Business glossary part 4

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BUSINESS GLOSSARY (S-Z)

Business-glossary

Ss

S Corporation - An S Corporation is a corporation which, under the Internal Revenue Code, is generally not subject to federal income taxes. Instead, taxable income of the corporation is passed through to its stockholders in a manner similar to that of a partnership.

Safe Harbor Rule - Concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently, safe harbors are used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation.

Sale-Leaseback Transaction - Sale of property by a seller who simultaneously leases the property back from the purchaser.

Salvage Value - Selling price assigned to retired FIXED ASSETS or merchandise unsalable through usual channels.

Sarbanes-Oxley (SOX) - The Sarbanes-Oxley Act was signed into law on 30 July 2002 by President Bush. The Act is designed to oversee the financial reporting landscape for finance professionals. Its purpose is to review legislative audit requirements and to protect investors by improving the accuracy and reliability of corporate disclosures. The act covers issues such as establishing a public company accounting oversight board, auditor independence, corporate responsibility and enhanced financial disclosure. It also significantly tightens accountability

standards for directors and officers, auditors, securities analysts and legal counsel. The law is named after Senator Paul Sarbanes and Representative Michael G. Oxley.

SAS - See STATEMENTS ON AUDITING STANDARDS.

SEC - See SECURITIES AND EXCHANGE COMMISSION.

SEC Filings - Financial and informational DISCLOSURES required by the SEC in order to comply with certain sections of the Securities Act of 1933 and the Securities and Exchange Act of 1934. Some of the more common filings that publicly owned companies must submit are the FORM 10-K, FORM 10-Q and FORM 8-K.

SEC Registration Statement - DISCLOSURE document that must be filed with the SEC in connection with a public offering of SECURITIES, unless the offering is exempt.

Securities and Exchange Commission (SEC) - Agency authorized by the United States Congress to regulate the financial reporting practices of most public corporations.

Security - Any kind of transferable certificate of ownership including EQUITY SECURITIES and DEBT SECURITIES.

Securitization -Source of financing whereby an entity's ASSETS (typically mortgage loans, lease obligations or other types of RECEIVABLES) are placed in a special purpose vehicle that issues SECURITIES collateralized by such assets.

Security Interest - Legal interest of one person in the property of another to assure performance of a second person under a contract.

Self Employment Tax - Most individuals that are in business for themselves, such as SOLE PROPRIETORS, PARTNERS or independent contractor, are subject to self employment taxes. The taxes provide coverage for the self employed individual for social security (OASDI) and Medicare benefits (HI) similar to the taxes withheld by employers from wages it pays the employees.

Settlement Method - Method of ACCOUNTING for SECURITIES whereby transactions are recorded on the date the securities settle by the delivery or receipt of securities and the receipt or payment of cash.

SFAS - See STATEMENT OF FINANCIAL ACCOUNTING STANDARDS.

Short Sale - Sale of an item before it is purchased. A person entering into a short sale believes the price of the item will decline between the date of the short sale and the date he or she must purchase the item to deliver the item under the terms of the short sale.

Short-Term - Current; ordinarily due within one year.

Significant Accounts - An account is significant if there is more than a remote likelihood that the account could contain misstatements that individually or when aggregated with others, could have a material effect on the financial statements, considering the risks of both overstatement and understatement.

Significant Deficiency - Acontrol deficiency or combination of control deficiencies, that adversely affects the company's ability to initiate, authorize, record, process or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a misstatement of the company's annual or interim financial statements that is more than inconsequential will not be prevented or detected.

Significant Findings or Issues - Substantive matters that are important to the procedures performed, evidence obtained, or conclusions reached and include but are not limited to:

1. significant matters

2. results of auditing procedures indicating a need for significant modification of planned auditing procedures

3. audit adjustments

4. disagreements among members of the engagement team

5. circumstances that cause difficulty in applying auditing procedures

6. significant changes in the assessed level of audit risk

7. matters that could result in modification of the AUDITOR's report

Single Audit Act - The Single Audit Act of 1984 and the Single Audit Act Amendments of 1996 establish requirements for audits of states, local governments, and nonprofit organizations that administer federal financial assistance programs above a certain threshold.

