Essential Business Finance Definitions
Key Financial Terms Defined
Treasury Plan
A monthly record tracking money inflows (receipts) and outflows (payments). At the end of each month, it helps determine if there is a cash surplus or if additional funds are needed to meet payment obligations.
Liquidity
The amount of readily available cash or assets that can be quickly converted to cash.
Solvency
The ability of a company to meet its long-term financial obligations and debts.
Security Deposit Example
When renting a property, a landlord typically
Read MoreUnderstanding Social Security Contribution Base Exclusions
Social Security Contribution Base Exclusions
When no municipality has stayed in the workplace longer than usual, and that constitutes the beneficiary’s residence, allowances for living expenses do not exceed the indicated amounts.
The excess over the indicated amounts must be included in the case of trading.
b) Urban transport bonuses and distance allowances, or their equivalents. The resulting excess, if any, will be computed on the basis of contribution.
c) Death benefits and payments for transfers,
Read MoreNEP, Stalinism, New Deal & Social Changes: Analysis
NEP Application: Overcoming War Losses
The NEP (New Economic Policy) aimed to:
- Overcome the losses of the war.
- Achieve economic growth to reach socialism.
- Support the nation through peace and without external assistance.
NEP Features:
- Free trade is allowed, outside state control.
- Foreign companies and capital investments are permitted.
- Wages and salaries are performance-based.
- Small private companies (more than 20 workers) are adopted.
- The state controls banking, foreign trade, transport, and key industries.
Understanding International Trade Restrictions and Economic Balance
International Trade Restrictions
Free trade worldwide faces restrictions. Some countries impose barriers to limit the entry of specific products, often to protect domestic industries.
These protective measures, also known as state intervention, can take various forms:
- Customs duties or tariffs
- Import quotas
- Export subsidies
Customs Duties (Tariffs)
Customs duties are import taxes, called tariffs, that restrict the entry of certain goods. This protects domestic industries or serves as a sanitary measure,
Read MoreCore Economic Concepts: Income Flow, Production, Distribution
Circular Flow of Income
The circular flow of income describes the set of relationships between economic agents, primarily involving:
- The payment of income from companies to families in exchange for work and other productive factors.
- The payment of prices from families to businesses in exchange for goods and services produced by them.
In economies that rely on the market to allocate resources, relationships exist between families, businesses, and the state within two main markets:
- The Market for Goods
Understanding Stolper-Samuelson, Rybczynski, and Factor Price Equalization Theorems
The Stolper-Samuelson Theorem
Under the assumptions that the underlying production technology exhibits constant returns to scale and that both goods are produced, an increase in the price of one good leads to an increase in the real income of the factor that is used intensively in producing that good, and lowers the real income of the other factor. Trade results in the rising of the price of the good which uses intensively the abundant factor that earned relatively low in autarky. Since demand for
Read More