Buisness glosarry 2 Flashcards
Foreign exchange market
The market that determines the exchange rate. It is where currencies are traded and therefore exchange rates are determined.
Formal groups
Groups that are set up within a business to carry out specific functions. They may be either temporary (to look at a particular problem or issue) or they may be permanent (managing a particular aspect of business activity).
Forward integration
The integration (or merger) of one firm with another firm that is at a later stage in the chain of production. An example could be a brewery taking over a chain of pubs and clubs.
Four P’s
The marketing mix. The four elements of a marketing strategy that a firm must ensure they meet if they are to meet their customer needs.
Franchise
A type of business organisation where the owner buys into an existing business idea but they keep control over the business. For the right to use the business name, idea and products they will pay a fee and/or pay a royalty.
Frederick Taylor
A theorist who set out the theory of scientific management in a book published in 1911. He studied the way in which tasks were carried out and applied scientific methods to make them more efficient.
Free float
The amount of time that an activity in a process could be delayed without affecting the total amount of time that the process will take. It is calculated by subtracting the earliest starting time (EST) at the start of the task and the duration from the EST at the end of the task.
Free market economy
A type of economic system for allocating resources where markets are used to allocate resources through the price mechanism. Supply and demand set a market price in each market.
Fringe benefits
Payments to workers other than wages and salaries. They may include things like subsidised meals, free transport loans, private health insurance and so on.
Full capacity
The maximum that can be produced by an economy with the existing level of resources.
Full cost pricing
A pricing method that businesses use to determine their prices where the fixed costs are allocated between all the products that are sold.
Gearing ratio
A measure of the percentage of capital employed that is financed by debt and long term finance.
Globalisation
The process whereby trade is now being conducted on ever widening geographical boundaries.
Going concern
The underlying assumption that any accountant makes when he prepares a set of accounts. The assumption is that the business being looked at will remain in existence for the foreseeable future.
Goodwill
An intangible asset. It is the amount by which the value of the firm exceeds the value of the net assets held by the firm. It can be seen as the value of the firm’s reputation and customer base.
Government expenditure
Spending by central government and local authorities on the provision of goods and services, transfer payments and debt repayments.
Government policies
Measures that the government puts in place to try to improve the workings of the economy. The main types are fiscal policy and monetary policy.
Gross domestic product
A measure of the total level of economic activity in an economy - in other words a measure of national income. The total value of all goods and services produced over a given time period (usually a year).
Gross profit margin
The level of gross profit as a percentage of sales.
Group decision making
The process of making regular business decisions through groups set up within the firm.
Handy
An influential management thinker who argued that any definition of a manager is likely to be too broad to be of any value and so he looked at what is involved in being a manager. He considered managerial dilemmas, the role of a manager in keeping business healthy and the manager as a person.
Hawthorne effect
An effect that was identified from a series of studies carried out at the Western Electric Company in Chicago between 1927 and 1932. The studies noticed that whatever changes were made in the working conditions over the five years, output always rose.
Health and safety
The process of ensuring that the working environment within a firm is both a healthy and a safe one.
Hedging
The process of protecting oneself against risk.
Henry Mintzberg
A theorist who argued that a manager in a firm needs to carry out certain roles. He identified three min roles and these are interpersonal roles, information roles and decision-making roles.
Herzberg
A theorist who looked at the factors that affect people’s motivation to work. He identified a two-factor theory that suggested that motivation depends on two causes or factors.
Hierarchy
The organisational structure of the firm from top to bottom into different levels of management.
Holding company
A company that owns and therefore controls other companies.
Horizontal communication
A form of communication that is also known often as lateral communication.
Horizontal integration
When two companies in the same industry and at the same stage in the chain of production merge. For example, a merger between two breweries.
Horizontal merger
When two companies in the same industry and at the same stage in the chain of production merge. For example, a merger between two breweries.
Human capital
The skill, knowledge and expertise of workers.
Human resource management
The process of managing the personnel of the firm.
Hygiene factors
Factors identified by Frederick Herzberg that can lead to workers being dissatisfied.
Import controls
Controls that a government put on to limit the volume of imports entering a country. They may include tariffs, quotas or perhaps even embargos on certain goods. A form of protectionism.
Import prices
The prices of goods brought into a country.
