Financial Terms
concurrent engineering

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Definition of concurrent engineering

Concurrent Engineering Image 1

concurrent engineering

see simultaneous engineering

Related Terms:

business process reengineering (BPR)

the process of combining information technology to create new and more effective
business processes to lower costs, eliminate unnecessary
work, upgrade customer service, and increase
speed to market

Engineering change

A change to a product’s specifications as issued by the engineering

engineering change order (ECO)

a business mandate that changes the way in which a product is manufactured or a
service is performed by modifying the design, parts,
process, or even quality of the product or service

Financial engineering

Combining or dividing existing instruments to create new financial products.

simultaneous engineering

an integrated approach in which
all primary functions and personnel contributing to a product’s
origination and production are involved continuously
from the beginning of a product’s life

value engineering

a disciplined search for various feasible
combinations of resources and methods that will increase
product functionality and reduce costs

Accounting change

An alteration in the accounting methodology or estimates used in
the reporting of financial statements, usually requiring discussion in a footnote
attached to the financial statements.

Concurrent Engineering Image 1

American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Basic business strategies

Key strategies a firm intends to pursue in carrying out its business plan.

Bill of exchange

General term for a document demanding payment.

Business cycle

Repetitive cycles of economic expansion and recession.

Business Cycle

Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.

Business Expansion Investment

The use of capital to create more money through the addition of fixed assets or through income producing vehicles.

Business failure

A business that has terminated with a loss to creditors.

business intelligence (BI) system

a formal process for gathering and analyzing information and producing intelligence to meet decision making needs; requires information about
internal processes as well as knowledge, technologies, and competitors

Business risk

The risk that the cash flow of an issuer will be impaired because of adverse economic
conditions, making it difficult for the issuer to meet its operating expenses.

Concurrent Engineering Image 2

business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay

Change in Accounting Estimate

A change in accounting that occurs as the result of new information
or as additional experience is acquired—for example, a change in the residual values
or useful lives of fixed assets. A change in accounting estimate is accounted for prospectively,
over the current and future accounting periods affected by the change.

Change in Accounting Estimate

A change in the implementation of an existing accounting
policy. A common example would be extending the useful life or changing the expected residual
value of a fixed asset. Another would be making any necessary adjustments to allowances for
uncollectible accounts, warranty obligations, and reserves for inventory obsolescense.

Change in Accounting Principle

A change from one generally accepted accounting principle to another generally accepted accounting principle—for example, a change from capitalizing expenditures
to expensing them. A change in accounting principle is accounted for in most instances
as a cumulative-effect–type adjustment.

Change in Reporting Entity

A change in the scope of the entities included in a set of, typically, consolidated financial statements.

Changes in Financial Position

Sources of funds internally provided from operations that alter a company's
cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.

Chicago Mercantile Exchange (CME)

A not-for-profit corporation owned by its members. Its primary
functions are to provide a location for trading futures and options, collect and disseminate market information,
maintain a clearing mechanism and enforce trading rules.

Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.

Commodities Exchange Center (CEC)

The location of five New York futures exchanges: Commodity
Exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New York Cotton Exchange,
the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size
statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of
analyzing trends and the changing relationship between financial statement items. For example, all items in
each year's income statement could be presented as a percentage of net sales.

Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer

Concurrent Engineering Image 3

cost-benefit analysis the analytical process of comparing the

relative costs and benefits that result from a specific course
of action (such as providing information or investing in a

Cumulative Effect of a Change in Accounting Principle

The change in earnings of previous years
based on the assumption that a newly adopted accounting principle had previously been in use.

Cumulative Effect of Accounting Change

The change in earnings of previous years assuming
that the newly adopted accounting principle had previously been in use.

Diffusion process

A conception of the way a stock's price changes that assumes that the price takes on all
intermediate values. dirty price. Related: full price

Effective Exchange Rate

The weighted average of several exchange rates, where the weights are determined by the extent of our trade done with each country.

Electronic data interchange (EDI)

The exchange of information electronically, directly from one firm's
computer to another firm's computer, in a structured format.

electronic data interchange (EDI)

the computer-to-computer transfer of information in virtual real time using standardized formats developed by the American National Standards Institute

Embodied Technical Change

Technical change that can be used only when new capital embodying this technical change is produced.

engineering change order (ECO)

a business mandate that changes the way in which a product is manufactured or a
service is performed by modifying the design, parts,
process, or even quality of the product or service

Equation of Exchange

The quantity theory equation Mv = PQ.


The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
are traded. Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange
(AMEX) and the National Association of Securities Dealers (NASDAQ)

Exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or
on the purchase of the local domestic currency by foreigners.

Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.

Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.

Exchange offer

An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
another security, such as shares of common stock.

Exchange rate

The price of one country's currency expressed in another country's currency.

exchange rate

Amount of one currency needed to purchase one unit of another.

Exchange Rate Mechanism (ERM)

The methodology by which members of the EMS maintain their
currency exchange rates within an agreed upon range with respect to other member countries.

Exchange Rate, Nominal

The price of one currency in terms of another, in this book defined as number of units of foreign currency per dollar.

Exchange Rate, Real

The nominal exchange rate corrected for price level differences.

