4.4 A2 Business key terms

Question 1

reverse engineering

Answer 1

a method of analysing a product’s design by deconstructing it, following detailed examination of its components and composition

Question 2

transfer pricing

Answer 2

a system operated by MNCs
it is an attempt to avoid relatively high tax rates through the prices which one subsidiary charges another for components and finished goods/services

Question 3

subsidiary

Answer 3

a company owned and controlled by another company

Question 4

ethics

Answer 4

the moral rules or principles of behaviour that should guide members of a profession or organisation and make them deal honestly and fairly with each other and their stakeholders

Question 5

institutional framework

Answer 5

the system of formal laws, regulations and procedures, and informal conventions customs and norms that shape activity and behaviour

Question 6

codes of conduct

Answer 6

a set of rules outlining the proper practices of an organisation that contribute to the welfare of key stakeholders and respects the rights of all that may be affected by its operations

Question 7

stakeholders

Answer 7

an individual or groups who have an interest in a business’ activities and are also affected by its actions

Question 8

competition policy

Answer 8

government policy that exists to promote competition and ensure that firms do not:

• abuse their market power
• attempt to fix prices
• use of pricing strategies to drive out competitors

Question 9

direct action

Answer 9

where a group tries to implement a policy or prevent the implementation of a policy itself, via demonstrations, protests, strikes or even sabotage

Question 10

pressure groups

Answer 10

voluntary organizations that operate at all levels of society, including international levels, and aim to change either political or commercial decision-making

Question 11

tax avoidance

Answer 11

using legal methods to reduce the amount of tax that a company pays
these include:
- taking tax credit for spending money on legitimate reasons (contributing to Individual Retirement Accounts)
- charitable contributions are tax-deductible

Question 12

tax evasion

Answer 12

using illegal means to avoid paying taxes that are owed
these include:
- providing false information in a business’ balance and income sheet to the IRS
- underpayment of taxes