Business Vocabulary A-D

Question 1

Aim

Answer 1

Intention to reach a goal

Question 2

Air pollution

Answer 2

The presence or introduction of harmful substances into the air causing disease, allergies or damage to humans, animals, plants or the built environment.

Question 3

Asset

Answer 3

Something the business owns; it has a value e.g. stock, premises (owned not rented).

Question 4

Average rate of return

Answer 4

The average profit for the year as a percentage of the original investment.

Average rate of return = average return per annum/initial investment × 100

Question 5

Boston matrix

Answer 5

A tool for analysing the contribution made by each product in a business’ product portfolio. It plots each product’s position according to its market share and the rate of growth of the market.

Question 6

Brand image

Answer 6

The consumers’ perception of the brand; its character, qualities and shortcomings. It is developed over time and operates as a consistent theme through advertising campaigns.

Question 7

Break even chart

Answer 7

A diagrammatic representation of the costs and revenue for a product; it plots total costs against total sales revenue, showing the break-even point where they cross.

Question 8

Break even output

Answer 8

The point at which the business’ total sales equals the total costs. There is neither profit nor loss.

Question 9

Buffer stock

Answer 9

A stock of raw materials held in reserve to protect the production process from unforeseen shortages.

Question 10

Business plan

Answer 10

A detailed statement of how the business intends to operate, either at start-up or during a given period of time. Business plans are based on forecasts and so cover only a short time.

Question 11

Cash

Answer 11

Money that the business has in cash or in the bank.

Question 12

Cash flow forecast

Answer 12

A financial planning tool that estimates the money coming into and going out of the business on a month-by-month basis; it allows the business to predict times when additional finance may be needed to maintain liquidity.

Question 13

Cash inflow

Answer 13

Money received by the business from its operations or investments.

Question 14

Cash outflow

Answer 14

Money paid out by the business to fund its operations or investment activities.

Question 15

Centralisation

Answer 15

Maintaining control by keeping authority at the senior levels of the organisation.

Question 16

Chain of command

Answer 16

The line through the hierarchy that shows who is responsible for whom from top to bottom of an organisation.

Question 17

Channels of distribution

Answer 17

The route the ownership of the product transfers from the seller to the buyer; it may be a single transaction or pass through others such as wholesalers, distributors, agents and retailers.

Question 18

Closing balance

Answer 18

The amount that remains in the account at the end of an accounting period.

Question 19

Commission

Answer 19

An amount of money paid to an employee that is based on a percentage of the sales he/she achieved; paid in addition to a basic salary.

Question 20

Competition

Answer 20

The rivalry between businesses looking to sell their goods/services in the same market.

Question 21

Competative pricing

Answer 21

Setting the price of a product so that it is in line with competitors’ prices.

Question 22

Consumer law

Answer 22

Laws designed to ensure that businesses make products that are safe and of good quality, and that they deal with customers honestly and fairly.

Question 23

Consumer spending

Answer 23

The money spent by households on goods and services to satisfy their needs and wants.

Question 24

Contracts of employment

Answer 24

A legal document that sets out the terms and conditions of the job for the employer and the employee.

Question 25

Cost

Answer 25

The money spent by a business on goods and services.

Question 26

Cost plus pricing

Answer 26

Setting the price of a good or service at an amount higher than the cost of producing it so that a profit is made.

Question 27

Customer

Answer 27

Individuals, businesses or organisations that purchase goods/services and make decisions about which supplier to choose.

Question 28

Customer engagement

Answer 28

The relationship between the business and the customer that puts the customer’s requirements at the centre of the operation to build brand loyalty.

Question 29

Customer loyalty

Answer 29

The likelihood that past customers will continue to buy from the business, enhanced by high quality customer service and/or reward programmes.

Question 30

Customer satisfaction

Answer 30

Whether customers are pleased with the goods/services they receive; whether they would purchase again.

Question 31

Decentralisation

Answer 31

Where authority is spread widely through the organisation.

Question 32

Delayering

Answer 32

The reorganisation of the organisation’s employees so that there are fewer levels of management.

Question 33

Delegation

Answer 33

Allocating a task to someone who would not normally be responsible for it.

Question 34

Demand

Answer 34

The quantity of a particular product that will be bought at particular price over a specific time.

Question 35

Directors

Answer 35

The people who are elected by the shareholders to run the business on their behalf.

Question 36

Diseconomies of scale

Answer 36

When a business grows too large, leading to a possible increase in unit cost.

Opposite of ‘economies of scale’

Question 37

Disposal of waste

Answer 37

The removal, storage or destruction of unwanted material. Methods include recycling, burning and landfill sites.

Question 38

Dividend

Answer 38

A portion of the after-tax profit that is paid to shareholders according to the number of shares they own.