AS Definitions Flashcards
Learn the definitions
Consumer goods
the physical and tangible goods sold to the general public – include durable consumer goods like cars and washing machines and non-durable goods like food, drinks and sweets that can be used only once
Consumer services
the non-tangible products sold to the general public – include hotel accommodation, insurance services and train journeys.
Capital goods
the physical goods the industry uses to aid in producing other goods and services, such as machines and commercial vehicles.
Creating value
increasing the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for.
Added value
the difference between the costs of purchasing bought-in materials and the price the finished goods are sold for.
Opportunity cost
the benefit of the next most desired option given up
Entrepreneur
someone who takes the financial risk of starting and managing a new venture.
Social enterprise
a business with mainly social objectives that reinvest most of its profits into benefiting society rather than maximising returns to owners.
Triple bottom line
the three objectives of social enterprises: economic, social and environmental.
Primary sector business activity
firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms.
Secondary sector business activity
firms that manufacture and process products from natural resources including computers, brewing, baking, and clothes-making and construction.
Tertiary sector business activity
firms that provide services to consumers and other businesses such as retailing, transport, insurance, banking, hotels, tourism and telecommunications.
The public sector
The public sector comprises organisations accountable to and controlled by the central or local government.
Private sector
comprises of businesses owned and controlled by individuals or groups of individuals.
Mixed economy
economic resources are owned and controlled by private and public sectors.
Free-market economy
economic resources are owned largely by the private sector with little state intervention.
Command economy
economic resources are owned, planned and controlled by the state.
Sole trader
a business in which one person provides the permanent finance and, in return, has full control of the business and can keep all of the profits.
Partnership
a business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
Limited liability
the only liability or potential loss the shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder.
Private limited company
a small to medium-sized business owned by shareholders who are often members of the same family; this company cannot sell shares to the general public.
Share
a certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.
Shareholder
a person or institution owning shares in a limited company
Public limited company
a limited company, often a large business, with the legal right to sell shares to the general public. Prices are quoted on the national stock exchange.
Memorandum of association
this states the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business.
Articles of association
this document cover the internal working and control of the business-for example, the names of the directors and the procedures to be followed at meetings will be detailed.
Franchise
a business that uses the name, logo and trading systems of an existing successful business.
Joint venture
two or more businesses agree to work closely together on a particular project and create a separate business division to do so.
Holding company
a business organisation that owns and controls a number of separate businesses, but does not unite them into one unified company.
Public corporation
a business enterprise owned and controlled by the state-also known as nationalised industry.
Revenue
total value of sales made by a business in a given time period. Capital employed – the total value of all the long term finance invested in the business.
Market capitalisation
the total value of a company’s issued shares.
Market share
business sales as a proportion of total market sales.
Internal growth
business expansion by opening new branches, hops or factories (also known as organic gr
Mission statement
a statement of the business’s core aims, phrased to motivate employees and stimulate interest by outside groups
Corporate social responsibility
this concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions of customers, employees, communities and the environment.
Management by objectives
coordinating and motivating all organisational staff by dividing its overall aim into specific targets for each department, manager and employee.
Ethical code (code of conduct)
a document detailing a company’s rules and guidelines on staff behaviour that all employees must follow.
Stakeholders
people or groups who can be affected by – and therefore have an interest in – any action by an organisation.
Stakeholder concept
the view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders.
Corporate social responsibility
the concept that accesses that businesses should consider the interests of society in their activities and decisions beyond the legal obligations that they have.
Manager
responsible for setting objectives, organising resources and motivating staff to meet the organisation’s aims.
Leadership
Leadership is the art of motivating a group towards achieving common objectives.
Autocratic leadership
a style of leadership that keeps all decision-making at the centre of the organisation.
Democratic leadership
a leadership style that promotes workers’ active participation in decisions.
Paternalistic leadership
a leadership style based on the approach that the manager is in a better position than the workers to know what is best for an organisation.
Laissez-faire leadership
a leadership style that leaves much of the business decision-making to the workforce – is a ‘hands off’ style approach and the reverse of the autocratic style.
Informal leader
a person who has no formal authority but has the respect of colleagues and some power over them.
Emotional intelligence (EI)
the ability of managers to understand their own emotions, and those of the people they work with, to achieve better business performance.
Motivation
the internal and external factors that stimulate people to take actions that lead to achieving a g
Self-actualisation
a sense of fulfilment reached by feeling enriched and developed by what one has learned and achieved.
Motivating factors (motivators)
aspects of a worker’s job that can lead to positive job satisfaction, such as achievement, recognition, meaningful and interesting work and advancement at work.
