What is an Adjustable-Rate Mortgage? This is a form of mortgage where the interest rate on the outstanding balance is not constant but varies throughout the life of the loan. The initial rate is first fixed for a period of time, and then it resets periodically after a month or a year. These interest rates adjust with London Interbank Offered Rate (L...

What are the Benefits of Ethical Marketing? There are numerous benefits to both company and society from ethical marketing practices. Some of the primary benefits include: Reputation - Companies that market consistent with ethical norms or expectations build a positive reputation with the public.  Customer Satisfaction/Loyalty - Delivering a product...

What is the Rule of Maximizing Utility? When making purchases you should choose the item with the greatest marginal utility per dollar spent (i.e., the most bang for the buck).   For a finite budget (limited funds to expend), and making a choice of the quantity of two goods to purchase, the utility maximizing choice should occur where the marginal u...

How Do Ethics Affect a Negotiation?  Ethics are broadly applied social standards for what is right or wrong in a particular situation, or a process for setting those standards.  Ethics grow out of particular philosophies, which purport to define the nature of the world in which we live, and prescribe rules for living together.  Ethics Concepts Discu...

What is Diversification Strategy? In other articles, we discussed various generic strategies to achieve growth in a given market or industry. Notably, in the Ansoff Matrix lecture, we introduced the concept of diversification as a growth strategy.  Diversification is a strategy used to expand market share or enter new markets by launching or acquiri...

What is a Piecemeal Opinion? A piecemeal opinion is a report that an external auditor issue regarding the financial statement opinion of specific line items. An auditor may give a piecemeal opinion when the about statement information is not complete. Generally accepted auditing principal (GAAP) no longer allows this type of opinion because it contr...

How does Education yield a Private and Social Rate of Return? The investment in anything, whether it is the construction of a new power plant or research in a new cancer treatment, usually requires a certain upfront cost with an uncertain future benefit. The investment in education, or human capital, is no different. Over the span of many years, a s...

What are Generally Recognized Accounting Practice (GRAP)? The Generally Recognized Accounting Practice (GRAP) is an accounting standard employed in South Africa. It is defined as an array of essential ideas that serves as a guide to processes related to accounting. It is similar to GAAP in the US. Conversely, unlike the General Accepted Accounting P...

What is a Homeowners Association? A homeowners association (HOA), also known as a property owners association (POA) is an organization or a corporation that is typically formed by a real estate development body in a residential plan. The HOA is responsible for formulating and enforcing guidelines for the properties within its control. Membership to ...

What is the Linder Hypothesis? The Linder hypothesis was proposed by Staffan Linder. The theory states that the more similarity a country shares in terms of total income generated, the more similarity they share in the consumption of products by consuming the same quality products and even trading with one another. How is the Linder Hypothesis Used?...