Chapter 3: Size of Business

Question 1

revenue

Answer 1

the total value of sales made during the trading period

Question 2

capital employed

Answer 2

the total value of all long-term finance invested in the business

Question 3

market capitalisation

Answer 3

the total value of a company’s issued shares

Question 4

market share

Answer 4

sales of the business as a proportion of total market shares

Question 5

organic growth

Answer 5

expansion of a business by means of opening new branches, shops or factories, also known as internal growth

Question 6

external growth

Answer 6

business expansion achieved by integrating with another business by either merger or takeover

Question 7

merger

Answer 7

an agreement by owners and managers of two businesses to bring them together in a new combined business, also known as friendly merger

Question 8

takeover

Answer 8

when a company buys more than 50% of the shares of another company and becomes its controlling owner, it can be called an acquisition

Question 9

horizontal integration

Answer 9

integration with a business in the same industry and at the same stage of production

Question 10

vertical integration

Answer 10

integration with a business in the same industry

Question 11

forward vertical integration

Answer 11

vertical integration with a customer business

Question 12

backward vertical integration

Answer 12

vertical integration with a supplier business

Question 13

conglomerate integration

Answer 13

integration with a business in a different industry

Question 14

synergy

Answer 14

literally means ‘the whole is greater than the sum of parts’ - it is often assumed that the new business will be more successful than the original separate businesses

Question 15

strategic alliance

Answer 15

agreement between two organisations to commit resources to achieving a specific objective while remaining independent