Hygiene factor
aspects of a worker’s job that have the potential to cause dissatisfaction, such as pay, working conditions, status and over-supervision by managers.
Job enrichment
aims to use workers’ full capabilities by allowing them to do more challenging and fulfilling work.
Time based wage rate
payment to a worker made for each period of time worked, e.g.; one hour.
Piece rate
a payment to a worker for each unit produced.
Salary
annual income that is usually paid on a monthly basis.
Commission
a payment to a salesperson for each sale made.
Bonus
a payment made in addition to the contracted wage or salary.
Profit sharing
a bonus for staff based on the profits of the business-usually paid as a proportion of bas
Performance-related pay
a bonus scheme to reward staff for above-average work performance.
Fringe benefits
benefits given, separate from pay, by an employer to the same or all employees.
Job rotation
increasing the flexibility of employees in the variety of work they do by switching from one job to another.
Job enlargement
attempting to increase the scope of a job by broadening and deepening the tasks undertaken.
Job redesign
involves restricting a job-usually with employees’ involvement and agreement- to make work more interesting, satisfying and challenging.
Quality circles
voluntary groups of workers who meet regularly to discuss work-related problems and issues.
Worker participation
workers are actively encouraged to become involved in decision-making within the organ
Team working
production is organised so that groups of workers undertake complete units of work.
Human resource management (HRM)
the strategic approach to effectively managing an organisation’s workers so that they help the business gain a competitive advantage.
Recruitment
the process of identifying the need for a new employee, defining the job to be filled and the type of person needed to fill it and attracting suitable candidate for the job.
Selection
involves the series of steps by which the candidates are interviewed, tested and screened to choose the most suitable person for the vacant post.
Job description
a detailed list of the key points about the job to be filled-stating all of its key tasks and responsibilities.
Person specification
a detailed list of the qualities, skills and qualifications that a successful applicant will need to have.
Employment contract
a legal document that sets out the terms and conditions governing a worker’s job.
Labour turnover
measures the rate at which employees are leaving an organisation. It is measured by: Number of employees leaving in 1 year/average number of people employed * 100
Training
work-related education to increase workforce skill and efficiency.
Induction training
introductory training programme to familiarise new recruits with the systems used in the business and the layout of the business site.
On-the-job training
instruction at the place of work on how a job should be carried out.
Off-the-job training
all training undertaken away from the business, e.g. work related college courses.
Employee appraisal
the process of assessing the effectiveness of an employee judged against pre-set objectives.
Dismissal
being dismissed or sacked from a job due to incompetence of breach or discipline.
Unfair dismissal
ending a worker’s employment contract for a reason that the law regards as being unfair.
Redundancy
when a job is no longer required, the employee doing this job becomes unnecessary through no fault of their own.
Work-life balance
a situation in which employee are able to give the right amount of time and effort to work and to their personal life outside work, for example to family or other interests.
Equality policy
practices and processes aimed at achieving a fair organisation where everyone is treated in the same way and has the opportunity to fulfil their potential.
Diversity policy
practices and processes aimed at creating a mixed workforce and placing positive value on diversity in the workplace.
Marketing
the management task that links the business to the customer by identifying and meeting the needs of customers’ profitability does this by getting the right product to the right place at the right time.
Marketing objectives
the goals set for the marketing department to help the business achieve its overall objectiv
Marketing strategy
a long-term plan established for achieving marketing objectives.
Market orientation
an outward-looking approach basing product decisions on consumer demand, as established by market research.
Asset-led marketing
is an approach to marketing that bases strategy on the firm’s strengths and assets instead of purely on what the customer wants.
Product orientation
an inward-looking approach that focuses on making products that can be made-or have been made for a long time-and then trying to sell them.
Social marketing
this approach considers not only the demands of consumers but also the effects on all members of the public (society) involved in some way when firms meet these demands.
Demand
the quantity of a product that consumers are willing and able to buy at a given price in a time period.
Supply
the quantity of a product that firms are prepared to supply at a given price in a time period.
Equilibrium price
the market price that equates supply and demand for a product.
Market size – the total level of sales of all producers within a market.
Market growth
the percentage change in the total size of a market (volume or value) over a period of time.
Market share
the percentage of total sales in the total market sold by one business. This is calculated by the following formula: Firm’s sales in time period/total market sales in time period * 100
Direct competitor
a business that provides the same or very similar goods or services.
USP-unique selling point (or proposition)
the special feature of a product that differentiates it from competitors’ products.
Product differentiation
making a product distinctive to stand out from competitors’ products in consumers’ perception.
