Buss3 Defenitions Flashcards
Aims/goals
General statements of what a business intends to achieve. Precise details of those intentions are set out in objectives
Business unit strategy
How a business attempts to compete successfully in a particular market
Corporate objectives
Objectives that relate to the business as a while. Usually set by top management
Corporate strategy
Concerned with the overall purpose and scope of the business activities
Cost leadership
A business strategy concerned with aiming to be the lowest-cost producer in an industry. Usually requires exploitation of economies of scale
Functional objectives
Set for each major business function- designed to ensure that the corporate objectives are met
Mission statement
A statement of the overall purpose of the business
Shareholder value
Where shareholders earn a return from their investment which is greater than their required rate of return
SMART objectives
Objectives that are more likely to be achieved because they are specific, measurable, achievable, realistic and timed
Social responsibility
The way in which a business meets its responsibilities to society as a key external stakeholder
Swot analysis
Assessment of the internal and external strengths and weaknesses of a business that the business needs to consider
Targets
Similar to objectives. Targets are often set at an individual or team level
Acid test ratio
A liquidity ratio that looks at whether a business can pay for current liabilities out of cash and near-cash assets (it ignores the value of stocks)
Asset turnover
A ratio that calculates the relationship between revenues and the total assets employed in a business
Assets
Amount owned by, or owed to a business
Average rate of return
A measure of the total accounting return from an investment project
Balance sheet
The financial statement that provides a snapshot of the assets and liabilities of a business at a particular date
Capital expenditure
Expenditure on assets which are intended to be kept in the business (eg it systems, machinery) rather than sold or turned into products
Cash flow targets
Specific objectives set by a business for cash-flow generated by a business
Corporation tax:
The tax levied on the profits of companies. The percentage varies depending on the size of the profits earned: typically 20-30%
Cost minimisation
A strategy of achieving the most cost-effective way of delivering goods and services to the required level of quality
Creditor days
A ratio that estimates the average period (in days) taken to settle amounts owed by a business to suppliers
Current ratio
A simple and popular measure of liquidity that assess the ability of current assets (eg cash, stocks) to finance current liabilities (eg trade creditors)
Debentures
A long term source of finance- a debenture is a form of bond or long term loan issued by a company
Debtor days
A ratio that focuses on the average time it takes for trade debtors to settle their accounted; usually measured in days
Depreciation
An accounting estimate of the fall in value of a fixed asset over time
Discount factor
The multiplication factor that converts a projected cost or benefit into a future year into its present value
Dividend
Amounts paid to shareholders out of the profits earned by a company
Dividend yield
A measure of shareholder return- calculated by comparing the dividend per share by the share price
Fixed assets
Assets such as property, equipment and vehicles that are intended to be retrained and used in a business for more than one year
Gearing
A ratio that focuses on the long-term financial stability and capital structure of a business. The gearing ratio measures the proportion of assets in a business that are financed by borrowing
Going concern
A business that is viable and able to continue in business for the foreseeable future
Goodwill
An intangible asset that can be included in a balance sheet= the difference between the net assets of a business acquired and the price paid for the business
Income statement
A financial statement that summaries the trading results of a business over a specific period- usually one year
Investment appraisal
Analytical techniques to help management evaluate the returns from potential investments and to help choose between competing investments
Liabilities
Amounts owed by a business to others
Liquidity
The ability of a business to finance required payments to creditors
Net present value
The present value of a series of future net cash flows that will result from an investment, minus the amount of the original investment
Operating profit
The product earned by a business from its entire trading operations- stated before financing (eg interest) and tax
Over trading
Where a business suffers financial difficulties from expanding too quickly- usually suffering set-up losses and increased working capital
Payback period
The time it takes for a project to repay its initial investment
Profit centres
A separately identifiable part of a business for which it is possible to identify revenues and costs and calculate a relevant profit
Profit quality
The sustainability of profit from one period to the next. Higher quality profit is profit that is likely to be repeated rather than affected by one-off items
Profitability
The amount of profit earned in a period (absolutely measure) or rate of profit earned compared with revenue
Provisions
Amounts set aside to cover future cots it liabilities (redundancies, legal dispute etc)
Ratio analysis
Interpretation of financial performance by calculating and interpreting ratios
Retained earnings
Profits earned by a business that are kept in the business rather than distributed as dividends
Revenue expenditure
Spending on day-to-day operation of the business (eg raw materials etc)
Rights issue
The issue of new shares to existing shareholders in order to raise new finance. The new shares are usually offered at a significant discount to the existing share price to encourage take-up
Return on capital employed
A measure of the percentage return that a business earns from the capital employed in the business. Often referred to as the ‘primary ratio’
Share capital
The amount invested into a company by shareholders
Shareholder returns
The rewards earned by shareholders = dividends paid to them + any increase in the value of their shares
Stock turnover
A liquidity ratio that looked at how often a business rotates its stock during a year
Trade creditors
A liquidity ratio that looks at how often a business rotate its stocks during a year
Trade debtors
Amounts that are owed to a business from its customers
Working capital
The net amount invested by a business to finance day-to-day trading: usually calculated as current assets- current liabilities
Ansoffs matrix
A strategic model for helping a business analyse the relationship between general strategic direction and suitable marketing strategies
Market penetration (existing product, existing market)
Product development (new product, existing market)
Market development (existing products, new markets)
