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Business > Business IGCSE 2018 > Flashcards

Business IGCSE 2018 Flashcards

1
Q

Inflation

A

This is when there is an increase in the average price of levels of goods and services

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2
Q

Unemployment

A

This is when someone wants to work but is unable to find a job

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3
Q

Economic growth

A

This is when a countries GDP increases (more goods and services are sold compared to the previous year)

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4
Q

Payments

A

This records the difference between a countries exports and imports

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5
Q

Real income

A

This is the value of income. It falls when prices rise faster than money income.

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6
Q

GDP - gross domestic product

A

This is the total value of goods and services in a country in one year.

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7
Q

Recession

A

This is a period of time in which the GDP is falling

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8
Q

Exports

A

This is when goods or services are sold from one country to another.

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9
Q

Imports

A

These are the goods and services brought in from another country.

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10
Q

Exchange rate

A

This is the price of one currency in terms of another.

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11
Q

Exchange rate depreciation

A

This is the fall of value of the currency when compared with other currencies.

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12
Q

Exchange rate appreciation

A

This is the rise of the value of the currency when compared to another currency

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13
Q

Currency depreciation

A

This happens when the value of the currency falls, meaning it buys less than it did before.

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14
Q

Currency appreciation

A

This is when the value of the currency rises, it buys more than it did before.

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15
Q

Fiscal policy

A

This is the changes of tax-rates or public-sector spending made by the government.

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16
Q

Direct taxes

A

This is paid directly from an income

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17
Q

Indirect taxes

A

These are added to the price of the good or service and the tax payers pay that tax when they purchase the good. Eg. VAT.

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18
Q

Disposable income

A

This is the level of income a taxpayer has after paying the income tax

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19
Q

Import tariff

A

This is the tax on an imported product

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20
Q

Import quota

A

This is the restriction to the number of goods that can be imported.

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21
Q

Monetary policy

A

This is the change in interest rates by the government or central banks.

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22
Q

Social responsibility

A

This is when a business decision benefits the stakeholders rather than the shareholders.

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23
Q

Consumer boycott

A

This is when customers decide not to buy products from a business that does not act in a socially responsible way

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24
Q

Ethical decision

A

These are the decisions taken based on what is seen to be right

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25
Q

Globalization

A

This is used to describe the increase in worldwide trade, movement of people and capital between countries.

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26
Q

Free trade agreements

A

This is when countries agree to import and export without any barriers such as tariffs or quotas.

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27
Q

Protectionism

A

This is when the government protects domestic firms from foreign competitors by using tariffs or quotas

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28
Q

Multinational / transitional businesses

A

These are the businesses with factories or service operators in more than one country

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29
Q

Business / trade cycle

A

Growth - GDP is rising, unemployment rate decreasing.

Boom - caused by too much spending. Prices rise and shortage of skilled workers.

Recession - caused by too little spending. GDP falls. Business demand and profits fall. Workers may loose their jobs.

Slump - a serious and long drawn out recession. Unemployment will reach high levels. Many businesses fail to survive at this point.

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30
Q

Effect of higher interest rates

A

Firm with existing variable interest loans may have to pay more interest to the banks

Managers thinking about expanding their business and borrowing money will have to delay their decision

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31
Q

Supply side policy

A

Privatization - the aim is to use profit motive to improve business efficiency.

Improve training and education

Increase competition in all industries

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32
Q

Economic problem

A

Limited resources, but people have unlimited wants and needs. Therefore, people have to make decisions (opportunity cost). This creates scarcity.

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33
Q

Scarcity

A

The lack of sufficient products to fulfill the total wants of the population

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34
Q

Factors that affect production

A

Land
Labour
Capital
Enterprise

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35
Q

Specialization

A

This occurs wen people Ajd business concentrate on what they do best. Increasing competition means that they have to keep costs low.

This can be done by division of labor.
- when the production process is split up into different takes and each worker performs one of these tasks.