Niche marketing
identifying and exploiting a small segment of a larger market by developing products to suit it.
Mass marketing
selling the same products to the whole market without attempting to target groups within it
Consumer profile
a quantified picture of consumers of a firm’s products, showing proportions of age groups, income levels, location, gender and social class.
Market segment
a sub-group of a whole market in which consumers have similar characteristics.
Market segmentation
identifying different segments within a market and targeting different products or services to them.
Market research
this is the process of collecting, recording and analysing data about customers, competitors and the market.
Primary research
he collection of first-hand data directly related to a firm’s needs.
Secondary research
a collection of data from second-hand sources.
Qualitative research
research into the in-depth motivations behind consumer buying behaviour or opinions.
Quantitative research
research that leads to numerical results that can be statistically analysed.
Focus groups
a group of people who are asked about their attitude towards a product, service, advertisement or new style of packaging.
Sample
the group of people participating in the market research survey selected to represent the overall target market.
Random sampling
every member of the target population has an equal chance of being selected.
Systematic sampling
every nth item in the target population is selected.
Stratified sampling
this draws a sample from a specified sub-group or segment of the population and uses random sampling to select an appropriate number from each stratum.
Quota sampling
when the population has been stratified, and the interviewer selects an appropriate number from each stratum.
Cluster sampling
using one or a number of specific groups to draw samples from and not selecting from the whole population, e.g. using one town or region.
Open questions
those that invite a wide-ranging or imaginative response- the results will be difficult to collate and present numerically.
Closed questions
questions to which a limited number of pre-set answers are offered.
Marketing mix
the four key decisions that must be taken to market a product effectively.
Customer relationship management (CRM)
using marketing activities to establish successful customer relationships and maintain customer loyalty.
Brand
an identifying symbol, image or trademark that distinguishes a product from its competitors.
Intangible attributes of a product
subjective opinions of customers about a product that cannot be measured or compared easily.
Tangible attributes of a product
measurable product features that can be easily compared with other products.
Product
the end result of the production process sold on the market to satisfy a customer’s nee
Product positioning
is the consumer perception of a product or service compared to its competitors.
Product portfolio analysis
analysing a business’s range of existing products to help allocate resources effectively between them.
Product life cycle
the pattern of sales recorded by a product from launch to withdrawal from the market. It is one of the main forms of product portfolio analysis.
Extension strategy
these are marketing plans to extend the maturity stage of the product before a brand new one is needed.
Consumer durable
manufactured process that can be reused and is expected to have a reasonably long life, such as a car or washing machine.
Price elasticity of demand (PED)
measures of demand responsiveness following a price change.
Markup pricing
adding a fixed markup for profit to the unit price of a product.
Target pricing
setting a price that will give a required rate of return at a certain level of output/sales.
Full-cost pricing
setting a price by calculating a unit cost for the product (allocated fixed and variable costs) and then adding a fixed profit margin.
Contribution-cost pricing
setting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and profits.
Competition-based pricing
a firm will base its price upon the price set by its competitors.
Penetration pricing
setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales.
Dynamic pricing
offering goods at a price that changes according to the next level of demand and the customers’ ability to pay.
Market skimming
setting a high price for a new product when a firm has a unique or highly differentiated product with a low price elasticity of demand.
Promotion
the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform consumers and persuade them to buy.
Promotion mix
the contribution of a firm’s promotional techniques to sell a product.
Above-the-line promotion
a form of promotion that is undertaken by a business by paying for communication with consumers.
Advertising
paid-for communication with consumers to inform and persuade, e.g. TV and cinema advertising.
Below-the-line promotion
a promotion that is not a directly paid-for means of communication but is based on short-term incentives to purchase.
Sales promotion
incentives such as special offers or special deals directed at consumers or retailers to achieve short-term sales increases and repeat consumer purchases.
Personal selling
a member of the sales staff communicates with one consumer intending to sell the product and establish a long-term relationship between the consumer and the company.
Sponsorship
payment by a company to the organisers of an event or team/individuals so that the company name becomes associated with the event/team/individuals.
Public relations
the deliberate use of free publicity provided by newspapers, TV and other media to communicate with and achieve understanding by the public.
Branding
the strategy of differentiating products from those of competitors by creating an identifiable image and clear expectations about a product.
Marketing OR promotional budget
the financial amount made available by a business to spend on marketing/promotion during a certain period.
Channel of distribution
this refers to the chain of intermediaries that the product passes through the firm producer to the final consumer.
Internet (online) marketing
refers to advertising and marketing activities that use the internet, email and mobile communications to encourage direct sales via electronic commerce.
E-commerce
the buying and selling goods and services by businesses and consumers through an electronic medium.
