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Financial Glossary – M

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Macroeconomics – a branch of economics that is concerned with general or large-scale economic factors, such as national output, interest rates, unemployment and prices (inflation). It contrasts with microeconomics, which focuses on the behavior of individual consumers, households, workers, companies and markets. The macroeconomy equals the total sum of all microeconomic activities.

Majority Shareholder – a person or entity that owns more than 50% of the common stock (ordinary shares) of a company. They can choose the members of the board of directors and make policy decisions. Also known as a majority interest or controlling shareholder.

Management – this involves the leadership, staffing, organization, and planning of a company to reach a goal or target. The term refers to either the people who manage, or the function of managing.

Manager – a person in a company or organization who exercises managerial functions primarily. These functions include hiring, firing, disciplining, doing performance appraisals, monitoring attendance, approving overtime, and authorizing vacations. The manager is in charge of a part of a company, which usually has a team of employees.

Margin – the difference between one price and another, usually related to the profit a trader or speculator can make. For a trader, it is the difference between the cost of production or purchase of a product, and how much it is sold for. In futures trading it is the difference between the current and future price.

Marginal – in business, economics and finance, the term usually has a similar meaning to ‘additional’ or ‘by adding one more’. For example, marginal price is the price of buying one more – imagine you bought 10 cars for your fleet, and then asked for one more in the order; it is the price of that extra one. There are many terms with the word ‘marginal’, such as marginal cost, marginal propensity to spend/save, marginal revenue, marginal utility, marginal output of labor, and marginal tax rate.

Market – a place where people and businesses gather to buy and sell products and services. The term may refer to a physical place, such as a flea market, store, or farmers market, or an abstract description that includes all the possible buyers, as in “The semi-conductor market is forecast to grow by 7% this year.”

Market Capitalization – the net value of shares issued by a public company. Market capitalization is determined by multiplying the price per share by the number of shares outstanding. It is one of the main factors in determining stock valuation.

Market Economy – an economy where prices are set by levels of supply and demand, rather than central or local government. All decisions regarding production, distribution, investment and salaries in a market economy are driven by market forces.

Market Equilibrium – a situation in which demand for a good or service is equal to its level of supply. When market equilibrium is reached, the price remains stable. Also known as the market clearing price.

Market Failure – when the market does not function as efficiently as it is capable of. Market failure typically has four causes: 1. Deficiency in the provision of public goods. 2. Externalities, such as a factory polluting the drinking water of nearby villagers. 3. The abuse of market power, such as monopolistic behaviors. 4. Asymmetric information – when one person knows more about something than the other person in a business transaction.

Market Forces – the forces of supply and demand, which in a free market economy determine the price of goods. When demand rises faster than supply, prices rise, when it is exceeded by supply, prices fall.

Market Garden – a small farm that grows vegetables, fruits and flowers and sells them to the public. The crops are grown for profit. Also known as a microfarm.

Marketing: refers to analyzing the market, determining what consumers want, finding out whether your company can produce it at the right price, producing it, and then selling it to them. It is an aggregate of functions related to the movement of goods from producer to consumer. Marketing is much more than simply promoting a product – it involves all the activities from before the product has been developed, through to after it has been sold.

Market Intelligence – the gathering and analyzing of data about products, customers, competitors and their products, etc., in a specific market, that a company uses to help it determine where to allocate more resources, what products to sell, and how much to charge for them.

Market Leader – a corporation or country that has the greatest sales in a specific product in the market. The market may be a country or the world. It is calculated either by volume or value of sales.

Market Orientation: – a business philosophy or culture where the number one priority is identifying what the customer wants and needs, and meeting that need with suitable products and/or services. It contrasts with product orientation, which focuses on the product and tries to persuade customers to buy it. The most successful commercial enterprises today are definitely market oriented.

Market Power – the extent to which a company can influence the price or supply of a good or service. Market power may refer to a producer or buyer. It is a firm’s ability to profitably increase the market price of a product over marginal cost. In a marketplace where perfect competition exists, market power is zero for all the competitors. If a company is the only supplier – a monopoly – its market power is absolute.

Market Rate – the usual price paid for a product, service or somebody’s labor in the open market. Also known as the going rate.

Market Research – the gathering and analyzing of data regarding customers, competitors, a product, and market trends. It is the study of how a product or service is sold, who buys it, why they buy it, and how competitors behave.

Market Risk – the risk that an investment might face due to market volatility and changes in the overall economy. Market risk can reduce the value of an investment. Also known as systematic risk.

