Definitions Flashcards
Profit
Total revenue is greater than total costs
To make more money than you spent
Mission
Overall purpose or main corporate aims
Mission statement
Tells you the purpose of a business.
Makes stakeholders aware of what the business does and why and to encourage all employees to work towards these aims
values, strategy, standards
Objectives
Helps enable them to achieve their missions
Turns the overall aims of the business into goals that must be met
Corporate objectives
Goals of the business as a whole
Depends on the size of a business
Functional objectives
Objectives of each department
More detailed and specific - helps achieve corporate objectives
Cash flow
Money that moves in and out of a business over a period of time
overtrading
business produces too much; they have to pay suppliers and staff so much that they’ll become insolvent before they get a chance to be paid by their customers
Ethical objectives
based on moral principles - how to treat people and the environment
Non - profit organizations
charities or social enterprises set to achieve social or ethical objectives
Revenue
Value of sales or turnover
Amount of money generated by sales of a product before deductions
Fixed costs
Don’t change with output
Variable costs
Change with output
Loss
Total costs are greater than total revenue
Large scale production
more output lowers cost per unit produced as FC are shared out between more items
Budgets
Forecasts how much costs are going to be over a year
Public sector
Owned and run by the government aim to provide services to the public - no profit
Private sector
owned and run by private individuals aim to make a profit but can also be non profit
Unlimited liability
The business and owner are seen as one under the law
Business debts are personal debts of the owner
Huge financial risk
Limited liability
Owner’s aren’t personally responsible for the debts of the business
Separate legal identity
Only lose the money you invest
Sole trader
Self employed and has full responsibility for the financial control of the business, meeting running costs and capital requirements
Has unlimited liability
Capital requirements
Money invested to set up a business or fund growth
Divorce of ownership and control
shares in a PLC can be owned by money - people who own the company don’t necessitate control over the company - controlled by directors
Ordinary share capital
shares sold by companies in order to raise money - LT investment
Dividend
Payment return for their investment
Proportion of the profits earned by the company paid to shareholders
Fixed amount per share
Market capitalization
Total value of all the ordinary shares issued by a company
Shareholder
Owns at least one share in a company
Majority shareholder
owns more than 50% of the shares
Has the most power in decision making
Capital gain
buy share prices when they are low and sell them when risen to make a profit
Interest rates
reward for saving and cost of borrowing
Fairtrade
Pay higher and fairer prices for products which improves standard of living for suppliers employees
Sweatshop
Factory where workers are forced to work long hours in poor conditions for low pay
Management
Telling people what to do and organizing resources to get the job done
Leadership
motivating and inspiring people - persuasion of decisions
Opportunity cost
Value of the next best alternative that’s been given up
Stakeholder
Anyone who is affected by a business and has a vested interest in what the business has to offer
Marketing
Identifies customer wants and needs and tries to anticipate future demand
Helps businesses earn profit
Research, planning, analysis and the marketing mix
Marketing mix
All the decisions a business makes about promoting and selling a product
Primary / secondary data
primary - new data
secondary - analyze data already available
Confidence intervals
A range of values you’re fairly sure the value for the population will lie within
Product line
related products - usually the same product different size, similar characteristics, use and target customers
Product portfolio / mix
combination of product lines a business produces - variety at different stages of the product life cycle
Boston Matrix
compares market growth with market share - size of circle represents product sale value
Cost plus pricing
price set to cover the cost of making the product and make a profit. added price is called the mark up
price skimming
new and innovative products sold at high prices when they first reach the market.
Penetration pricing
launching a product at a low price in order to attract customers and gain market share
Predatory pricing
lower prices to force another business out of the market and later increasing pricing
competitive pricing
companies monitor competitors price to set prices at an equal or lower level
Psychological pricing
based on customer experiences - high price means high quality, insignificant price change can have a big psychological impact on the customer [£99.99 - £100]
Loss leaders
products sold at or below cost price - indirect profits e.g. in supermarkets
dynamic pricing
increase revenue by changing prices depending on competitor prices and demand e.g. train tickets
Industrial marketing
B2B business to business
Promotion
Inform customers about a product / service or persuade them to buy it
Capacity utilization
Increasing output so it’s closer to the maximum amount of goods that firms could produce with current levels of staff and machinery
Adding value
increasing the difference between the cost of the raw materials and the the price the customer pays - increases profit
Job production
one off items by skilled workers
Flow production
mass production on continuous production line with division of labor
Batch production
small batches of identical items
Cell production
divided into sets of tasks each completed by a work group
Lean production
streamlined production with waste at a minimum
Capacity
maximum output that is produced in a given period without buying any more fixed assets
Outsource
Business uses another firm to do some work on its behalf - meet unexpected demand
Productivity
output per worker in a given time period
Efficiency
getting more outputs from a given number of inputs
JIT Production
efficient stock control as there is reduced waste of materials and products by keeping stock low. supply is directly linked with demand
Time based management
Reduce wasted time in production processes
Lead time
Time between a customer placing an order and taking delivery
Quality control
checking goods as you make them or when they arrive from suppliers
Quality assurance
introducing measures into the production process to try and ensure things don’t go wrong in the first place, prevent errors
Kaizen
employees should be slightly improving their work all the time
Capital
wealth in the form of money or assets owned by a business
capital expenditure
money spent to buy fixed assets
Creditors
people who are owed money by the business
debtors
people who owe the business money
payable
money that the business owes
receivables
money that is owed to the business
sales and leaseback
sell equipment to raise capital and then lease (rent) the equipment back
debt factoring
When banks and other financial institutions take unpaid invoices off the hands of the business and give them an instant cash payment.
The agent pays the business about 80% of the value of the invoice as an instant cash advance.
Budgets
forecast future earnings and future spendings
Income budget
forecasts amount of money that comes as revenue
expenditure budget
predicts businesses total costs for the year - FC and VC
variance
difference between actual figures and budgeted figures
Break even output
Level of sales a business needs to cover its costs
break even point: costs = revenue
Overdraft
where a bank lets a business have a negative amount of money in its bank account
venture capitalist
funding in the form of a share or loan capital that is invested in a business that is thought to be high risk and has the potential to be successful.
Hard HRM
employees seen as a resource, ST, motivated by money, training done to meet production needs
Soft HRM
employees are the most important resource, LT, motivate workers through empowerment, training done to meet development needs
delayering
removing parts of the hierarchy to create a flatter structure with wider spans of control
delegation
giving responsibility for decision making to people below you
Centralization
All decisions are made by senior managers at the top of the business
decentralization
shares out authority to more junior employees
Balance sheets
snapshot of a firms finance at a fixed point in time
show the value of all the businesses assets, liabilities, the value of all the capital and sources of capital
Inventories
stock - unsold products
net current assets
working capital available to spend for day to day spending
depreciation
non current assets losing value over time
investment
using capital to buy assets that will generate more revenue in the future
Non current assets
assets the business is likely to keep for more than a year
current assets
assets the business is likely to exchange for cash within the accounting year they include receivables and inventories
current liabilities
debts that have to be paid off within a year they include overdrafts, payables, taxes and dividends
Income statements
shows how much money has been coming into the company as revenue and how much has been going out as expenses
liquidity
how easily an asset can be turned into cash and used to buy things.
current ratio
Shows how solvent - able to pay debts a business is
Inventory turnover
How many times during the year the business has sold all of its stock
Gearing
shows potential investors where a businesses finance has come from through non current liabilities i.e. shareholders and borrowing. shows how vulnerable a business is to interest rates