Viral marketing
using social media sites or text messages to increase brand awareness or sell products.
Integrated marketing strategy
the key marketing decisions complement each other and work together to give customers a consistent message about the products.
Added value
the difference between the cost of purchasing raw materials and the price the finished goods are sold is the same as creating value.
Intellectual capital
intangible capital of the business that includes human capital (well-trained and knowledgeable employees), structural capital (database and information system) and relational capital (goods links with suppliers and customers).
Production
converting inputs into outputs.
Level of production
the number of units produced during a time period.
Productivity
the ratio of outputs to inputs during production, e.g. output per worker per time period.
Efficiency
producing output at the highest ratio of output to input.
Effectiveness
meeting the enterprise’s objectives by using inputs productively to meet customers’ needs.
Labour intensive
involving a high level of labour input compared with capital equipment.
Capital intensive
involving a high quantity of capital equipment compared with labour output.
Operations planning
preparing input resources to supply products to meet expected demand.
CAD-computer-aided design
using computer programs to create two-or-three-dimensional (2D or 3D) graphical representations of physical objects.
CAM-computer-aided manufacturing
the use of computer software to control machine tools and related machinery in manufacturing components or complete products.
Operational flexibility
the ability of a business to vary both the production level and the range of products following changes in consumer demand.
Process innovation
using a new or much-improved production or service delivery method.
Batch production
producing a limited number of identical products- Each item in the batch passes through one production stage before passing on to the next stage.
Flow production
producing items in a continually moving process.
Mass customisation
using flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass-production cost levels.
Optional location
a business location that combines quantitative and qualitative factors best.
Quantitative factors
are measurable in financial terms and will directly impact either the costs of a site or its revenues and profitability.
Qualitative factors
non-measurable factors that may influence business decisions.
Offshoring
the relocation of a business process done in one country to the same or another company in another country.
Multinational
a business with operations or production bases in multiple countries.
Trade barriers
taxes (tariffs) or other limitations on the free international of goods and services.
Scale of operations
the maximum output that can be achieved using the available inputs (resources)-this scale only be increased in the long term by employing more of all inputs.
Economies of scale
reductions in a firm’s unit (average) costs of production that results from an increase in the scale of operations.
Diseconomies of scale
factors that cause average costs of production to rise when the scale of operation is increased.
Enterprise resource planning
the use of a single computer application to plan the purchase and the use of resources in an organisation to improve the efficiency of operations.
Supply chain
all of the stages in the production process from obtaining raw materials to selling to the consumer point of origin to point of consumption.
Sustainability
production systems prevent waste by using the minimum of non-renewable resources so that production levels can be sustained in the future.
Inventory (stock)
materials and goods required to allow for the production and supply of products to the customer.
Economic order quantity
the optimum or least-cost of stock to re-order, taking into account delivery costs and stock-holding costs.
Re-order quantity
the number of units ordered each time. Lead time – the normal time taken between ordering new stocks and their delivery.
Buffer inventories
the minimum level of inventory level that should be held to ensure that production can still take place should a delay in delivery occur or should production rates increase.
Just-in-time
this inventory-control method aims to avoid holding inventories by requiring supplies to arrive just as needed in production and completed products are produced to order.
Start-up capital
the capital an entrepreneur needs to set up a business.
Working capital
the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers. In accounting terms, working capital = current assets – current liabilities.
Liquidity
the ability of a firm to pay its short-term debts.
Liquidation
when a firm ceases trading and assets are sold for cash to pay suppliers and other creditors.
Capital expenditure
the purchase of assets expected to last more than one year, such as building and machinery.
Revenue expenditure
spending on all costs and assets other than fixed assets and including wages and salaries, and materials bought for stock.
Overdraft
The bank agrees to a business borrowing up to an agreed limit as and when required.
Factoring
selling of claims over trade receivables to a debt factor in exchange for immediate liquidity-only a proportion of the value of the debts will be received as cash.
Hire purchase
an asset is sold to a company that agrees to pay fixed repayments over an agreed time period. The asset belongs to the company.
Leasing
obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period; this avoids the need for the business to raise long-term capital to buy the asset; ownership remains with the leasing company.
Equity finance
permanent finance raised by companies through the sale of shares.
Long-term bonds OR debentures
bonds issued by companies to raise debt finance, often with a fixed interest rate.
Right issue
existing shareholders are given the right to buy additional shares at a discounted price.
Venture capital
risk capital invested in business start-ups or expanding small businesses that have good profit potential but do not find it easy to gain finance from other sources.