Import restrictions
Restraints that a government may impose to limit the volume of imports entering a country. They may include tariffs, quotas or perhaps even embargos on certain goods. A form of protectionism.
Imports
Goods or services that have been bought from overseas.
Income elasticity of demand
The responsiveness of demand to a change in income.
Income tax
A direct, progressive tax.
Index numbers
Numbers used for expressing average changes in a number of different variables.
Indirect taxation
Taxation on expenditure.
Induction
A programme to help a new employee settle quickly and efficiently into their job. It may include introductions to key personnel, tours around the workplace and information about company systems.
Industrial action
Action that may occur when there is a dispute that cannot be easily resolved between the firm and group of their employees. It may be taken by either employers’ or employees.
Industrial inertia
A situation where a firm remains in its original location even after the initial advantage that led to them locating there has disappeared.
Industrial relations
Relations between employers and employees. Generally the relations between a union or other group representing the workers at the firm and the management of the firm.
Industrial tribunal
An independent body which an employee can appeal to if they feel that they have been unfairly dismissed.
Inelastic
A situation where one variable is unresponsive to changes in another.
Inflation
A rise in the general price level that means that the value of money has fallen.
Informal groups
Groups within a business that are made up of people with similar interests. Not a formal part of the business organisation but arise from people having a similar interest in discussing issues.
Informative advertising
Advertising which emphasises facts and factual information about a product.
Infrastructure
The basic underlying networks of an economy necessary to support economic activity.
Innovation
The process of introducing new ideas that may affect products or the way in which they are made. It can also be considered as the commercial exploitation of a new invention.
Inorganic growth
When a firm grows by taking over or merging with another firm (integration). Often also known as external growth.
Insolvency
A situation where a company does not have sufficient assets to meet its liabilities.
Intangible assets
Forms of fixed asset that are not physical assets and so will include assets like goodwill (the value of the firm’s reputation and customer base), the value of a firm’s brand and investments.
Integration
The process of two firms combining. It may be either horizontal or vertical.
Intellectual assets
A form of intangible asset that includes things like the abilities of individuals and the brands that a company owns.
Interest
The reward received for the investment of money.
Interest cover
A ratio that measures how easily the firm can meet the interest payments on any debts that they have. It is calculated by dividing the profit before tax and interest by the amount of interest paid.
Interest rate
The rate received in exchange for money that is lent to a firm or individual.
Internal constraints
Limits that are placed on the behaviour of a firm by their rules, regulations and policies.
Internal growth
A form of growth where a firm gets larger from expanding by using its own resources. Also often known as organic growth.
Internal rate of return
The rate of return of an investment project where the net present value is zero.
Internal recruitment
The process of recruiting personnel to posts from within the company.
International marketing
The process of marketing a firm’s goods and services in other countries.
International trade
The process of exchanging goods and services between countries. It involves the buying and selling of imports and exports.
Investment
The purchase of capital equipment that firms need to enable them to produce. It may include machinery, equipment and vehicles.
Investment appraisal
The process of assessing potential investment projects to see which ones are most viable (and profitable) for the firm. There are a range of techniques that they may use including the payback method, the average rate of return and discounted cash flow.
Inward investment
Money flowing into a country to be invested there that has come from other countries.
Job description
A paper that is an important part of the recruitment process. It gives details of what the job entails and explains the basic roles and responsibilities of the job.
Job enlargement
The process of giving an employee more work of a similar nature to do. It will often mean them carrying out a larger proportion of the production process for the product.
Job enrichment
The process of giving a person more responsibility for the work they are carrying out. This will often mean the ‘vertical’ extension of their role to give them further responsibilities for more areas.
Job production
A production method where just one item at a time is made which is usually used where the product is a one-off product or perhaps unique to each customer.
Job rotation
The process of changing the roles or tasks that employees carry out from time to time. This is often done to help avoid dissatisfaction among workers.
Job specification
A paper that looks at all the skills and knowledge required by an employee to carry out their role. It therefore gives a profile of the sort of person required for a particular post.
Joint venture
A situation where two companies get together to carry out a business venture. They will share the costs, responsibility and profits but they remain as separate firms.
Just-in-time
A stock control system which operates on the scheduling of stocks in a precise, co-ordinated way, so minimising the quantity needed to be held. Stocks are only ordered a short time period before they are needed for the actual production of the final good.
