key terms Flashcards
above the line promotion
Form of promotion that refers to any form of paid-for promotional technique through independent consumer media.
accounting rate of return/average rate of return
this method of investment appraisal calculates the average annual profit of an investment project expressed as a percentage of the amount of invested.
acid test ratio
this short-term liquidity ratio measures an organization’s ability to pay its short-term debts without having to sell any stock (inventories).
accumulated depreciation
This refers to the accrued value of non-current assets, most of which fall in value over time due to depreciation.
Acquired needs theory (HL only) - D. McClelland’s theory of motivation
based on three types of needs that must be satisfied in order to improve motivation: the need for achievement, power, and affiliation.
adaptive cultures
A type of organizational culture that exists in organizations that are responsive and receptive to change. Organizations with adaptive cultures tend to be highly creative and embrace, rather than resist, change.
adverse variance
This discrepancy in the budget occurs when profit is lower than expected, due to costs being higher than expected and/or revenues being lower than predicted.
autocratic management
Management style that involves centralised and autonomous decision-making, without input from others in the organization.
backwards vertical integration
A method of external growth that involves a company buying another company that is further away from the consumer in the chain of production.
bankruptcy
Sometimes referred to receivership or corporate liquidation, this means a situation when a person or business declares that they can no longer pay back their debts, so the entity collapses (fails).
batch production
Operations method that involves producing a set of identical products, with work on each batch being fully completed before production switches to another batch, which may have slightly different specifications.
below the line promotion
Form of promotion that refers to all forms of advertising or promotion that do not use external media agents.
benchmarking
The routine process of an organization comparing its products, processes (operations) and performance to that of its competitors or its own historical standards.
break-even
This condition exists when a firm’s sales revenues cover all of its production costs.
break-even analysis
This is a business management tool used to determine the level of sales volume needed to cover all the costs associated with the output of a particular good or service.
break-even chart
This is a graphical illustration of an organization’s production costs, sales revenues, and profits (or loss) at given levels of output.
break-even point
This is the point on a break-even chart where the firm’s total costs equal its total revenue, shown by the intersection of the TR and TC curves.
break-even quantity
The quantity of sales (sales volume) required for a firm to reach break-even. It is found by using the formula: BEQ = Fixed costs / (Price – Average variable cost).
break even revenue
This is the value of the output needed to break-even.
branding
This is the practice of using an exclusive name (brand), symbol, or design which identifies a specific product or business.
bulk-increasing industries
Describes the businesses that need to be located near to their customer as the final product (such as hand-made home furniture) is bulkier and heavier than the raw materials used to make it.
bulk-reducing industries
Describes the businesses that need to be located near to the raw materials needed to produce a certain good, e.g., breweries should locate where there is a readily available supply of barley and water, as the weight of the final output is less than that of the raw materials.
business angels
Wealthy and successful private individuals who risk their own money in a business venture that has high growth potential.
bureaucracy
The administrative systems within an organization, such as the formal policies and procedures of the business. It includes the formal rules, regulations, and procedures of the organization.
capacity utilisation
Refers to the extent to which an organization operates at its maximum level (known as the firm’s productive capacity).
capacity utilisation rate
Measures a firm’s actual output as a percentage of its capacity (maximum potential output), at a particular point in time.
capital employed
The value of the funds used to operate the business and to generate a financial return for the organization. It is the sum of non-current assets and equity finance.
capital expenditure
An organization’s spending on the purchase or acquisition of non-current assets or capital equipment, e.g., spending on buildings (premises), machinery, equipment and tools.
capital intensive production
This refers to the manufacturing of a good or provision of a service that relies mainly on the use of machinery and capital equipment, e.g., conveyor belts and automated production systems.
capital productivity
This measures how efficiently an organization’s non-current assets are used to generate output for the business.
cash
This refers to the money an organization has either “in hand” (at its premises) and/or “at bank” (i.e., in its bank account). It is the most liquid type of current assets.
cash flow
The movement of an organization’s cash inflows (cash received from the sale of goods and services) and cash outflows (used to pay for the costs of running the business).