Exchange rate risk

Also called currency risk, the risk of an investment's value changing because of currency
exchange rates.

Exchange risk

The variability of a firm's value that results from unexpected exchange rate changes or the
extent to which the present value of a firm is expected to change as a result of a given currency's appreciation
or depreciation.

Exchangeable Security

Security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.

expectations theory of exchange rates

Theory that expected spot exchange rate equals the forward rate.

FIFO method (of process costing)

the method of cost assignment that computes an average cost per equivalent
unit of production for the current period; keeps beginning
inventory units and costs separate from current period production
and costs

Fixed-exchange rate

A country's decision to tie the value of its currency to another country's currency, gold
(or another commodity), or a basket of currencies.

Fixed Exchange Rate

An exchange rate held constant by a government promise to buy or sell dollars at the fixed rate on the foreign exchange market.

Flexible Exchange Rate

An exchange rate whose value is determined by the forces of supply and demand on the foreign exchange market.

Floating exchange rate

A country's decision to allow its currency value to freely change. The currency is not
constrained by central bank intervention and does not have to maintain its relationship with another currency
in a narrow band. The currency value is determined by trading in the foreign exchange market.

Floating Exchange Rate

See flexible exchange rate.

Foreign exchange

Currency from another country.

Foreign Exchange

The currency of a foreign country.

Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.

Foreign Exchange Market

A worldwide market in which one country's currency is bought or sold in exchange for another country's currency.

Foreign Exchange Reserves

A fund containing the central bank's holdings of foreign currency or claims thereon.

Foreign exchange risk

The risk that a long or short position in a foreign currency might have to be closed out
at a loss due to an adverse movement in the currency rates.

Foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency
at one or more future dates.

Forward Exchange Market

A market in which foreign exchange can be bought or sold for delivery (and payment) at some specified future date but at a price agreed upon now.

Forward exchange rate

Exchange rate fixed today for exchanging currency at some future date.

forward rate of exchange

Exchange rate for a forward transaction.

Gold exchange standard

A system of fixing exchange rates adopted in the Bretton Woods agreement. It
involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.

High-Risk Small Business

Firm viewed as being particularly subject to risk from an investors perspective.

Historical exchange rate

An accounting term that refers to the exchange rate in effect when an asset or
liability was acquired.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Internet business model

a model that involves
(1) few physical assets,
(2) little management hierarchy, and
(3) a direct pipeline to customers

Ito process

Statistical assumptions about the behavior of security prices. For
details, see the book by Hull listed in the “Bibliography”.

joint process

a manufacturing process that simultaneously
produces more than one product line
joint product one of the primary outputs of a joint process;
each joint product individually has substantial revenuegenerating

London International Financial Futures Exchange (LIFFE)

A London exchange where Eurodollar futures
as well as futures-style options are traded.

London International Financial Futures Exchange (LIFFE)

London exchange where Eurodollar futures as well as futures-style options are traded.

Medium of Exchange

Any item that can be commonly exchanged for goods and services.

modified FIFO method (of process costing)

the method of cost assignment that uses FIFO to compute a cost per
equivalent unit but, in transferring units from a department,
the costs of the beginning inventory units and the
units started and completed are combined and averaged

multiprocess handling

the ability of a worker to monitor
and operate several (or all) machines in a manufacturing
cell or perform all steps of a specific task

Net change

This is the difference between a day's last trade and the previous day's last trade.

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common
and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in New York City

Nominal exchange rate

The actual foreign exchange quotation in contrast to the real exchange rate that has
been adjusted for changes in purchasing power.

operating risk (business risk)

Risk in firm’s operating income.

Organized exchange

A securities marketplace wherein purchasers and sellers regularly gather to trade
securities according to the formal rules adopted by the exchange.

Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign
currency options on spot exchange rates are traded.

Political Business Cycle

A business cycle caused by policies undertaken to help a government be re-elected.

Price discovery process

The process of determining the prices of the assets in the marketplace through the
interactions of buyers and sellers.


A series of linked activities that result in a specific objective. For example, the
payroll process requires the calculation of hours worked, multiplication by hourly
rates, and the subtraction of taxes before the final objective is reached, which is the
printing of the paycheck.

process benchmarking

benchmarking that focuses on practices and how the best-in-class companies achieved their results

process complexity

an assessment about the number of processes through which a product flows

Process costing

A method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced.

Process costing

A costing methodology that arrives at an individual product cost through the calculation of average costs for large quantities of identical products.

process costing system

a method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products;
it accumulates costs by cost component in each production department and assigns costs to units using equivalent units of production

Process flow production

A production configuration in which products are continually
manufactured with minimal pauses or queuing.

process map

a flowchart or diagram indicating every step
that goes into making a product or providing a service

process productivity

the total units produced during a period
using value-added processing time

process quality yield

the proportion of good units that resulted from the activities expended

processing time

the actual time consumed performing the
functions necessary to manufacture a product

product- (or process-) level cost

a cost that is caused by the development, production, or acquisition of specific products or services

Purchased In-Process Research and Development

Unfinished research and development that is acquired from another firm.

Real Business Cycle Theory

Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.

Real Exchange Rate

Exchange rate adjusted for relative price levels.

Real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries.







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