Key Terms Flashcards
Goods
A physical product
Service
An intangible item.
Product
A more general term which includes goods and services.
Gross domestic product
Measures the value of a country’s total output of goods and services over a period of time, normally one year.
Mission statement
Sets out a business’s overall purpose to direct and stimulate the entire organisation.
Aims
Long-term plans of the business from which its corporate objectives are derived.
Objectives
Medium to long-term targets established to coordinate the business.
Profit
The surplus of total revenue over total costs for a business over a trading period.
Cash flow
The movement of cash into and out of a business over a period of time.
Stakeholders
Individuals or groups who have an interest in the business.
Revenue
The earnings or income generated by a business as a result of its trading activities.
Fixed costs
Costs that do not alter when the business alters its levels of output.
Variable costs
Costs that alter directly with the level of the businesses output.
Total costs
Fixed and variable costs added together.
Average costs
Total costs of production divided by the level of production or output to give the cost of producing a single unit of output.
Sole trader
A business that is owned and managed by one person, but it may employ other people.
Unlimited liability
When the business ad the owner have the same legal identity.
Company
A business organisation that has its own legal identity and that has limited liability.
Incorporation
The process of establishing a business as a separate legal identity that allows it to benefit from limited liability.
Shareholder
An investor in and one of the owners of a company.
Limited liability
The owner and business have separate legal identities.
Dividends
That part of a company’s profits that are paid to the shareholders in proportion to the number of shares they own.
Takeover
Occurs when one company acquires control of another by buying more than 50% of its share capital.
Privatisation
The process under which the state sells businesses that it has previously owned and managed to private individuals and businesses.