Simple Plans - An employer may adopt a simplified retirement plan called a SIMPLE Plan (Savings incentive match plan for employees) if it has fewer than 100 employees that received at least $5,000 in compensation in the preceding year.

Simple Trust - This type of TRUST is required to distribute all its income currently, whether or not the TRUSTEE actually does so, and it has no provision in the trust instrument for charitable contributions. It is to be distinguished from a COMPLEX TRUST. A trust may be a simple trust in one year and a complex trust in another year. In the year in which the trust distributes its corpus, it loses its classification as a simple trust.

Small Business Stock - Noncorporate investors may exclude up to 50 percent of the GAIN they realize on the disposition of qualified small business stock issued after Aug. 10, 1993, and held for more than five years. The amount of gain eligible for the 50 percent exclusion is subject to per-issuer limits. In order to qualify for the EXCLUSION, the CORPORATION issuing the stock must be a C Corporation (but excluding certain investment corporations) and it must use at least 80 percent of its assets in active conduct of one or more qualified trade or businesses. In addition, its gross assets cannot exceed $50 million.

Sole Proprietorship - See PROPRIETORSHIP.

Special Assessment - Charge made by a local government for the cost of an improvement or service. It is usually levied on those who will benefit from the service.

 Special Report - Special report is a term applied to AUDITORs' reports issued in connection with various types of financial presentations, including: Financial statements that are prepared in conformity with a comprehensive basis of accounting other than generally accepted accounting principles. Specified elements, accounts or items of a financial statement. Compliance with aspects of contractual agreements or regulatory requirements related to audited financial statements. Financial presentations to comply with contractual agreements or regulatory provisions. Financial information presented in prescribed forms or schedules that require a prescribed form of auditor's reports.

Spinoff - Transfer of all, or a portion of, a subsidiary's stock or other ASSETS to the stockholders of its parent company on a PRO RATA basis.

Spot Market - Market for buying and selling commodities or financial instruments for immediate delivery and payment based on the settlement conventions of the particular market.

Spread - Difference between two prices, usually a buying and selling price.

SSARS - See STATEMENTS ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES.

Standard Deduction - Individual taxpayers who do not itemize their deductions are entitled to a standard deduction amount by which to reduce ADJUSTED GROSS INCOME in arriving at taxable income. The amount of the standard deduction varies by the type of the taxpayer and changes each year. A schedule of standard deductions is easily found in the instructions for the federal form 1040. Each state may also use a standard deduction format, but the amounts and computations differ from the federal and from state to state. Certain taxpayers may not be entitled to use the standard deduction. An example of this would be a married filing separate taxpayer. If one taxpayer itemizes then the other is required to by law even if the married filing separate taxpayer is unknowing of what is included on the spouses separate return. A reason for this might be the prevention of pooling and duplication of deductions.

Start-up Costs –

(1) Costs, excluding acquisition costs, incurred to bring a new unit into production.

(2) Costs incurred to begin a business.

 Stated Value - Per share amount set by the BOARD OF DIRECTORS to be placed in the CAPITAL STOCK account upon issuance of NO-PAR VALUE.

Statement of Cash Flows - A statement of cash flows is one of the basic financial statements that is required as part of a complete set of financial statements prepared in conformity with generally accepted accounting principles. It categorizes net cash provided or used during a period as operating, investing and financing activities, and reconciles beginning and ending cash and cash equivalents.

Statement of Financial Accounting Standards (SFAS) - Statements issued by the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB).

Statement of Financial Condition - Basic FINANCIAL STATEMENT, usually accompanied by appropriate DISCLOSURES that describe the basis of ACCOUNTING used in its preparation and presentation as of a specified date, the entity's ASSETS, LIABILITIES and the EQUITY of its owners. Also known as BALANCE SHEET.

Statements on Auditing Standards (SAS) - Statements issued by the Accounting Standards Board of the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA).

Statements on Standards for Accounting and Review Services (SSARS) - Statements issued by the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA) that specifically relate to REVIEWS and COMPILATIONS. (See ACCOUNTANTS' REPORT.)

 Statute of Limitations - This sets out the period within which actions may be brought upon claims or within which rights may be enforced. As it pertains to tax returns, the statute of limitations is generally three years from the date a return is due or filed.