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36
Q

Advantages and disadvantages of division of labor

A

Advantages: workers are trained and specialized with increases the efficiency and output.
Less time is wasted moving from one work bench to another.

Disadvantages: workers can get bird of doing only one job, which may lead into a drop in efficiency.
If one worker is absent and no one else can do the job then production is stopped.

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37
Q

Added value

A

Difference between selling price of a product and the cost of bought in materials and components.

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38
Q

Primary sector

A

Extracts and uses the natural resources of the earth to produce raw materials that can be used by other businesses.

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39
Q

Secondary sector

A

Manufacturers goods using the raw materials provided by the primary sector

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40
Q

Tertiary sector

A

Provides services to the consumers and other sectors of the industry.

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41
Q

Public sector

A

Provides services for the country. These are usually owned by governments: such as public schools, hospitals, transportation services.

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42
Q

Private sector

A

Is where businesses make profits and is owned by private individuals or groups of people. This is a legal form of business that are registered to pay taxes

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43
Q

Mixed economy

A

This when public enterprises and organizations join with the private organizations to satisfy everyone’s wants and needs.

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44
Q

Nationalization

A

This is when a business or company move from the private sector to the public sector.

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45
Q

Privatization

A

This is when a business or a company moves from the public sector to the private sector.

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46
Q

Business plan

A

Document containing the business objectives and important details about the Finance and owners of the business.

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47
Q

Why do governments support start up businesses

A
  • reduce unemployment
  • increase competition
  • increase output - benefits the economy
  • benefit society

How?

-Finance: loans at low interest rates
- Grants:
- labour: train employees
Research: encourage universities to make their research facilities available.

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48
Q

Sole trader

A

A business owned and operated by just one person- the owner is the sole proprietor

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49
Q

Liability

A

The responsibility for debt

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50
Q

Insolvent

A

When a business gets into debt that they cannot pay

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51
Q

Limited liability

A

When business closes or gets into debt it cannot pay, owners only loose the amount of money they invested. They cannot loose any personal belongings.

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52
Q

Unlimited liability

A

When business gets into debt it cannot pay, the owners are responsible for the total debt of the business. They can also loose personal belongings so that the debt can be paid.

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53
Q

Continuity

A

When business is still operational even after the owners leave or die.
This can only happen if the business has a separate legal identity (LLC and PLC)

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54
Q

Legal entity

A

When a business has its own name, assets and liabilities. If business is in debt, the creditors approach the business and not the owners.

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55
Q

Franchise

A

A business that uses the name, promotional logos and trading methods of an existing successful business.

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56
Q

Franchisor

A

Sells the franchise to the franchisee

The company grants the independent operator (franchisor) the right to distribute its trademarks, products and techniques.

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57
Q

Franchisee

A

Buys the franchise from the franchisor. The franchisee buys the license to operate this business from the franchisor.

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58
Q

Franchise agreement

A

A document which contains the provisions covering.

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59
Q

Joint venture

A

This is when two businesses agree to start a new project together, sharing the capitals, risks and the profits.

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60
Q

Business objectives

A

The aims or targets that a business works towards to help make the business successful and help with decision making.

  • survival
  • profit
  • return to shareholders
  • growth
  • market share
  • provide service to society
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61
Q

Stakeholder

A

Any person with a direct interest in the performance and activities of the business.

62
Q

Market share

A

Proportion of total market sales achieved by one business.

63
Q

Social enterprise

A

Has social objectives as well as making profit so that the profit can be invested back into the business.

This is operated by private individuals (private sector)

64
Q

Dividends

A

These are payments made to shareholders from the profits (after tax) of a company as a reward for investing in the business.

65
Q

Incorporated businesses

A

Are companies that have separate legal status from their owners

66
Q

Unincorporated businesses

A

Does not have separate legal identity.

67
Q

Shareholders

A

These are the owners of a limited company. This is done by buying shares which represent the ownership of the company.

