common stock and that has a prior claim on the corporation’s assets in the event of liquidation. However
has no voting rights.
STEEPLE analysis
expanded from pest analysis. These systems should be considered when planning business as these can have impacts on business success or failure. Social
Stress test
a risk management tool that helps to identify how vulnerable a business
Supply Chain Management
The oversight of materials
Survey
The collection of data from a given population for the purpose of analysis of a particular issue. Data is often collected from only a sample of a population
sustainable advantage
a competitive advantage that can be maintained over the long term
SWOT analysis
Identify Strengths
tertiary industry
segment of the economy that provides services to its consumers. Financial institutions
terotechnology
a multidisciplinary technique that combines the areas of management
Theory of constraints
a management paradigm that views any manageable system as being limited in achieving more of its goals by a very small number of constraints. This is always at least one constraint. The underlying premise of theory of constraints is that organizations can be measured and controlled by variations of three measures: throughput
Throughput in theory of constraints
rate at which system generates money through sales
Inventory in theory of constraints
all the money that the system has invested in purchasing things which it intends to sell.
Operational Expenses in theory of constraints
all the money the system spends in order to turn inventory into throughput.
Theory X
represents a negative view of human nature that assumes individuals generally dislike work
Theory Y
Denotes a positive view of human nature and assumes individuals are generally industrious
Theta
a measure of the rate of decline in the value of an option due to the passage of time. Can also be referred to as the time decay on the value of an option. If everything is held constant
Top Down Approach
An autocratic style of leadership in which strategies and solutions are identified by senior management and then cascaded down through an organization. Can be considered a feature of large bureaucracies. Has been criticized for being out of date style that leads to stagnation and business failure.
total return
one more way to evaluate investment decisions
treasury bond
a bond issued by the US govt that bears fixed interest
turnaround management
uses analysis and planning to save troubled companies and returns them to solvency. Involves management review
value added
the enhancement added to a product or service by a company before the product is offered to customers
value analysis
a cost reduction and problem solving technique that analyzes an existing product or service in order to reduce or eliminate any costs that do not contribute to value or performance.
Usually focuses on design issues relating to the function of a product or service
looking at the properties that make it work
Value Chain
sequence of business functions in which customer usefulness is added to products. The general 6 primary functions are research and development
Primary activities of value chain
directly concerned with the production or delivery of certain products or services.
support activities
help to support the efficiency and effectiveness of primary activities.
value-in-use analysis
in purchasing the examination of each procurement item to ascertain its total cost of acquisition
variable costs
cost of labor
vertical integration
The process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity
work sampling
the statistical technique for determining the proportion of time spent by workers in various defined categories of activity
world trade organization (WTO)
an international organization set up with the goal of reducing restriction in trade between countries.
Write-down value
the value of an asset after accounting for depreciation or amortization. Also called book value or net book value.
Yield
the income return on an investment. The interest or dividend received from a security and is usually expressed annually as a percentage based on the investment’s costs
zero-budgeting
method where cash flow budgets and operating plans each fiscal period must start from scratch with no pre-authorized funds. Total income minus total expenses should be zero. Forces the company to assign every dollar of income to an expense.
