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Glossary
 
Balance Sheet
 
A financial statement summarizing a firm's assets, liabilities, and net worth at a given point in time.
Capital Investment
The money put into buildings, tools, and machines to create goods and services.
Cash Flow
The amount of money going into and out of a business during regular business operations.
Company Report
A report that contains private information about the inner working of a specific company.
Demand Curve
A graphic depiction of the quantity of a particular good or service that people are willing and able to buy at different possible prices at a particular time. A demand curve is usually downward sloping to the right. Typically price and quantity demanded move in opposite directions. As price decreases, the quantity demanded increases. If price increases, the quantity demanded (total orders) decreases.
Depreciation

The value lost in assets as they wear out or become obsolete. Depreciation is both an accounting expense and an economic concept. The rules of accounting in this simulation allow a company to expense 5 percent of its plant investment as a cost incurred in production. Depreciation is also an economic concept because the total cost of production includes not only labor, natural resources, and material, but also the wear and tear on production facilities. Economic depreciation may vary due to levels of production, maintenance, the age of the facility, and other factors.

Economies of Scale

Reductions in cost resulting from large-scale production. Economies of scale develop as a company increases its factory capacity and uses the latest technology and more efficient production processes. Thus, a company can lower its average cost by increasing plant capacity. Suppose you increase plant investment by $8,000 each quarter. As plant capacity increases, cost per unit falls at each level of capacity utilization.

Long-run average cost curves do not fall forever. Eventually, a company will hit its most efficient-scale plant. Further expansion may actually cause the long-run average cost curve to begin to increase which means a company has become too large.

Eighty percent of the plant capacity will continue to be the lowest-cost point on the short- run average cost curve at any level of factory investment.

Elasticity of Demand

A measure of the effect a price change has on the quantity demanded. The quantity demanded of a product with a highly elastic demand curve will change dramatically as a result of a small change in price. On the other hand, consumers will continue to purchase similar quantities of goods, regardless of price, if their demand curves are inelastic.

More precisely, demand is elastic if the percentage change in quantity purchased is greater than the percentage change in price. Demand is inelastic if the percentage change in price is greater than the percentagechange in quantity purchased.

An easy way to estimate the effects of a price change is to calculate the total revenues anticipated at various prices.

Total Revenue (TR) = Price X Quantity

Gross Margin

The difference between the total costs to manufacture and sell a product and the revenue from sales of the product.

Income Statement
A graphic depiction of the quantity of a particular good or service that people are willing and able to buy at different possible prices at a particular time. A demand curve is usually downward sloping to the right. Typically price and quantity demanded move in opposite directions. As price decreases, the quantity demanded increases. If price increases, the quantity demanded (total orders) decreases.
Industry Report

A report that summarizes the performance of an entire industry.

Interest

Payment for using someone else's money; income from allowing someone else to use one's capital. See also Interest (Income) or Interest (Expense).

Margin

The difference between the cost of production and the selling price.

Marketing

Everything that occurs between production and purchase.

New Loans

Additional funds a company borrows from the bank.

Oligopoly

A market structure in which a few large businesses supply most or all products. Breakfast cereals, major appliances, carbonated soft drinks, and the auto industry are examples of oligopolies.

Profit

The difference between a firm's total revenues and its total costs.

Repayments

Money a company spends to pay off a loan.

Retained Earnings

Undistributed profits.

Revenue

Income, as from sales, property, or taxes.

Plan Detail

Area of granular decision-making for specific funding uses for R&D and Marketing. R&D sub-decision funding can specify research funding for individual Holo-Gen features and focus group moneys. Marketing sub-decisions allow for choosing specific marketing campaigns, such as newspaper ads or billboard ads. Individual sub-decisions for both fields have different costs and levels of effectiveness based on overall plan designs.

Supply Curve

A graphic depiction of the quantity of a particular good or service that people are willing and able to provide at different possible prices at a particular time

Volume/Price Strategy

The decision of a company to produce a specified number of items at a particular price within a specific area of a market.

   

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