68
Q

Annual General Meeting - AGM

A

This is a legal requirement for all companies. Shareholders may attend and vote on who they want to be in the board of directors for the coming year.

69
Q

Internal growth

A

Opening new branches

Introducing new products

Producing more of the same products

70
Q

External growth

A

Horizontal merger - business in one particular industry merged with another in the same industry.

Vertical merger - two businesses in the same industry merge with each other, different stages of manufacturing.

Conglomerate - a random merger with no connection. This is done to spread the risk, if one industry fails or is under threat the other keeps it running.

71
Q

Size of businesses

A

Capital intensive - money spent on machinery.

Labour intensive - money spent on wages and salary

Sales (value of output)

Amount of capital employed (total value of capital used in the business)

Profits made

72
Q

Why businesses choose to stay small

A

Remain exclusive

Keep the service personal

Avoid risk

Owners might want to keep their identity

73
Q

Why do businesses want to grow

A

Lower costs, higher profits

Wider range of products, which is safer.

Prevent competitors from gaining advantage, as you would be gaining more control of the market)

74
Q

Marketing

A

Includes the activities of a business that are aimed at providing products and services that meet the need of its target market and selling it at a price that ensures the business makes a profit and maintain or grow its market share.

75
Q

Marketing objectives

A

Raise customer awareness of the product

Increase sales revenue and profitability

Increase or maintain market share

Improve image of the product or business

Target a new market or market segment

Develop new products

76
Q

Role of marketing

A

Businesses use marketing to identify the customers needs by finding out what products or service they want and how much they are willing to pay and from where they will buy it. After identifying those needs, it is then the businesses aim to try and satisfy those needs so that they can achieve good sales. Furthermore, this gives the business information about their customers which builds a relationship with them that could help them understand why customers buy a specific product and therefore use it to improve their marketing.

77
Q

Market segment

A

An identifiable sub group of the whole market in which consumers have similar characteristics or preferences. This can be by age, gender, location…

78
Q

Mass market

A

Very large number of sales of a product

Advantages:
Risk is spread
Economics of scale
Opportunity for growth

Disadvantages:
High levels of competition
Lots of advertising needed
Standardized products, so customers needs not always meet.

79
Q

Niche market

A

Small amount of goods are sold to a specialized market segment

Advantages:
Suitable for small firms
Customers needs can be focused on and meet

Disadvantages:
Limited sales
High risks because of specialization

80
Q

Market orientated business

A

Is when the main focus of the business is to do research to deliver products and services that the consumer needs.

81
Q

Product orientated business

A

is when the main focus of the business is on the product itself

82
Q

Marketing budget

A

A financial plan for the marketing of a product in a specified period of time so that the department know how much they can spend on advertising and developing the product.

83
Q

Market research

A

Is the process of gathering, analyzing and interpreting information about a market

84
Q

Primary research

A

Collection of original date via direct contact with potential or existing customers.

Questionnaires
Interview
Focus group
Observation

85
Q

Secondary research

A

Information that has already been collected and is available for use by others. Information may be from either internal or external sources.

86
Q

Role of promotion

A

To communicate marketing information to the consumer regarding the product, price and place using different types of promotional media.

87
Q

Aims of promotion

A
  • increase sales
  • create brand image
  • introduce new products to the market
  • compete with competitors products.
88
Q

Advertising

A

Informative- this is where the emphasis of advertising of sales promotion is to give full information about the product.

Persuasive- this is where the purpose of the advertising or promotion is to try and motivate/persuade the consumer that they should buy the product.

89
Q

USP

A

Unique selling point

90
Q

Diversification

A

Ways if expanding into either me market or existing markets.

Expanding into new markets means that the company or business sells prices to a new market segments

Expanding into existing markets means that he company or business sell more products to an existing group of customers.