 Stepped Up Basis - Generally, the basis of property acquired by INHERITENCE, BEQUEST or device from a DECENDANT is the FAIR MARKET VALUE of the property on the date of the decendant's death. Thus if the fair market value is more than the decedent's basis, a taxpayers basis in the property received is stepped-up.

Stock Compensation Plan - FRINGE BENEFIT that gives employees the option to purchase the employer's stock at a specified price during a specified period.

Stock Option - Right to purchase or sell a specified number of shares of stock at specified prices and times.

 Stock Rights - Stock rights are rights issued to stockholders of a CORPORATION that entitle them to purchase new shares of stock in the corporation for a stated price that is often substantially less than the FAIR MARKET VALUE of the stock. These rights may be exercised by paying the stated price, may be sold, or may be allowed to expire or lapse. Stock rights are generally treated as stock DIVIDENDS.

Stock Split - Increase in the number of shares of a company's COMMON STOCK outstanding that result from the issuance of additional shares proportionally to existing stockholders without additional capital investment. The PAR VALUE of each share is reduced proportionally.

Straight-Line Depreciation - ACCOUNTING method that reflects an equal amount of wear and tear during each period of an ASSET'S useful life. For instance, the annual STRAIGHT-LINE DEPRECIATION of a $2,500 asset expected to last five years is $500. (See ACCELERATED DEPRECIATION.)

Strike Price - Price of a financial instrument at which conversion or exercise occurs.

Subsequent Event - Material event that occurs after the end of the accounting period and before the publication of an entity's FINANCIAL STATEMENTS. Such events are disclosed in the notes to the financial statements. (See MATERIALITY.)

Surviving Spouse - This is a person whose husband or wife died during the tax year. A surviving spouse may file a JOINT RETURN for the year in which the death occurred. In addition a joint return may be filed for the two succeeding tax years if during that time the surviving spouse:

1. Remains unmarried; and

2. Maintains as his home a household that is the principal place of abode during the entire TAX YEAR for a child for whom a dependency exemption may be claimed.

Swap - Financial contract in which two parties agree to exchange net streams of payments over a specified period. The payments are usually determined by applying different indices (e.g., interest rates, foreign exchange rates, equity indices) to a NOTIONAL amount. The term notional is used because swap contracts generally do not involve exchanges of PRINCIPAL.

Tt

 Tangible Asset - ASSETS having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process. (See INTANGIBLE ASSETS.)

Tax - Charge levied by a governmental unit on income, consumption, wealth, or other basis.

Tax Court - The U.S. Tax Court is a legislative court functioning to adjudicate controversies between taxpayers and the IRS arising out of deficiencies assessed by the IRS for INCOME, GIFT, ESTATE, windfall profit and certain EXCISE TAXES. It has no jurisdiction over other taxes such as employment taxes. Various sales taxes and certain excise taxes.

 Tax Credit for the Elderly and Disabled - Taxpayers age 65 or older or those under 65 who are retired with permanent and total disability are eligible to claim a credit to reduce the amount of their tax liability. It is designed primarily to benefit those individuals who receive small amounts of retirement INCOME. Each taxpayer is allocated an initial base amount based on his or her filing status determining the credit. The base amount is then reduced by the amount of nontaxable income, or is phased out for taxpayers whose ADJUSTED GROSS INCOME exceeds certain

levels.

Tax Lien - ENCUMBRANCE placed on property as security for unpaid taxes.

 Tax Shelter - Arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.

Tax Year - The period used to compute a taxpayer's TAXABLE INCOME is tax year. It is an annual period that is either a calendar year , FISCAL YEAR or fractional part of a year for which the return is made.

Taxable Income - Taxable income is generally equal to a taxpayer's ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.

Taxpayer Identification Number (TIN) - Any individual or other taxable entity that is required to file a return, statement or any other document with the IRS must indicate his (or its) taxpayer identification number. For an individual, the social security number is used, and if you do not have a social security number, the IRS will assign you a TIN. A federal or employer ID number is assigned to other types of entities and will use that as their TIN.

Tenancy-in-Common - Co-ownership of property. In a valid tenancy-in-common, a deceased coowner's title passes to his or her heirs without being included in the estate of the deceased coowner.

