Business Terms

Question 1

Market

Answer 1

Let’s begin our list by thinking about where businesses operate; the place where businesses and buyers come together. We’re talking about the market. Quite simply, a market is anywhere where these two come together to transact with each other.

Question 2

Target Market

Answer 2

is the group of customers or consumers that a company believes will target their selling efforts - that is, the primary audience/buyers for its goods or services.

Question 3

Brand Awareness

Answer 3

Used to describe how well a company’s target market knows a company by its product or name. Brand awareness is all about companies making sure consumers think about their brand when thinking about where to make a purchase or use a service.

Question 4

Entrepreneurship

Answer 4

Act of developing and managing a new business venture.

Question 5

Marketing

Answer 5

Refers to activities a company carries out to promote the buying or selling of their brand and products or services.

Question 6

Unique Selling Proposition

Answer 6

What makes a company’s particular product or service unique from their competitors. USPs are commonly used by marketing teams, who work hard to highlight the reasons why customers should choose them over another company.

Question 7

Balance Sheet

Answer 7

A financial statement that reports any assets or liabilities a company has, as well as a shareholder’s equity at a specific point in time. Essentially, it provides a snapshot of what a company owns and owes, as well as the amount invested by any shareholders.

Question 8

Forcast

Answer 8

Forecast is used to predict various aspects of a company’s future based on its current situation and plans for product development, marketing efforts, and many other aspects. Business forecasts are usually over a much longer period of time, over months even several years. It really does depend on what a company is trying to predict. Business forecasts can take many different forms, such as sales forecasts or cashflow

Question 9

Consumer Law

Answer 9

Consumer law exists to provide protection to the consumer against issues such as fraud or mis-selling when they purchase a product or services. However, it also protects organisations from issues such as copyright infringement or intellectual property rights theft.

Question 10

Procurement

Answer 10

A key business term for product-based businesses, referring to the act of obtaining goods or services for business purposes. This could be anything from purchasing raw materials to make goods, or arranging contracts with hauliers to mass transit items to international markets. Procurement is a key part of a company’s strategy, because the ability to purchase certain services or materials can determine if company operations will be profitable.

Question 11

B2B

Answer 11

Supply goods or services to other businesses. B2B transactions tend to make up part of a supply chain, where one company will purchase materials or services from one company which are used to manufacture a product or service that they will then go on to sell to other businesses or even consumers.

Question 12

B2C

Answer 12

This means you supply goods and services directly to an end-user or consumer

Question 13

Asset

Answer 13

Refers to an item of value which is owned by a company. Business assets span many categories and can be classified as anything including; physical, tangible goods, such as vehicles, office equipment, office furniture, computers, and real estate; or intangible assets, such as intellectual property, patents, copyrights, licences, and trademarks. Assets = Liabilities + Owner’s Equity

Question 14

Current Assets

Answer 14

Those with a shorter lifespan and easily transferable into cash - also known as tangible assets which are physical or material goods

Question 15

Fixed Assets

Answer 15

Are intended for long-term use and are unlikely to convert quickly into cash - also commonly referred to as intangible assets due to their non-material substance but clear value to businesses.

Question 16

Depreciation

Answer 16

The tool used by companies to record the reduction in the original value of an asset. Depreciation is recorded every year on a company’s profit and loss sheet until it becomes unusable. On a balance sheet, the original cost of the fixed asset is shown to reduce by the amount of depreciation each year.

Question 17

Straight line depreciation

Answer 17

Where the same amount is deducted every year, e.g. £20 per year

Question 18

Reducing balance depreciation

Answer 18

Where the same percentage of an asset’s value is taken off each year, e.g. 20%

Question 19

Audit

Answer 19

An objective examination and evaluation of the financial statements of an organization to ensure that all records are a fair and accurate reflection of the transactions they claim to represent. Audits can be conducted either internally, by a company’s in-house financial team, or externally by auditors from a certified public accountancy firm. Usually, external audits will include a review of both financial statements and the internal controls of a company. Meanwhile, internal audits are often used as a managerial tool to improve internal processes and controls within an organization.