91
Q

Brand name

A

Unique name of a product that distinguishes it from the brands

92
Q

Brand loyalty

A

Consumers keep buying the same brand over and over again instead of choosing the competitors brand.

93
Q

Brand image

A

Image or identity given to a product which gives it a personality of its own and distinguished it from its competitors brand.

94
Q

Role of packaging

A

To protect, promote and display the product.

95
Q

Current assets

A

Assets owned by the business and used within one year

96
Q

Non current assets

A

Items owned by the business for more than one year

97
Q

Start up capital

A

The finance needed by a new business to pay for essential fixed and current assets before it can begin trading

98
Q

Working capital

A

The finance needed by a business to pay its day to day costs.

99
Q

Capital expenditure

A

Money spent in fixed assets which lasts for more than one year

100
Q

Revenue expenditure

A

Money spent on day to expenses which do not involve the purchase of a long term asset

101
Q

Internal finance

A

Retained profit

Sales of existing assets

Owners savings

102
Q

External finance

A

Issue of shares

Bank loans

Grants

Overdrafts

Trade credit - delaying paying suppliers

Debenture - long term certificate

Factoring if debt

Hire purchase - buying an asset over a long period of time with monthly payments

103
Q

Cash flow

A

This is the cash inflows and outflows of a business over a period of time

104
Q

Cash inflows

A

The sum of money received by the business during a period of time

105
Q

Cash outflows

A

The sum of money paid out by the business over a period of time.

106
Q

Cash flow forecast

A

An estimate of future inflows and outflows of a business. This shows the expected cash balance at the end of each month.

107
Q

Overcoming cash flow problems

A
  • increasing bank loans
  • delaying payments to supplier
  • asking debtors to pay quicker
  • delay/cancel purchases of capital equipment
108
Q

Income statements

A

This is a document that records the income of a business and all costs incurred to earn that income over a period of time

109
Q

Gross profit

A

Sales revenue - costs of good sold

110
Q

Sales revenue

A

Income to a business during a period of time from the sales of goods

111
Q

Net profit

A

Gross profit - expenses

Made by a business after all costs have been deducted from sales revenue

112
Q

Retained profit

A

The net Profit invested back after all payments have been deducted.

113
Q

Balance sheet

A

Shows the value of a business’s assets and liabilities at a particular time.

114
Q

Working capital (formula)

A

Current assets - current liabilities

115
Q

Liquidity

A

The ability of a business to pay back its short term debts.

116
Q

Capital employed

A

This is the long term And permanent capital invested into a business.

117
Q

Return on capital employed

A

(Net profit / capital employed) x 100

118
Q

Gross profit margin

A

(Gross profit/sales revenue) x 100

119
Q

Net profit margin

A

(Net profit / sales revenue) x 100

120
Q

Current ratio

A

Current assets / current liabilities

121
Q

Acid test ratio

A

(Current assets - inventories) / current liabilities

122
Q

Productivity

A

This is the measurement of efficiency of a business.

Measured by: outputs / inputs

123
Q

Increasing productivity

A

Improving quality control

Improve employee motivation

Introducing new technology

Improving inventory control

Train staff to become more efficient

Using machines instead of people

124
Q

Why is increasing productivity important

A

because it increases the output relative to the input which could result in lower costs per unit allowing the business to use that money in different areas of the business. If fewer people are needed then the business can save money because they would have lower wage costs and so could increase the wage to motivate the workers.

125
Q

Buffer inventory level

A

This is the inventory held to deal with any sudden changes in customer demand or delivery of the goods.

126
Q

Types of waste in production

A

Overproduction

Transportation

Unnecessary inventory

Motion

Over processing

Defects

127
Q

Lean production

A

Techniques used by businesses to cut down on waste to help increase efficiency.