Tenant- A person who pays rent where they live

Tender- A written offer by a company or person to do a piece of work a certain way to a certain deadline and at a stated price

Term- A clause that forms part of a contract and a length of time for which something lasts, such as the period for paying back a loan

Term deposit- A type of account in which a person agrees to leave their savings for a fixed time (the term) or face penalties

Term assurance- A simple form of life assurance that a person takes out for a set period of time (for example, 10, 20 or 25 years) and guarantees to pay out a specified sum if the person dies during that period of time

Term Loan - Loan for a specified time period.

Third party, fire and theft insurance- Motor insurance that pays out if a person accidentally causes damage to another person’s car or if their own car is damaged by fire or stolen

Tied agent - Somebody, usually a broker or financial adviser, who is tied to a certain financial services provider and can only recommend and sell their products or services.

Timeshare-A way of owning property, usually a holiday home abroad, jointly with other people, each of whom takes turns to occupy the property for a fixed period

Timing of Tests of Control - The AUDITOR must perform tests of controls over a period of time

that is adequate to determine whether, as of the date specified in management's report, the controls necessary for achieving the objectives of the control criteria are operating effectively.

Total Gain - Excess of the proceeds realized on the sale of either INVENTORY or noninventory goods.

Trade Date - Date when a SECURITY transaction is entered into, to be settled on at a later date. Transactions involving financial instruments are generally accounted for on the trade date.

Trader- Someone who buys and sells financial instruments such as stocks and shares

Trading profit- Similar to gross profit, the profit from selling goods and services before accounting for expenses

Transaction- Any payment into or out of a person’s or company’s account

Transferred Basis - A transferred basis is the basis of property in the hands of a transferor, donor or GRANTOR. In this sense a prior owner's basis in the property is transferred to the taxpayer. Transferred basis occurs in the following transactions: GIFTS, transfers in trusts, certain transfers to controlled CORPORATIONS, contributions to PARTNERSHIPS and LIQUIDATING distributions from a corporation.

Transferee Liability - A person may be held LIABLE for another taxpayer's delinquent taxes if:

1. The transferee received assets of the transferor-taxpayer; and

2. The transferor was INSOLVENT at the time or was rendered insolvent by that transfer or

related series of transfers. However the insolvency requirement does not apply to GIFT taxes. The transferee is only liable to the extent of the value of the property received from the transferor. Thus, transferee liability merely provides a means for the IRS to recover any assets the transferor-taxpayer attempts to transfer to avoid paying taxes.

Travel insurance- Insurance that can pay for lost luggage or for medical treatment needed for certain illnesses and injuries when a person travels abroad

Travellers’ cheques- Cheques in a certain currency that a person buys and signs before they leave for another country and that they can use to buy goods and services abroad by signing the cheques again and showing identification

Treasury Bill - Short-term obligation that bears no INTEREST and is sold at a discount.

Treasury bond - Long-term obligation that matures more than five years from issuance and bears INTEREST.

Treasury Instruments - Direct financial obligations of the United States government. (See TREASURY BILL; TREASURY bond; TREASURY NOTE; TREASURY STOCK.)

Treasury Note - Intermediate-term obligation that matures one to five years from issuance and bears INTEREST.

Treasury Stock - Stock reacquired by the issuing company. It may be held indefinitely, retired, issued upon exercise of STOCK OPTIONS or resold.

Troubled Debt Restructuring - Agreement between DEBTOR and CREDITOR which amends the terms of a DEBT that has little chance of being paid in accordance with its contractual terms. The agreement may involve the transfer of ASSETS in full or partial satisfaction of the debt.

Trust - Ancient legal practice where one person (the GRANTOR) transfers the legal title to an ASSET, called the principal or corpus, to another person (the TRUSTEE), with specific instructions about how the corpus is to be managed and disposed.

Trustee - Person who is given legal title to, and management authority over, the property placed in a trust.

Uu

Unaudited Financial Statements - FINANCIAL STATEMENTS which have not undergone a detailed AUDIT examination by an independent CERTIFIED PUBLIC ACCOUNTANT (CPA).