Question 20

Return on Investment (ROI)

Answer 20

A performance measure, used to evaluate the efficiency or profitability of an investment, or, to compare the effectiveness of a number of different investments. Based on an investment’s cost, ROI tries to directly measure the amount of return from that particular investment.

To calculate ROI, the benefit (or guaranteed return) of an investment is divided by the cost of the investment. The result is usually expressed as a percentage or ratio.

Question 21

Price Elasticity of Demand (PED)

Answer 21

Used to understand how supply and demand for a product changes as a result of a change in its price. PED = % change in quantity demanded / % change in price

Question 22

Fiscal Year

Answer 22

A company’s fiscal year is a set period of time used to calculate financial statements and file their taxes. Most commonly, a fiscal year is used for accounting purposes to generate financial reports and prepare budgets. Fiscal years are particularly important for publicly-traded companies and their investors, who are able to make year-to-year comparisons on revenue and earnings.

Question 23

Human Resources (HR)

Answer 23

Many new start-ups and forward-thinking organisations have begun to prioritise wellbeing roles within their HR teams to maximise employee satisfaction, while others will have a more traditional approach to looking after the team.

Question 24

Public Relations (PR)

Answer 24

The act of managing how information about an individual or company is disseminated to the public.

Question 25

Cash Flow

Answer 25

The overall movement of your business finances each month, including income and expenses. The cash flow for a company is divided into three parts. Operating, Financing and Investment Cash Flow

Question 26

Operating Cash Flow

Answer 26

Refers to those from internal activities of a company such as a employee’s salary

Question 27

Investment Cash Flow

Answer 27

Involves the business’ fixed assets, such as the finances to buy a piece of new equipment

Question 28

Financing Cash Flow

Answer 28

The business’ financing transactions such as payment of dividends and issuance of stock

Question 29

Expenses

Answer 29

It is the ordinary and necessary costs that are incurred to run a business or trade. In business, expenses are part of your statement of income. These are the finances that are needed each month for the company to operate. It includes legal costs, worker’s salary, marketing costs, and rent. It is recommended for a business to keep its expenses as low as possible to stabilize the financial status of a company.

Question 30

Liabilities

Answer 30

They are debts and financial obligations owed to another person or entity from a past transaction. Your liabilities are reported in a balance sheet and separated into two categories: current liabilities and long-term liabilities.

Question 31

Current Liabilities

Answer 31

Are immediate debts that need to be repaid within one year, which include taxes, wages, and accounts payable.

Question 32

Long-term Liabilities

Answer 32

Can be repaid over a year, such as mortgages, business loans, and pension obligations.

Question 33

Gross Profit

Answer 33

A profit of a company after deducting the costs of making a product or providing a service. This can be computed after subtracting the cost of goods sold (COGS) from revenue (sales) and will be available as your company’s income statement. This measures a company’s financial performance in managing the demand and supply of goods and services associated with the production and sales of products and services.

Question 34

Revenue

Answer 34

It is the income generated from business operations of selling goods and services to customers in a given period. In an income statement, revenue appears first, where net income is at the bottom line. Thus, it is expressed as revenues minus expenses since there is a profit when revenues are higher than the expenses.

Question 35

Net Income

Answer 35

Also referred to as net profit, it reveals how much revenue is left after all business expenses have been paid. It is calculated as sales minus the cost of goods sold, tax interests, and all other operating expenses.

Question 36

Income Statement

Answer 36

For a business to be financially stable, it must generate more revenue from the sale of its products and services. It is a financial statement showing a business’s revenues and expenses in a given period. Usually, it is expressed either in a fiscal year or a full calendar year. This is done by taking all revenues and subtracting all operating and non-operating expenses.

Because it plays a vital role in the company’s performance reports, it highlights four essential items- revenue, expenses, gains, and losses.

With income statements, upper-level management can make business decisions to increase production capacity, expand to a new location, or terminate product sales. As a bottom line, through this, the financial performance of the company can be gauged if they can be able to generate profit.