Crowdfunding
the use of small amounts of capital from a large number of individuals to finance a new business venture.
Microfinance
providing financial services for poor and low-income customer who do not have access to banking services, such as loans and overdrafts offered by traditional banks.
A business plan
is a detailed document giving evidence about a new or existing business that aims to convince external leaders and investors to finance the business.
Direct costs
these costs can be clearly identified with each unit of production and can be allocated to a cost centr
Variable costs
costs that vary with output.
Fixed costs
costs that do not vary with output in the short run.
Marginal costs
the extra cost of producing one more unit of output.
Indirect costs
costs that cannot be identified with a production unit or allocated accurately to a cost centre.
Break-even point of production
the output level at which total costs equal total revenue; neither a profit nor a loss is made.
The margin of safety
the amount by which the sales level exceeds the break-even level of output.
Contribution per unit
selling price less variable cost per unit.
Income statement
records the revenue, costs and profit (or loss) of a business over a given period of time.
Gross profit
equal to sales revenue less costs of sales.
Revenue (formerly called sales turnover)
the total value of sales made during the trading period = selling price * quantity sold.
Cost of sales (or cost of goods sold)
this is the direct cost of the goods that were sold during the financial year.
Operating profit (formerly net profit)
is gross profit minus overhead expenses.
Profit for the year (profit after tax)
operating profit minus interest costs and corporation tax.
Dividends
the share of the profits paid to shareholders as a return for investing in the company.
Retained earnings (profit)
the profit left after all deductions, including dividends, have been made, this is ‘ploughed back’ into the company as a source of finance.
Low-quality profit
one-off profit that cannot easily be repeated or sustained.
High-quality profit
profit that can be repeated and sustained.
Non-current assets
assets to be kept and used by the business for more than one year. Used to be referred as ‘fixed assets’.
Intangible assets
items of value that do not have a physical presence, such as patents, trademarks and current assets.
Current assets
assets that are likely to be turned into cash before the next balance sheet date.
Inventories
stocks held by the business in the form of materials, work in progress and finished goods.
Trade receivables (debtors)
the value of payments to be received from customers who have bought goods on credit.
Current liabilities
debts of the business that will usually have to be paid within one year.
Accounts payable (creditors)
value of debts for goods bought on credit payable to suppliers, also known as ‘trade payables’.
Non-current liabilities
the value of debts of the business that will be payable after more than one year.
Statement of financial position (balance sheet)
an accounting statement that records the value of a business’s assets, liabilities and shareholders’ equity at one point in time.
Shareholders’ equity
total value of assets – total value of liabilities
Asset
an item of monetary value that is owned by a business.
Liability
is a business’s financial obligation that it must pay in the future.
Share capital
the total value of capital rose from shareholders by the issue of shares.
Intellectual capital OR property
the amount by which the market value of a firm exceeds its tangible assets minus liabilities – an intangible asset.
Goodwill
arises when a business is valued at or sold for more than the balance sheet value of its assets.
Cash-flow statement
a record of the cash received by a business over a period of time and the cash outflows from the business.
Gross profit margin
this ratio compares gross profit (profit before deduction of overheads) with revenue. Gross profit margin % = gross profit/revenue × 100
Operating profit margin
this ratio compares operating profit (formerly, this ratio was referred to as the net profit margin) revenue. Operating profit margin % = operating profit/revenue × 100
Liquidity
the ability of a firm to pay its short-term debts.
Current ratio
current assets/current liabilities
Acid-test ratio
liquid assets/current liabilities
Liquid assets
current assets – inventories (stocks) = liquid assets.
Window-dressing
presenting the company accounts in a favourable light – to flatter the business performance.
Cash flow
the sum of cash payments to a business (inflows) less the sum of cash payments (outflows).
Liquidation
when a firm ceases trading, and its assets are sold for cash to pay suppliers and other creditors.
Insolvent
when a business cannot meet its short-term debts.
Cash inflows
payments in cash received by a business, such as those from customers (trade receivables) or from the bank, e.g. receiving a loan.
Cash outflows
payments in cash made by a business, such as those to suppliers and workers.
Cash-flow forecast
an estimate of a firm’s future cash inflows and outflows.
Net monthly cash flow
is the estimated difference between monthly cash inflows and outflows.
Opening cash balance
cash held by the business at the start of the month.
Closing cash balance
cash held at the end of the month becomes next month’s opening balance.
Overtrading
expanding a business rapidly without obtaining all of the necessary finance so that a cash-flow shortage develops.
Credit control
monitoring of debts to ensure that credit periods are not exceeded.
Creditors
suppliers who have agreed to supply products on credit and who have not yet been paid