Unauthorised overdraft charges- Fees that a person must pay if they take out more money than they have in their account without the permission of their bank or building society

Uncleared cheque- A cheque that has been paid into an account, but for which money has not yet been collected from the bank that will pay the cheque

Under-capitalised- A situation in which a business does not have enough money to support its activities and enable it to expand.

Underwriter- An organisation, usually an insurance company, that agrees to pay a claim on an insurance policy

Underwriting- What happens when an investment firm, such as a bank, agrees to buy any unsold shares from a company after it has offered them to the public or what happens when assessing whether a person can afford a loan from a financial institution

Unearned Income - Payments received for services which have not yet been performed.

Uniform Accountancy Act (UAA) - The UAA is the proposal for a new regulatory framework for the public accounting profession which was developed jointly by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA). The new framework is intended to enhance interstate reciprocity and practice across state lines by CPAs, meet the future needs of the profession, respond to the

marketplace and protect the public that the profession serves.

Uniform Capitalization Rules - These are a set of rules intended to be a single comprehensive set of rules to govern the capitalization, or inclusion in INVENTORY of direct and indirect cost of producing, acquiring and holding property. Under the rules, taxpayers are required to capitalize the direct costs and an allocable portion of the indirect costs attributable to real and tangible personal property produced or acquired for resale. The obvious effect of the uniform capitalization rules is that taxpayers may not take current deductions for these costs but instead must be recovered through DEPRECIATION or AMORTIZATION.

Universal payment- A social welfare payment or benefit that a person receives no matter how many PRSI contributions they have made or the level of their means; examples include Child Benefit and Free Travel

Unit trust- A fund that a person invests in by buying units; their money is used by a trust manager to buy investments and the value of the units changes in line with the value of the fund

Unlimited company- A company that does not limit what its shareholders need to pay towards the company’s debts if the company is wound up

Unpaid item- An item such as a cheque, standing order or direct debit that a bank refuses to pay

Unpresented cheque- A cheque that a person has given to another person, but has not yet appeared on the bank account that will pay it

Unqualified Opinion - AUDIT opinion not qualified for any material scope restrictions nor departures from GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The AUDITOR may issue an unqualified opinion only when there are no identified material weaknesses and when there have been no restrictions on the scope of the auditor's work. Also known as CLEAN OPINION.

Unsanctioned overdraft- An overdraft that a customer of a bank or building society has obtained without the bank’s permission

Unrestricted Funds - Resources of a not-for-profit entity that have no restrictions as to use or purpose. (See FUND ACCOUNTING and RESTRICTED FUND.)

Upfront fee- A fee that a person owes or must pay in advance

 Use of Professional Skepticism when Evaluating the Results of Testing - The AUDITOR must conduct the audit of internal control over financial reporting and the audit of the financial statements with professional skepticism, which is an attitude that includes a questioning mind and a critical assessment of audit evidence.

Utility bill- A bill for a utility, such as gas, electricity or the telephone

Vv

Valuation Allowance - Method of lowering or raising an object's CURRENT VALUE by adjusting its acquisition cost to reflect its market value by use of a CONTRA ACCOUNT.

Valuation point- The date and time when a fund manager revalues the investments in a fund, such as a unit trust

Variable interest rate- An interest rate that is likely to go up or down over time

Variable Rate Loan - Loan whose interest rate changes over its life in relation to the level of an index.

VAT-Value Added Tax – a tax paid to the government for most goods and services

Variance - Deviation or difference between an estimated value and the actual value.

Venture Capital - Investment company whose primary objective is capital growth. New ASSETS invested largely in companies that are developing new ideas, products, or processes. 

Vesting - Point at which certain benefits available to an employee are no longer contingent on the employee continuing to work for the employer.

Visa- An international card payments organisation owned by banks worldwide, which provides credit cards

Volatility- The extent of change in the value of a given market; a market that goes up and down in value dramatically in a short period has high volatility 

Voluntary excess-A sum of money that an insured person agrees to pay for any loss, damage or injury before an insurance company

Ww

Waiting period- A period of time in an insurance policy which must pass before some or all cover begins

Walkthroughs - The most effective means for an AUDITOR to confirm his understanding how internal control over financial reporting is designed and operates to evaluate and test its effectiveness. It includes making inquiries of and observing the personnel who actually perform the controls; reviewing documents that are used in, and that result from, the application of the controls; and comparing supporting documentation to the accounting records. In a walkthrough, the auditor traces a transaction from origination through the company's information systems to

the point where it is reflected in the company's financial reports. Walkthroughs provide the auditor with evidence to:

 1. Confirm the auditor's understanding of the process flow of transactions.

2. Confirm the auditor's understanding of the design of controls identified for all five components of internal control over financial reporting, including those related to the prevention or detection of fraud.