128
Q

Advantages of lean production

A

Production process is quicker

Less money tied up in inventories

Less storage of raw material

129
Q

Kaizen

A

Is the Japanese term for continues improvement through the elimination of waste

130
Q

Advantages of kaizen

A

Productivity increases

Less space needed for production processes

Unfinished work (work in progress) is reduced

131
Q

Just in time

A

This is a method of production that focuses on reducing the holding inventory level.

This is done by having the products delivered only at the time they are needed

132
Q

Advantages for just in time

A

Storage and warehouse spaces are not required which reduces costs.

The finished product is sold quickly which helps improve the business cash flow.

133
Q

Cell production

A

Is when the production is divided into parts and each person or group is responsible for a specific part.

134
Q

Job production

A

This is when there is only one product made at a time

135
Q

Advantages of job production

Disadvantages of job production

A

Advantages :

Suitable for personal services - usually done to a high quality

Product meets requirements of customer

Disadvantages :

Skilled labor is often used

Costs are higher as it is labor intensive

Long production time

Materials might have to be specifically purchased, leading to higher costs.

136
Q

Batch production

A

This is where a quantity of one product is made, then a quantity of another is made.

137
Q

Advantages of batch production

Disadvantages of batch production

A

Advantages:

Flexible way of working
Offer some variety to the workers job
Production is not badly affected if machine breaks down

Disadvantages:

Machines have to rest between each production batch, causing a delay

Warehouse space will be needed for stock or raw materials

138
Q

Flow production

A

This is where a large quantity of a product is produced in a continues process (mass production)

139
Q

Advantages of flow production

Disadvantages of flow production

A

Advantages:

High output of specialized product

Costs are low and therefore prices are lower

Reduced labour costs, could be capital intensive

Benefits from economics of scale

Product produced quickly and cheaply

Disadvantages:

Very boring for workers so they can get de motivated

Storage is required which is costly

Setting up the production line is expensive

If one machine breaks down then the whole production will have to be paused

140
Q

Advantages and disadvantages of break even chart

A

Advantages:
Managers are able to read off the expected profit or loss to be made at the level of output

Used to show how many sales are needed to exceed the break even point, safety Margin.

Disadvantages:
This is assuming all products are actually sold

Fixed costs might change if the the scale of production changes

It doesn’t help managers on reducing waste and how to increase sales

141
Q

Fixed costs

A

Costs which do not change, they have to be paid whether the business is making sales or not

142
Q

Variable costs

A

Costs which directly vary directly with the number if items sold or produced

143
Q

Total costs

A

This is the fixed costs And the variable costs combined.

144
Q

Economies of scale

A

The factors that lead to a reduction in Average costs as the business increases in size

145
Q

Diseconomies of scale

A

The factors that lead to an increase in Avery’s exists as s business grows beyond a certain size

146
Q

Revenue

A

Income of a business during a period of time from the sales of goods

147
Q

Breaks even point

A

The quantity that must be sold for total revenue to equal total costs

148
Q

Quality

A

This means to produce s good or service that meets the customers expectation

This is helpful to the business because it establishes a brand image and builds customer loyalty which will help increase sales and attract new customers. Bad quality risks loosing customers to the competitor brand and having to replace any faulty goods is time consuming and costly.

149
Q

Quality control

A

This the checking for quality at the end of the production process

Advantages:
This helps eliminate errors or faults

Requires less training

Disadvantages:
Expensive as employees need to be paid to check

It identified the errors but doesn’t solve it or figure out how it was caused

150
Q

Quality assurance

A

This is the checking for the quality standards throughout the production process.

Advantages:
Helps eliminate any faults or errors

Fewer customer complaints

Reduced costs of products do not have to be repeated

Disadvantages:
Expensive to train employees to check the product

Relies on employees following instruction

151
Q

Total quality management

A

Advantages:
Eliminates all faults or errors before customer receives product

Waste is removed and efficiency increases

No customer complaints do brand image is improved

Disadvantages:
Expensive to train employees to check the product

Relied on employees following TQM ideology

Business (1 decks)

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