INTERNET MARKETING

INTERNET MARKETING

INTERNET MARKETING

 

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BUSINESS TERMS (C-D)

 

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Understanding business terms is the key to learning about business. Terms C-D are listed below:

Cash Flow, Consumer Price Index (CPI), Capital, Capitalism, Cash Basis Accounting, Commission, Current Assets, Current Liabilities, Debt, Deficit, Deflation, Devaluation, Discount, Distribution Channel, Downsize  

 

CPI (Consumer Price Index)
The Consumer Price Indes (CPI) is a measure of the price of consumer goods and services.  It measures the increase or decrease in the price of those goods and services.  It is published mothly by the Department of Labor (DOL)

 

Capital
Capital is money used by a business to finance production or provide a service.


Capitalism
An economic system defined by private or corporate ownership of capital goods, by investment that are determined by private decision, and by prices, production and the distribution of goods that are determined mainly by competition in the free market.  Source:  Webster Dictionary.

Cash Flow
Cash Flow is the movement of money in and out of a business.  Cash inflows result of financing, investment and operations.  Outflows result from expenses or investment.

Operating Cash Flow is cash generated by day to day operations of the business.  It includes accounts receivable, inventory and income generated.

Positive cash flow is when the company is generating more money that it is using.  Positive cash flow can enable a company to buy back stock, offer a dividend, reduce debt, or grow by acquiring other companies.

The Cash Flow statement is a report that show how much money was generated and used by the company for a specific period of time (as stipulated by the company). 


Cash Basis Accounting
In Cash Basis Accounting expenses is incurred when it is paid and income is earned when the money is received.  This is unlike Accrual accounting where income and expenses are incurred when they occur, not when the money is received or the expense is paid.  See more.


Commission
A commission is a fee paid to am employee on a percentage basis.  It is used to motivate employees to perform at a higher level.  For exmaple, it is used to get employees to generate more sales.  The employee receives a percentage of the money generated in sales as a reward for his/her efforts.  A commission is normally offered in addition to a base salary as added compensation.

Consignment
Consighment is where the retailer agree to let you place your products in their store and maintain a certain level of stockage in return for sharing a percentage of the retail price with the retailer whenever an item is sold.  The retailer will process the payment from customers and give you your portion of the proceeds.  This minimizes the risk and upfront cost to the retailer and it helps you to get your items in the store.  Once the item sells well you can change the arrangement with the retailer and have the retailer pay for the items upfront and sell it to customers at a profit.

Core Competency
A core competency is a specific factor that a business sees as central to the way it operates. This is a term coined by C. K. Prahalad and Gary Hamel.  It gives the business a competitive advantage in creating and delivering value to its customers.  This should not be confused with the term core business.  The core business expresses the company's main or essential activity.  Core competency can be a specific set of skills, technique or activity that the company performs that enables them to meet their business objectives and brings additional value to the cutomer.  Core competencies are difficult for others to imitate, and brings value to the customer.  Some examples include, distribution, low cost operations, culture, operations, great guest service, etc.

Cost Per Click (CPC)
CPC refers to the what an advertiser pays for every time someone clicks on one of their ads.  Advertisers such as other businesses place advertisement on popular websites and pays the website owners a fee for hosting those ads on their sites.  The fee is paid every time a visitor to the website clicks on one of the ads.  The CPC cost is determined between the advertiser the hosting website owners  or a advertising network if one is used.  Learn more about CPC.

CPM
CPM stands for cost per 1,000 impressions.  This means that advertisers will pay you based on how many people see their ads on your website.  This is unlike CPC which is based on how many people clicks on the advertiser's ads.


Current Assets
Current Assets are assets on the balance sheet that can be converted to cash or be used to pay current liabilities within 12 months.  Current liabilities include, cash, securities, accounts receivables, inventory and prepaid liabilities.


Current Liabilities
Current Liabilities are debts and expenses that are to be paid in cash within the fiscal year or the operating cycle of the company (whichever one is longer).  This includes payment to vendors, short term loan payments, wages, taxes, acounts payable, etc.

Payments due beyond one year are considered fixed liabilities or long term liabilities.  however, the monthly payments are considered current liabilities.

Customer Acquisition Cost (CAC)
Customer Acquisition Cost is the cost of persuading a customer to buy your product/service.  You calculate your CAC by dividing your marketing cost by the number of customers you acquire.  For example, if it cost you $2,000 to travel and display your business at an expo and you acquired 5 customers then your CAC will be $400.  ($2,000 / 5 = $400).  It is important to know what your CAC is so that you can efficiently utilize your marketing resources.


Debt
Debt is the obligation your business incurr when you borrow money to support the business.  Debt usualy have to be repaid with interest.  However, the terms of the repayment is between the borrower and the lender.


Deficit
A deficit is incurred when liabilities or expenditure exceeds income or assets.  In other words, this is when you more expenses than you have money to pay for.


Deflation
Deflation is the negative growth of inflation.  When inflation falls below zero deflation begins.  While it may increase the value of the currency it is bad for business because it leads to lower price and less spending on the part of consumers who are waiting for prices to go even lower.


Demand
Demand refers to how much of a product or service is desired by consumers based on a certain price at a given point in time. 


Devaluation
Devaluation is the reduction of a country's currency in relation to foreign currency value.  This is when a country decides to set a new fix lower rate for its currency.

When a government devalues its currency, it is often because the interaction of market forces and policy decisions has made the currency's fixed exchange rate untenable. In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves. 

devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country's exports and decrease imports, and may therefore help to reduce the current account deficit

Source: Federal Bank of New York

Discount
Discount is selling a product or service at a lower price than the  list price.  Discount lowers the price is lowered in advance of payment.

Discounts are used to move out-of-stock items, generate short-term sales, reward customers or incentivize distribution channels to sell your product.

Distribution Channel
Distribution Channel is how you get your product before potential consumers using direct or indirect means.  For example, to get someone to buy the book that your company produced you have to offer it at a retail location.  To get it to that retail location you may have to go thru a distributor.  Everyone between you and your potential customer represents your distribution channel.

Distribution channel can consist of wholesalers, agents, brokers, distributors, value added resellers, manufacturer's representative, retail sales agent, retailers, etc.

Downsize
Downsizing is reducing your workforce by layoffs or dismissals.

Drop Shiping
Drop Shipping is the technique whereby a retailer offering something for sale does not actually have the item in stock.  Instead the retailer takes and processes the order for the item from the customer and transfers the order and shipment details to the manufacturer or wholesaler who then ships it directly to the customer.  Retailers such as Sears, amazon.com and many others offers this type of service where they allow sellers to sell their products on their websites without having the items physically in their posession.  The seller is responsible for shipping the item.  In return the retailers gets a fee for taking the order and processing the payment.





 

 

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