Business Jargon

I know that I have been gone for a while, so to make it up to you all, I am offering a bit of knowledge that may be helpful... an explanation of some business jargon. If there is something specific that you would like a definition of, please leave it as a comment...

P/E (Price to Earnings) Ratio: Essentially this metric says "I am willing to pay $x for every dollar of earnings." (P/E is usually calculated using NEXT year's forecasted earnings unless it is a trailing P/E ratio which uses this/last year's actual earnings)

Strategic Myopia: I love this one... There are really two different meanings here- 1) You are too close to the decision/issue to see the big picture (can't see the forest for the trees) or 2) You are focusing exclusively on the short run

LOMLOT: This is a customer group (and therefore usually used in marketing circles) meaning "Lots of Money, Lots of Time." Products like high end sewing machines or pretty much anything marketed directly to stay at home moms and/or housewives is targeting this group.

Synergy: Another favorite... This is often thrown around by consultants and bosses. It means when multiple factors combine to produce something greater than the sum of the parts. Essentially when 1+1>2.

Call Option: A call option is the right to buy a stock at a predetermined price (often called the "strike price") on a given date (if "European"; if "American," the option can be exercised on or before the maturity date).

Put Option: A put option is the right to sell a stock at a predetermined price (often called the "strike price") on a given date (if "European"; if "American," the option can be exercised on or before the maturity date).

Arbitrage: A situation in which you are guaranteed to make money. This is probably easier defined by example- John wants a book and will pay $10 for it. Sarah finds the book somewhere for $5. Sarah buys the book and sells it to John for $10, thereby making $5. Of course if John knew he could buy it for $5 he would have and Sarah would not have this arbitrage opportunity, so she needs to move quick. Similarly, arbitrage opportunities do not exist for long in the financial world.

Outsourcing: Hiring somebody else to do something.

Off-shoring: Outsourcing to someone in a non-geographically proximate location.

Near-sourcing: Outsourcing to someone in a geographically proximate location.

CFIMITYM: This is a great term from the world of entrepreneurship wherein cash flows are of the utmost importance. It stands for "Cash Flow Is More Important Than Your Mother."

Bubble: A situation in which prices are artificially high (usually due to (over?) speculation).

Market Capitalization: This number simply tells you the number of shares a firm has on the markets multiplied by the firm's current share price. This figure is often used in media to value a firm (such as firm XYM is worth $5B).

Nominal: An amount of money that has not been adjusted for inflation.

Real: An amount of money that has been adjusted for inflation.