3. Confirm that the auditor's understanding of the process is complete by determining whether all points in the process at which misstatements related to each relevant financial statement assertion that could occur have been identified.

4. Evaluate the effectiveness of the design of controls.

5. Confirm whether controls have been placed in operation.

Warrant - Option to purchase additional SECURITIES from the issuer.

Wash Sale - A wash sale occurs if stock or securities are sold at a LOSS and the seller acquires substantially identical stock or SECURITIES 30 days before or after the sale. Stock or securities for this purpose includes contracts or operations to acquire or sell stock or securities. Losses incurred in a wash sale cannot be deducted. It does not matter if the total 60 day period begins in one tax year and ends in another. However, the disallowed loss is not permanently lost. Instead, the basis in the newly acquired stock or securities is the same basis as of the stock or securities sold, adjusted by the difference in price of the stock or securities.

Whole-of-life policy- Life assurance that pays out an agreed sum on the death of the person who took out the insurance, as long as they continue to pay their premiums

Will- A legal document containing instructions on how a person wishes their estate to be distributed after they die

Wind up- The end or closure of an organisation or company

 Withdraw- Taking money out of an account

Withholding - Amount withheld or deducted from employee salaries by the employer and paid by the employer, for the employee, to the proper authority.

 Withholding Allowance - Each taxpayer is allowed to claim a withholding allowance, which exempts a certain amount of wages from being subject to WITHHOLDING. The allowance isdesigned to prevent too much taxes being withheld from a taxpayers wages and a person cancompute this by completing form W-4 and submitting it to their employer.

Working Capital - Excess of CURRENT ASSETS over CURRENT LIABILITIES.

 Working Papers –

a.      Records kept by the AUDITOR of the procedures applied, the tests performed, the information obtained, and the pertinent conclusions reached in the course of the AUDIT.

b.     Any records developed by a CERTIFIED PUBLIC ACCOUNTANT (CPA) during an audit.

 Work in Progress - INVENTORY account consisting of partially completed goods awaiting completion and transfer to finished inventory.

 Wrap-Around Mortgage - Second MORTGAGE which conveniently expands the total amount of borrowing by the mortgagor without disturbing the original mortgage.

Yy

Yellow Book - Written by the GENERAL ACCOUNTABILITY OFFICE, the yellow book sets forth standards to be followed in auditing the FINANCIAL STATEMENTS of entities that receive federal financial assistance. "Yellow Book" is the name given to "Government Auditing Standards" issued by the Comptroller General of the United States which contains standards for audits of government organizations, programs, activities and functions, and of government assistance received by contractors, nonprofit organizations and other nongovernment organizations. 

Yield - Return on an INVESTMENT an investor receives from DIVIDENDS or INTEREST expressed as a percentage of the cost of the SECURITY.

Yield to Maturity - Rate of return on a SECURITY to its maturity, giving effect to the stated interest rate, accrual of discount, or AMORTIZATION of PREMIUM.

Zz

Zero-Coupon bond - bond on which the holder receives only one payment at maturity which includes both PRINCIPAL and INTEREST from issuance to maturity.

Zero rated- A term to describe goods, for example books, that are taxed at zero per cent

 80/20 rule

A general rule of thumb in business that says that 20 percent of the items produce 80 percent of the action. Twenty percent of the product line generates 80 percent of the sales, 20 percent of the sales force produces 80 percent of the orders, 20 percent of the customers produce 80 percent of the complaints, and so on. Of course, this rule is

inaccurate, but it does reflect the often-proven truth that nothing is evenly distributed; there is concentration. In evaluating any business situation be sure you find out which small group produces the major

share of the transactions you are concerned with. Looking at things with the 80/20 rule in mind will sharpen your perceptions greatly.