Kanban
An approach to production which uses just in time stock control to ‘pull’ stocks to production when they are required and is based on establishing very close relationships with suppliers.
Known price item
A good whose price is widely known by consumers. They are usually priced very competitively to attract customers.
Labour force
All those who are employed or are available for work. It is made up of the employed, the self employed and the unemployed. The term may also be used to refer to all the workers in a particular company.
Labour intensive
A form of production that uses a high proportion of labour to capital in the production process.
Labour market
The market where labour is bought and sold. People supply their labour and it is in turn demanded by firms.
Labour turnover
A measure of how many people leave a business over a given period of time. It is usually expressed as a percentage of the total labour force.
Laissez faire
A term used to describe an economic system where the government intervene as little as possible and leave the private sector to organise most economic activity through markets.
Laissez faire leadership
A style of leadership where people are left to make decisions and carry out their tasks much more independently than under other leadership styles.
Lateral integration
The merger of two firms who sell related goods or services but the firms do not compete directly with each other.
Latest finishing time
The latest time (in hours or days) that a task can be finished without delaying the next task in the process when using critical path analysis.
Lead time
The time taken between an order and the delivery of the goods.
Leading edge
Being at the forefront of developments in your profession, job, market etc.
Lean production
A production technique (originally used in Japanese manufacturing companies) where production methods are streamlined as much as possible.
Leasing
The process of getting hold of equipment without buying it outright. The equipment is effectively rented for a period of time for a fee.
Liabilities
Items which are potentially owed to someone. They may be either current or long-term.
Limit pricing
A method of pricing where a firm sets price just low enough to discourage possible new entrants. This will act as a barrier to entry to new firms.
Limited companies
Firms owned by shareholders who have limited liability.
Limited company
A firm owned by shareholders who have limited liability.
Limited liability
A situation where any shareholders’ loss is limited to the amount of capital they have invested in a company.
Linked processes
A situation where different but related stages of production are combined together to make a product.
Liquid assets
Assets which can readily or easily be converted into cash.
Liquidation
The process of winding-up a company when it is insolvent.
Liquidity
The ease with which an asset such as money in the bank or shares can be turned into cash.
Living standards
The quality of peoples lives. This will depend on the level of incomes as well as other measures like the number of doctors, nurses, teachers and so on.
Loan capital
Money that a business has borrowed for a lengthy period of time to fund expansion and development of the business. It is shown on the balance sheet as a part of the capital employed.
Lobbying
A situation when organisations try to persuade decision makers (often government) that their view or product or organisation should be supported.
Location
Where a firm is geographically sited. This may depend on the nature of its business, the nature of the product, the need for raw materials and a wide range of other factors.
Logo
A symbol or other recognisable form that allows others to recognise your company, its products, premises etc.
Long run
The period of time when all factor inputs, including capital, can be changed.
Long run average cost curve
The curve showing the minimum unit cost of producing each level of output. The shape will depend on the existence of economies and diseconomies of scale.
Long term liabilities
Items owed that are due for repayment in more than a year. They may include loans, debentures and other forms of loan capital.
Long term liquidity ratios
A group of ratios that assess the performance of the capital that has been invested in the company for a longer period of time. They include the Gearing and Interest Cover ratios.
Loss leader
A good that is sold at a low price (often below cost) to attract customers.
Macroeconomic policies
Policies designed to influence the principal economic targets. These include the level of employment, the price level, economic growth and the balance of payments.
Macroeconomics
The study of the whole economy or large sectors of the economy. It is therefore concerned with issues like unemployment, inflation and economic growth.
Major player
A firm that is one of the largest market-share holders in a particular market. They will have a significant proportion of the market when compared to other firms.
Management
The process of organising resources. This may involve planning, organising and co-ordinating of all the resources available for a particular task.
Management accounting
The preparation of financial statements and other data for managers to support them in the decision-making process. The data prepared is only for internal use.
Management buy-out
A situation when a group of managers in the firm become the firm’s owners by buying all the shares in the company from the existing shareholders.
Margin of safety
The difference between the current level of output of the firm and the break-even level of output.
Marginal cost
The cost of producing one extra unit. It is the increase in total cost when one more unit is produced.