Market Sector – part of the economy. Market sector covers a broader area than an industry. Some sectors may include two or more industries. Stock markets classify shares according to market sector. In bond markets the term refers to the type of issuer (government or company).

Market Segmentation – businesses should ensure that their products are being properly targeted for the right consumer base. Market segmentation is a strategy that focuses on targeting different consumer bases – which attracts more consumers, and consequently boosts sales.

Market Share – refers to how big your slice of the total market pie is, in percentage terms. In other words, what your total sales represent relative to the size of the industry. Market share may be measured by units sold, or the value of total sales.

Market Value – the price that buyers and sellers both agree on when a security or asset is traded on the open market, based on the forces of supply and demand. A company’s market value is what investors believe it is worth. Also known as market price, fair value, fair market value and open market value.

Marshall Plan – a US program of international aid, named after General George Marshall, destined for Western Europe after WWII, to help the war-torn countries get back on their feet. It formed part of the ‘Truman Doctrine’, President Harry Truman’s attempts at stopping the spread of Soviet communism in Europe. During the Marshall Plan – 1948-1952 – the United States and Canada donated 1% of their gross national product.

Material Nonpublic Information – confidential information that can affect the share price of a company, or how investors make decisions. Only a small number of corporate insiders currently know about this information. Acting on this information to sell or buy shares, before the public has access to it, is known as insider trading and is illegal. Passing on material nonpublic information to others is also illegal.

Matrix organization – a management structure in which some employees are responsible to managers in two or more different departments within a company. An engineer may have to report to the head of the engineering department as well as the project manager or product manager. Matrix organization structures emerged in the 1960s in the aerospace industry in the United States.

Media the plural of medium, describes the various ways through which people communicate in society. It refers to the communication channels through which news, movies, music, promotional messages, education and other data are disseminated. It includes newspapers, magazines, books, TV, radio, billboards, and the Internet.

Mercantilism – an economic theory and practice that was common in Western Europe from the 16th to 19th century. Mercantilists believed that global GDP was fixed, so that a country could only become wealthier at the expense of others. Governments tried to get domestic producers to export as much as possible, and kept imports down to a minimum by placing hefty taxes on them. Countries like Great Britain, France, Spain and Portugal gained colonies in order to expand their markets, and accumulated as much wealth, gold and silver as possible.

Merchandise – any type of product, including commercial or personal goods, as well as commodities that are sold or given away to the public (retail) or other commercial enterprises (wholesale). When a political party gives away T-shirts with a photograph of its candidate during an election campaign, it is an example of free merchandise. The aim in merchandising is to get consumers to spend their money, or encourage customer loyalty.

Merger – the combination of at least two companies into a new legal entity. A merger is a marriage of equals, unlike an acquisition or takeover, where there is a predator and a prey – one company literally consumes the other.

Mergers and Acquisitions (M&A) – a practice of corporate finance that deals with combining, dividing, selling, and buying different companies to create a new enterprise, merge them together, or help a company complete a takeover. A merger is a marriage, while an acquisition is a takeover.

Menu Costs – in economics the term refers to the costs to a company resulting from a price change. It will have to redesign its catalogue, get new ones printed, tell customers about the change, and perhaps hire a team of price experts. Companies are reluctant to change prices for this reason. In times of high inflation, menu costs can significantly undermine a firm’s ability to make a profit. Studies have shown that menu costs amplify the business cycle.

Microeconomics – the study of the economic behavior of individual units of a country’s economy, such as a firm, household or person. It contrasts with macroeconomics, which is the study of the aggregate economy. Microeconomics is mainly concerned with the factors that influence individual economic choices.

Millennial Generation – refers to people born in the early 1980s up to about 1995, and in some cases the end of the last century. Also known as Generation Y, the Echo Boomers, the Me Me Generation and the Boomerang Generation. Unlike previous generations, most Millennials were brought up in homes with Internet connection and electronic devices & games in their homes.

Minimum Wage – the lowest amount an employer is legally allowed to pay a worker. It is always calculated at an hourly rate. Employers can pay more but never less than the minimum wage. More than ninety countries across the world have a minimum wage.

Minimum-variance portfolio – this is a portfolio with the lowest risk possible. Each individual investment has a higher risk than all of them combined.

Misery Index – the sum of a nation’s unemployment and inflation rates. It is an informal measure of how healthy or unhealthy a country’s economy is. The lower the score the better off a country is, the higher the score the worse off it is. There are some variations – the Barro Misery Index or BMI adds to the Misery Index total the interest rate, plus (minus) the surplus (shortfall) between the actual and trend rate of GDP growth.

