COMMONLY USED BUSINESS AND ECONOMIC ABBREVIATIONS AAGR Average Annual Growth Rate AAR Average Annual Return ABB Asean Braun Boveri ADAG Anil Dhirubhai Ambani Group ADB Asian Development Bank ADR American Depository Receipts AGM Annual General Meeting APEC Asia Pacific Economic Cooperation APM Administered Price Mechanism ASCII American Standard Code for Information Interchange ASSOCHAM Associated Chambers of Commerce and Industry B2B Business to Business B2C Business to Consumer BIS Bank for International Settlements, Bureau of Indian Standards BOP Balance of Payment BPO Business Process Outsourcing BRIC Brazil India Russia China BSE Bombay Stock Exchange CAGR Compounded Annual Growth Rate CEO Chief Executive Officer CFO Chief Financial Officer CII Confederation of Indian Industries CIS Commonwealth of Independent States CMIE Centre for Monitoring Indian Economy CPI Consumer Price Index CRISIL Credit Rating Information Services of India Ltd. CRR Cash Reserve Ratio CSO Central Static’s organization DIAL Delhi International Airport Ltd. EMI Equated Monthly Installment EPS Earnings Per Share EPZ Export Processing Zone ESOP Employee Stock Ownership Plan EXIM Bank Export and Import Bank FDI Foreign Direct Investment FEMA Foreign Exchange Management Act FERA Foreign Exchange Regulation Act FICCI Federation of Indian Chambers of Commerce and Industry FII Foreign Institutional Investor FIPB Foreign Investment Promotion Board GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GDR Global Depository Receipt GNP Gross National Product HDFC Housing Development Finance Corporation HNWI High Net Worth Individuals ICICI Industrial Credit and Investment Corporation of India ICRA Investment Information and Credit Rating Agency of India IDBI Industrial Development Bank of India IFC Industrial Finance Corporation; International Finance Corporation ILO International Labour Organization IMF International Monetary Fund IPCL Indian Petrochemical Corporation Limited IPO Initial Public Offering IRDA Insurance Regulation and Development Authority IRR Internal Rate of Return JV Joint Venture KPI Key Performance Indicators LIBOR London Inter-bank Offered Rate LIC Life Insurance Corporation of India M1 Money supply with public M2 M1 + time related deposits + savings deposits, money market funds. M3 Aggregate monetary resources MNC Multi National Corporation MOU Memorandum of Understanding NABARD National Bank of Agriculture and Rural Development NAFTA North American Free Trade Agreement NASDAQ National Association of Securities Dealers Automated Quotation NASSCOM National Association of Software and Service Companies (of India) NAV Net Asset Value NCAER National Council of Applied Economic Search NHAI National Highways Authority of India Limited NPA Non Performing Assets NRIs Non-Resident Indian NRS National Readership Survey NSE National Stock Exchange NYSE New York Stock Exchange ONGC Oil and Natural Gas Corporation OPEC Organisation of Petroleum Exporting Countries OTCEI Over the Counter Exchange of India PETA People for Ethical Treatment of Animals PLR Prime Lending Rate PPP Purchasing Power Parity PSU Public Sector Undertaking RBI Reserve Bank of India RPI Retail Price Index SAARC South Asian Association for Regional Coorporation SAIL Steel Authority of India Limited SEBI Securities and Exchange Board of India SENSEX Sensitivity Index (of Share Price on BSE) SEZ Special Economic Zone SLR Statutory Liquidity Ratio SME SME SWOT Strengths, Weakness, Opportunities and Threats TISCO Tata Iron and Steel Co. UHNWI Ultra-high Networth Individual UNCTAD United Nations Conference on Trade and Development VAT Value Added Tax WEF World Economics Forum WPI Whole Sale Price Index YTM Yield to Maturity TYPES OF BUSINESS ENTITIES A business entity is an institution engaged in an economic activity, producing, selling and distributing goods/services with an aim of earning profits. Three important types of business entities are: 1. Sole Proprietorship 2. Partnership 3. Company 1. SOLE PROPRIETORSHIP When an individual takes the initiative to start an activity related to start a trade or commerce for his own economic benefit, it is known as sole proprietorship. A sole proprietor is a single person who owns, maintains and manages the whole show in the business. All the salaries and other overheads only form a part of the expenses of the sole proprietorship firm. After deducting all the expenses that relate to the business from total receipts of the business, what remains is the profit which may either be reinvested in the firm or could be withdrawn by the proprietor. Characteristic of a Sole Proprietorship Business i. Single Ownership ii. Autonomy in Decision Making - The sole proprietor is the only decision maker and has complete autonomy in decision making. Quick Decision Making – Since the firm is owned by a single person, the decision iii. making is prompt. iv. Unlimited Liability – In case of insolvency of the firm, the liability stands unlimited i.e. if the assets of the firm are not enough to pay off the business debts the personal assets of the proprietor are also attached to the firm’s property. v. Can be winded up without any prior legal notice. vi. No Separate Legal Entity – In case of sole proprietorship, the owner and the business are considered one and the same i.e. the actions taken by the proprietor are binding upon the firm and vice versa. 