Marginal cost pricing
A pricing method where price is determined by reference to the additional cost of one more unit.
Mark up
The amount that is added to the cost of a good or service to get to the price.
Mark up pricing
A pricing method where price is set by adding a percentage onto costs.
Market concentration
A measure of how competitive a market may be. It measures the market share of the largest firms in the industry.
Market economy
An economy where markets are used to allocate resources through demand and supply and the price mechanism.
Market leadership
A situation where a firm has the largest share of the market. Other companies will watch carefully the actions of the firm and follow them closely to ensure they do not get left behind.
Market orientated
A firm which focuses closely on the needs of the customer before making decisions regarding the product, pricing strategy and promotion.
Market orientation
A situation where the business will focus on the needs of the customer before making decisions regarding the product, pricing strategy and promotion.
Market penetration
A pricing strategy where a firm reduces price to a low level to try to sell a large volume of their product and increase their market share.
Market research
The process of collecting and analysing data about a market to help inform the firm when they are preparing their marketing strategy.
Market segment
A particular group or sub-group of consumers within a market who have similar characteristics. By targeting these groups, the firm is able to make their marketing more effective.
Market segmentation
The process of breaking a market down into particular groups or sub-groups of consumers, each of which reflects different customer preferences.
Market share
The proportion of total sales in a market accounted for by a particular brand or firm.
Market stagnation
Where a market fails to grow or grows very slowly.
Market structure
The number and type of firms in a particular industry. Examples include perfect competition, monopolistic competition, oligopoly and monopoly.
Marketing economies of scale
A situation where larger firms are able to lower the unit cost of advertising and promotion perhaps through access to more effective marketing media.
Marketing mix
The balance of marketing techniques required for selling the product. It’s components are often known as the four P’s.
Matrix structure
A form of organisational structure where people are grouped into teams (project teams) each with different areas of responsibility. These groups communicate between each other on the same level.
Maximum price
An upper limit in a market set by a government or other agency above which the price charged is not allowed to rise.
Means testing
The process of looking at a person’s income and wealth to see if they are entitled to something.
Memorandum of association
One of two legal documents that are required when setting up a limited company. It sets out the constitution and various other details about the firm.
Meredith Belbin
A theorist who carried out an extensive study of group roles in a work setting. He argued that each person has a role they prefer to carry out and for a group to function correctly all the roles need to be filled.
Merger
When two firms agree to join together to form a new company.
Micro-environment
The immediate environment in which an individual or company works.
Microeconomic policies
Policies designed to improve the efficiency of individual markets and therefore get a better allocation of resources. They are also known as supply-side policies.
Microeconomics
The study of the behaviour of individual consumers, firms, markets and industries.
Minimum efficient scale
The smallest size of plant needed to minimise unit cost. It is the lowest output level at which average cost can be minimised.
Minimum price
A price floor set by a government or other agency below which the price charged is not permitted to fall. An example is a minimum wage.
Minimum wage
A lower wage limit set by a government below which the wage paid cannot fall.
Mission Statement
A formal statement that focuses on the major objectives and values a company holds and what they are aiming to achieve.
Mixed economy
A form of economy where some resources are owned by both private individuals and some by the government. It is the most common form of organisation of an economy.
Monetary policy
The use of changes in the supply of money and interest rates to achieve economic policy targets.
Monopoly
A firm that dominates the market and has a high degree of market power and therefore the ability to ‘set’ prices.
Multi-skilling
Ensuring that individuals are able to undertake a range of tasks. This will require education and training to ensure that the workers are flexible.
Multinational
A large company owning subsidiaries and producing in a number of countries.
Multinational corporation
A large company owning subsidiaries and producing in a number of countries.
National income
The total value of goods and services created by a country in one year. GDP and GNP are both measures .
Natural advantages
The benefits of a location which occur naturally. These may be a factor that determine the geographical location of a firm.
Natural resources
Inputs that are not man-made. These will include minerals and other naturally occurring raw materials.
Negotiation
The process of discussion and debate between different groups to agree an outcome. Generally used as part of the collective bargaining process to determine wages.
Net assets
The difference between total assets and current liabilities. This figure is shown on the balance sheet and will balance with the capital employed.
Net current assets
The working capital of the business - the difference between current assets and current liabilities.
Net present value
The value today of future incomes less any costs.