centralisation
The situation where decision-making is predominantly made by a very small group of senior managers at the top of the organizational hierarchy.
chain of command
The formal lines of authority in an organization. It can be seen via an organizational chart, which shows the formal path through which commands and decisions are communicated from senior managers to subordinates.
circular business models
are strategies and approaches that prioritize sustainability and environmental responsibility by minimizing waste and maximizing resource efficiency.
circular supply models
A type of circular business model that focus on replacing virgin natural resources with renewable, recyclable, and/or biodegradable resource inputs
clustering
This occurs when businesses choose to locate near other firms operating in related industries in order to benefit from passing trade and demand for products in complementary markets.
cost-centre
A section or division of a business that has responsibility for its own operational costs. It is held accountable for its departmental expenditure.
cost to buy
In a ‘make or buy decision’, this method calculates the total cost of subcontracting production to a third-party supplier.
cost to make
In a ‘make or buy decision’, this method calculates the total cost of producing the product in-house, instead of using a third-party provider.
collateral
Refers to the financial guarantee, using a firm’s non-current assets, for the purpose of securing loan capital.
competitive pricing
This pricing method involves a business setting the price of its products at the same or similar level charged by competitors in the market.
contribution pricing
A pricing method that involves setting the price of a product at a level higher than the direct costs. Hence, the sale of each product earn the firm a positive contribution towards paying its indirect costs
consumer panel
A focus group comprised of people who belong to the firm’s target segment(s), referred to in order to gather their expert feedback.
copyrights
These intangible assets give the registered owner the legal rights to creative pieces of work, such as the works of authors, musicians, conductors, playwrights (scriptwriters) and directors.
companies (corporations)
this refers to any business organisation that is owned by its shareholders, who have limited liability. They comprise of privately held companies and publicly held companies.
corporate social responsibility
This is an organization’s decisions and actions that impact society in a positive way.
cooperatives
These are for-profit social enterprises owned and run by their members (usually employees, managers or customers). Their primary goal is to create value for their member-owners.
corporate culture (organisational culture)
Refers to an organization’s set of core values and beliefs, which shape the firm’s attitudes, behaviour, and norms.
cost-plus pricing (or mark-up pricing)
Adds a profit margin to the costs of production, thereby ensuring that each unit sold contributes towards the profits of the firm.
cowboy products
Goods or services that are perceived by customers to be of low quality but high price.
cradle to cradle
This lean approach to waste management involves design and manufacturing that is sustainable and waste-free. All material inputs can be recycled or reused or are consumable or compostable.
creditor days ratio
The efficiency ratio that measures the average number of days an organization takes to repay its creditors (suppliers who the business has bought products from using trade credit, so have yet to pay for these).
creditors
Also known as trade creditors, this refers to the suppliers that allow a business to purchase goods and/or services on trade credit.
credit control
The process of monitoring and management of debtors, such as ensuring only suitable customers are given trade credit and that customers do not exceed the credit period.
current ratio
A short-term liquidity ratio used to calculate the ability of an organization to meet its short-term debts (within the next twelve months of the balance sheet date).
current liabilities
These are the short-term debts of a business, which need to be repaid within twelve months of the balance sheet date. Examples include bank overdrafts, trade creditors, and other short-term loans.
decentralisation
The situation in an organization where decision-making authority is delegated throughout, rather from a central authoritative group
digital Taylorism
The management approach that relies on management information systems to improve productivity by managing employees and the tasks they perform in the most systematic and methodical ways.
delayering
his occurs when an organization removes one or more layers in its hierarchical structure, i.e., the number of layers of management is reduced, or made flatter.
delegation
The act of line managers entrusting and empowering employees with authority to successfully complete a particular task, project, or job role.
demerger
This occurs when a company sells off a part of its business, thereby separating into two or more separate entities. This often happens due to conflicts and inefficiencies of two or more firms previously in a merger agreement, such as culture clashes.
depreciation
The fall in the value of a non-current asset over time, mainly due to wear and tear (usage) and obsolescence.
diseconomies of scale
Growth that is excessive results in inefficiencies and higher average costs of production, perhaps due to problems such as miscommunication, misunderstandings, and poor management of resources.
