Standardization

AAA

DEFINITION of 'Standardization'

A framework of agreements to which all relevant parties in an industry or organization must adhere to ensure that all processes associated with the creation of a good or performance of a service are performed within set guidelines. This is done to ensure the end product has consistent quality, and that any conclusions made are comparable with all other equivalent items in the same class.

INVESTOPEDIA EXPLAINS 'Standardization'

An example of standardization would be the Generally Accepted Accounting Principles to which all companies listed on U.S. stock exchanges much adhere. GAAP is a standardized set of guidelines created by the Financial Accounting Standards Board (FASB) to ensure that all financial statements undergo the same processes so that the disclosed information is relevant, reliable, comparable and consistent.

Standardization can be found in business processes when companies require that a consistent level of quality be achieved. For example, many fast food franchises have detailed processes documented to make sure that a burger is prepared in the same manner regardless of which chain in its franchise a consumer visits.

RELATED TERMS
  1. Financial Accounting Standards ...

    A seven-member independent board consisting of accounting professionals ...
  2. Proprietary Technology

    A process, tool, system or similar item that is the property ...
  3. Franchise

    A type of license that a party (franchisee) acquires to allow ...
  4. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  5. Industry

    A classification that refers to a group of companies that are ...
  6. Accident Year Experience

    Premiums earned and losses incurred during a specific period ...
Related Articles
  1. Investing

    What is the difference between IAS and GAAP?

    To answer this question, we must first define what IAS and GAAP are, in order to get a better grasp of the function they serve in the world of accounting.The acronym "IAS" stands for International ...
  2. Options & Futures

    Henry Ford: Industry Mogul And Industrial Innovator

    This man made his dream of bringing the automobile to the masses a reality.
  3. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  4. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  5. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  6. Fundamental Analysis

    What is the difference between the acid test ratio and working capital ratio?

    Using liquidity ratios to determine the financial stability of a company is an important tool to accounting professionals and investors.
  7. Fundamental Analysis

    What are some examples of return on investment capital?

    Read about some basic examples of return on investment capital for publicly traded companies and companies that have a handful of investors.
  8. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.
  9. Fundamental Analysis

    What is the difference between cash flow and EBIDTA?

    Understand the difference between cash flow and EBITDA, and find out why cash flow is a more comprehensive metric for evaluating a company's financial health.
  10. Active Trading Fundamentals

    What is the difference between cash flow and fund flow?

    See how cash flow and fund flow differ from each other, and why fund flow can be used very differently by accountants and investors.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center