2. PARTNERSHIP An individual i.e. a sole proprietor may not be in a position to cope with the financial and managerial demands of the present business world. As a result, two or more individuals may decide to pool in their financial ad non-financial resources to start and carry on a business. The Indian partnership act defines partnership as, ―the partnership between persons who have agreed to share the profits of business carried on by all, or any one of them acting for all.‖ Characteristics of a Partnership Business i. An association of two or more persons. ii. An agreement entered into by all persons concerned. iii. Existence of business (and not just an agreement) . iv. The carrying on of business by all, or any one of them acting for all. v. Sharing of profits (or losses)of the business. From the point of view, the main thing is that relations among the partners will be governed by mutual agreement. The agreement is known as The Partnership Deed which is to be properly stamped. It should be comprehensive to avoid disputes later on. It is usual therefore, to find the following clauses in a Partnership business: i. Name of the firm and the partnership business. ii. Commencement and duration of business iii. Amount of capital to be contributed by each partner iv. Rate of interest to be provided to each partner on his capital v. Disposal of profits and the ratio in which it would be done Amount to be allowed to each partner as drawings and the timings of such vi. drawings vii. Whether a partner will be allowed a salary viii. Any variation in the mutual rights and duties of the partners ix Method by which goodwill will be calculated x Procedure by which a partner may retire and the method of payment of his dues xi Treatment of losses arising out of the insolvency of a partner xii Preparation of accounts and their audit 3. COMPANY The word Company etymologically is a combination of two Latin words ‗Com‘ meaning ‗with or together‘ and ‗Pains‘ meaning ‗bread‘. Originally, it referred to a group of persons who took their meals together. In business terminology, a company ―refers to a legal entity formed which has a separate legal entity from its members, and is ordinarily incorporated to undertake commercial business‖. Put in simple words, a company is nothing but a group of persons that have come together and have contributed money for some common purpose and have incorporated themselves into a distinct legal entity in the form of a company for the same purpose. A company is formed and registered under the Companies Act, 1956. Characteristics of a Company i. Separate Legal Entity - A company has a legal identity distinct from that of its members. In a court case, Salomon vs. Salomon & Co. Ltd, 1807, the entity of the company has been described as following “A company is a person, artificial, invisible, intangible and existing in the eyes of law”. ii. Limited Liability – In a company limited by shares, liability of the members is limited to the unpaid value of the shares whereas in a company limited by guarantee, liability of the members is limited to such amount as the members may undertake to contribute to the assets of the company, in the event of it being winded up. iii. Perpetual Succession – A company’s life does not depend upon the life of its members. Members of a company may come and go, may change from time to time, but that does not affect the continuity of the company. iv. Separate Property – Since the company has a separate legal entity, it also has a separate property of its own. No member can claim to be the owner of the company’s property till the existence of the company. v. Transferability of Shares – The shares in a company are freely transferable but subject to certain conditions, such that no shareholder is permanently or necessarily attached to the company. vi. Common Seal - A company is an artificial person and does not have a physical existence. A common seal is the official signature of the company under which it operates and carries out its activities. vii. Legal Entity – Since a company is a separate entity, distinguished from its owners, it has the capacity to sue and can be sued in its own name. viii. Separate Management – A company is owned by its shareholders but the management of a company is in the hands of its managerial force constituted of Board of Directors, employees etc. Thus the management of a company is separate from its owners. The shareholders may or may not constitute a company’s management.