Net profit margin
Net profit as a percentage of the sales that generated it. It is calculated by dividing the net profit by the turnover and multiplying by 100 to get the figure as a percentage.
Network analysis
A tool used by business to help with decision making. A network is constructed that shows each of the tasks as a ‘node’ and the earliest start time and latest finishing time of each task are calculated.
Niche market
A specialist area of the market, normally a small segment of a market.
Niche marketing
The process of marketing a good or service in a specialist area of the market, normally a small segment of a market.
Nodes
A part of a network that is being used to help decision making. The earliest starting time of the task and the latest finishing time are both shown. Once they have all been identified, the firm can find the critical path.
Nominal rate of interest
The actual current rate of interest expressed as a percentage without taking any account of the rate of inflation.
Non-price competition
Competition between firms using methods other than price reductions. Examples include advertising, free gifts, quality, reliability and so on.
Non-renewable resources
Resources which are finite and cannot be replaced. Examples include minerals and fossil fuels.
Non-wage benefits
Benefits received from working that are received in a form other than money. Examples may include fringe benefits, free uniform, free travel to work and so on.
Not for profit
Any organisation that does not seek to make a surplus. It usually refers to charities and similar organisations that have aims other than profit making.
Oligopoly
A market structure where a market has just a few firms. Each of the firms will account for a large proportion of output.
Operating profit
The profit (or surplus) that the firm has made after overheads (indirect costs) have been deducted from the gross profit.
Opportunity cost
The cost that results from making a choice. The value of the next best alternative foregone.
Ordinary share
A type of share issued in a firm. These shareholders have voting rights in the firm and the dividend they receive depends on the profits made by the firm.
Organic growth
Growth where the company itself has grown from its own business activity and its own resources, often called internal growth.
Organisational culture
The shared values and ideals that are common throughout the organisation.
Output
The production of goods and services.
Output per worker
The level of total output divided by the number of workers employed. It is a measure of the productivity of labour.
Overheads
The costs of the business that are not attributed to any particular part of the production process or any particular product produced. They will include business expenses like rent, administration and other office expenses.
Overmanning
A situation where more people are employed than are needed to produce the current level of output. This will mean higher unit costs for the firm.
Overproduction
A situation where production is above the socially optimum level. This will often occur where the production of a good results in negative externalities.
Overseas investment
The purchase of overseas financial and physical assets.
Overtime
Work done over and above standard working hours. It is generally paid at a higher rate than the standard hours.
Overtrading
A situation where the business expands rapidly without having sufficient working capital. In other words they do not have sufficient funds to pay their day to day business expenses.
Ownership
The people or organisations to whom the firm belongs.
PEST analysis
A tool used by businesses to look at the external environment they face and issues that may arise from the global marketplace they operate in.
PESTLE analysis
A tool used by businesses to look at the external environment they face and issues that may arise from the global marketplace they operate in.
Packaging
The way in which a product is presented and delivered to the consumer. Colour, shape, size and different materials will generally be used to help market the product.
Participation
The encouragement of those not normally involved in a particular process or decision-making system to be involved. It may be encouraged by empowering employees to take more responsibility for their work and therefore become more involved.
Participation rate
The percentage of the population of working age in the economy.
Partnership
A firm owned by between 2-20 people who share the profits and usually have unlimited liability for the debts of the firm.
Patent
A form of protection for the inventor or originator of a product, idea or production process to prevent other firms from copying it.
Payback period
A technique used in investment appraisal to help assess whether an investment project may be worthwhile. It is the amount of time taken for the original investment outlay to be repaid by income from the investment.
Penetration pricing
A pricing strategy where a firm reduces price to a relatively low level to try to sell a large volume of their product and increase their market share.
Perfect competition
A market structure made up of a large number of small firms, each selling homogeneous (identical) products with a small market share to a large number of buyers.
Performance ratios
A group of ratios that consider how well the firm is performing in terms of profitability and turnover. They include the return on capital employed (ROCE) and the gross and net profit margins.
Performance related pay
A situation where incomes are adjusted according to performance. Targets are usually set and exceeding these targets can often result in a bonus.
Person specification
A document that looks at all the skills and knowledge required by an employee to carry out their role and therefore gives a profile of the sort of person required for a particular post.