Modern Portfolio Theory – a financial theory that attempts to achieve the best expected return for a specific level of risk, or the smallest possible risk for a set level of expected return. This is possible if the investor carefully chooses the proportions of different assets. It is a mathematical formulation.

Monetarism – a school of thought that says that high inflation is caused by increasing the money supply faster than GDP growth. If you manage to control the money supply, monetarists say, the rest of the economy will take care of itself. Monetarism contrasts with the Keynesian economic policies of demand management. President Ronald Reagan and Prime Minister Margaret Thatcher were great believers in monetarism. Their monetary policies were influenced by one of the pioneers of monetarism theory, Milton Friedman.

Monetary Policy – the decisions a Central Bank of a country makes to manage the money supply and make sure inflation is on target and that the economy is moving in the right direction. During a recession, monetary policy will be expansionist, but when the economy is overheating monetary policy will be contractionary. The setting of interest rates forms part of monetary policy.

Money – any intangible or tangible thing that represents a unit of value and can be used as a medium to exchange goods. Money has been around for thousands of years.

Money Illusion – the erroneous notion that many people have that a unit of money does not decrease in value over time, which it does because of inflation.

Money Laundering – the process of turning ‘dirty’ money into ‘clean money’. The funds were obtained from illegal activities. The criminals need to launder their proceeds in order to be able to use them openly and place them properly in the financial system.

Moneylender – an individual or organization that lends money, usually at very high interest rates and outside the official banking system.

Money Markets – places where money and various types of extremely liquid assets – money market instruments – are lent and borrowed between a few hours and just over a year. In the money markets, money managers, retail investors and banks can make short-term investments, effectively lending money to governments, broker-dealers, banks, and non-financial corporations. Together with capital markets, money markets make up the financial market and provide liquidity for the global financial system.

Money Order – a financial instrument that allows the payee to receive a certain amount of cash on demand – considered as safer than a check.

Money Supply – also known as money stock, refers to the amount of monetary assets that an economy has access to at a certain period of time. It is measured by monitoring currency in circulation and demand deposits.

Monopoly – a market where there is just one producer/supplier of a product or service; there is no competition. The monopolist controls the price and it is either extremely difficult or impossible for any other entity to enter the market.

Monopsony – a situation where a market has just one buyer, or one buyer dominates that sector. In a monopsony there are usually many suppliers, and they all exist at the mercy of the buyer, who can dictate terms, prices, delivery dates, product specifications, etc. A monopsonist may be a buyer of products or services, or an employer. For example, in an isolated town, a large company, organization or entity may employ most of the workers in the area.

Mortgage – a loan to a purchaser of real estate that is secured on the property that is being bought. A mortgage could also be provided for any other purpose, when the borrower already owns a property and uses it as security.

Mortgage-Backed Securities – these are bonds that are backed by either a mortgage or a collection of mortgages (mortgage pool). The borrower is essentially paying the bondholder through his or her monthly installments.

Mortgage Bond – this is a bond in which the issuer has granted the bondholders a lien against the pledged assets (property). If the borrower defaults, the bondholder can resell the property.

Mortgage Protection Insurance – also known as mortgage payment protection insurance, covers the policyholder if he or she is unable to meet payments due to accident, sickness or unemployment. Policy prices vary considerably, so consumers are advised to shop around.

Motivation – in business, it is about finding ways to encourage staff so that they can give their best. A workforce that is motivated cares about the success of the business and works more effectively. Motivation is all about why a person acts or behaves in a particular way – it is about enthusiasm.

Multinational Company – a company that has business, staff and premises in more than one country. They typically have a centralized head office from which global activities are managed. Also called a multinational corporation or transnational corporation.

Multiplier – also known as the ‘multiplier effect’, is a calculation that tells us how big an initial expenditure can eventually become when it has worked its way through the economy. For example, the government spends an additional $5 billion on education, schools consequently hire more teachers, the new teachers buy goods in shops and eat out in restaurants, shops and restaurants consequently hire more workers, their workers spend on … ,etc. Multiplier effect theory was created by John Maynard Keynes during the Great Depression of the 1930s.

Mutual Fund – a company that gathers the money from several investors – pools it – and invests it in securities such as stocks, bonds and short-term debt. Some mutual funds are huge, with several hundreds of thousands of investors. People buy shares in the mutual fund, i.e. they become owners of a proportion of the fund. Mutual funds in the United Kingdom are known as unit trusts.

Mutual Savings Bank – a financial institution that belongs to its depositors. It has no shareholders, i.e. no equity capital. They were first founded two hundred years ago to encourage low-income workers to save.