Diversification (new products, new markets)
Competitive advantage
Skills, competences, resources and other advantages that enable a business to out-perform it’s competition
Correlation
A measure of how close the relationship it (positive or negative) between an independent variable and a dependent variable
Customer relationship management
The process of building a long-term profitable relationship between a business and its customers
Extrapolation
The use of trends established by historical data to make predictions about future values
Growth rate
The percentage growth over a particular period. Market growth rates are typically quoted in terms of percentage growth per year
Market analysis
The process of analysing the size, structure and growth of a market in order to support marketing decisions
Market share
The proportion of a market revenue or sales volume that is captured by a business of brand
Marketing budget
Specific amounts that are allocated to activities in the marketing plan
Marketing plan
The actions that management intend to take via the marketing mix in order to achieve marketing objectives
Moving average
A calculation that takes a data series and ‘smoothes’ the fluctuations in data to show a trend average
Product positioning
The way in which the marketing function tried to create an image or identity in the minds of the target market
Repositioning
Changing the marketing mix for a product to appeal to a different market segment
Sales forecasting
Techniques for estimating the likely demand (revenue and volume) for a product in future periods
Target market
The market segment or segments which a business is attempting to enter with the chosen marketing mix
Test marketing
Launching a new product or service in a limited pet of the target market in order to gauge the viability of the product and assess the most appropriate marketing mix
Trend
A general direction in which something tends to move
Capital intensity
The extent to which production or operations depends on investment in and use of capital (ie machined, buildings etc)
Critical path analysis
Project management tool that uses network analysis to help manage complex and time sensitive operations
Diseconomies of scale
Factors which result in higher unit costs as production output reaches too high a level
Economies of scale
Cost advantages that a business can exploit as a result of expanding its scar of production. Economies of scale reduce the average unit cost of production
Efficiency
A measure of the ability of a business to achieve the required level of production whilst minimising the use of resources
Industrial inertia
Where a business decides to stay in its existing location despite potentially better locations being available to it
Innovation
Putting a new idea or approach into action- the commercial exploitation of ideas
Just in time
Methods of lean production where production resources arrive at the moment they are required rather than being held in stock
Kaizen
A cultural approach to lean production and quality assurance. Involves encouraging employees to constantly seek and implement small incremental changes to production in order to improve quality and efficiency
Labour intensity
The extent to which production or operations depend on investment in and use of labour ie people, training
Labour productivity
The level of output per unit of labour
Lead-time
The period of time between an order being placed and being received
Lean production
An approach to management that focuses on cutting out waste whilst still ensuring quality
Marketing economies
Where marketing costs per unit sold can be lowered by spreading marketing costs over larger output
Minimum efficient scale
The minimum output a business needs to achieve in order for it to be able to minimise unit costs
Network analysis
Breaking a project down into separate activities and their requirements
Offshoring
Where a business has work done for it overseas
Outsourcing
Where a business has work done for it by someone else
Productivity
Measures of how effective a business is in turning resources (eg labour hours) into output
Purchasing economies
Cost savings that arise from buying in bulk or from a more powerful relationship with a supplier due to increased output
Quota
A restriction on the volume or quantity of a good that can enter or be sold in a market (form of trade barrier)
Scale
The size or output of a business, best measured relative to that of direct competitors
Subcontracting
Part of outsourcing- where another business is used to provide pet of the production process
Tariff
A tax levied on imports to increase their price compared with domestic goods (form of trade barrier)
Technical economies
Reductions in unit costs arising from the effective use of technology
Unit costs
The key measure of productive efficiency- calculated as total costs divided by total output (over a specific period)
Arbitration
An alternative to a court of law in determining legal and employment disputes. Involves a specialist outsider being asked to make a decision on a dispute
Centralisation
An organisational structure where authority rests with senior management at the centre of the business
Communication
The process by which a message or information is exchanged from a sender to a receiver
Conciliation
A way of mediated industrial disputes to gain agreement without going to arbitration
Core workers
Employees who are part of the core workforce of a business- central to the business activities
Decentralisation
An organisational structure where authority is delegated further down the hierarchy, away from the centre
Delayering
The process of removing one or more layers from an organisational structure
Downsizing
The reduction in the scale and resources of a business
Flexible working
The range of employment options designed to help employees balance work and home life
Gap analysis
Analysis of the difference between the workforce needs of a business and it’s current capabilities
Hard HRM
An approach to HRM based on treating employees as resources in the same way as any other business resource
Human resource management
Strategies for managing people in order to achieve business objectives
Peripheral workers
Employees who are on the fringe of the core workforce. They are not essential workers and their activities can often be outsourced or provided using flexible contracting
Soft HRM
An approach to HRM based on treating employees as the most important resource in a business
Labour turnover
The proportion of staff that leave their employment with a business over a period of time
Team working
Individuals work in groups rather than go using on their own specialised jobs
Trade union
Organisations of employees who seek to negotiate their employment terms through collective bargaining
Workforce planning
How a business determine how many and what kind of employees are required
Works council
A formal meeting of employer and employees to consider issues affecting the business and workplace- mandatory for larger businesses in the EU
