Estate Tax

What is Estate Tax? Definition: Estate tax is the tax that is required to be paid to the government when a person dies. It is levied by the federal government as well as some states. What does Estate Tax mean? All your possessions including the assets that you partially own...

Expenditure

What is an Expenditure? Definition: An expenditure is a payment in cash or the promise to pay at a future date. It could be made towards an operational expense or for the acquisition of a capital asset. What does Expenditure mean? A company needs to incur expenditure to run its business...

Expenditure Approach

What is Expenditure Approach? Definition: The gross domestic product (GDP) of a country can be calculated by adding total spending in the economy to total investments and net exports. This is the expenditure approach to arriving at the GDP. What does Expenditure Approach mean? The expenditure approach calculates GDP by adding:⇨...

Externality

What is an Externality? Definition: At times, an economic decision made by one party has an unintended effect on another unrelated party. This effect is known as an externality. Most externalities are negative, although there are many positive externalities as well. What does Externality mean? A company may set up a...

Financing Activities

What are Financing Activities? Definition: The financing activities of a firm refer to matters pertaining to its long-term and short-term liabilities. The term includes the raising of funds by issuing equity capital and borrowings in the form of bank loans and bond issues. What does the term Financing Activities mean? Each...

Fixed Cost

What is a Fixed Cost? Definition: Fixed costs remain constant regardless of the level of production. Consequently, an increase in output leads to fixed costs being spread over a larger number of units leading to lower average fixed costs. Companies try to control their fixed costs so that they can improve...

Flexible Budget

What is a Flexible Budget? Definition: A flexible budget allows a business to make changes based on the level of activity. In this respect, it is superior to a static or fixed budget. However, preparing a flexible budget could require a great deal of effort as the components of the budget...

Forward Integration

What is Forward Integration? Definition: When a firm expands by making an acquisition that allows it to get one step closer to its customer, it is referred to as forward integration. A manufacturer may buy the distributor that sells its products or an oil company may acquire a chain of gas...

Free Market System

What is a Free Market System? Definition: In a free market system, the forces of supply and demand determine prices. There is no central authority that directs the economy. Instead, businesses function in an independent fashion. There is little or no regulatory control. What does Free Market System mean? In a...