key terms and stuff

Question 1

solvency

Answer 1

Solvency is the ability of a company to meet its long-term debts and financial obligations.

Question 2

Efficiency

Answer 2

is about getting the most out of your resources. It means your business is able to produce more with less money and less waste. It also means you can operate day-to-day without making costly errors.

Question 3

profitability

Answer 3

a measure of an organization’s profit relative to its expenses.

Question 4

productivity

Answer 4

Measures of output per worker over a given period of time.

Question 5

fixed costs

Answer 5

Fixed costs are expenses that stay the same no matter how much activity a business is doing.

Question 6

semi-variable

Answer 6

a semi-variable cost is an expense which contains both a fixed-cost component and a variable-cost component. It is often used to project financial performance at different scales of production.

Question 7

variable

Answer 7

Variable costs are costs that change as the quantity of the good or service that a business produces changes. Variable costs are the sum of marginal costs over all units produced.

Question 8

marketing and promotion

Answer 8

Marketing promotion is defined as a way of communication between buyer and seller in which a buyer persuades their audience to buy the sellers products. The main aim of Promotion is to create awareness of product/services, create interest, sales and increase brand loyalty.

Question 9

capital expenditure

Answer 9

Capital expenditures are purchases of significant goods or services that will be used to improve a company’s performance in the future.

Question 10

margin/ gross margin

Answer 10

is sales minus the cost of goods sold. eg if a product is sold for £100 and cost £70 to make the margin is £30.

Question 11

Mark up

Answer 11

mark up Is the amount by which the cots of a product is increases in order to make a profit.

Question 12

SWOT

Answer 12

strengths, weakness, opportunities, threats
strengths and weakness are an internal assessment.
opportunities and threats are an external assessment.

Question 13

product life cycle

Answer 13

5 stages
Development-the product is being made not out yet .
Introduction- the product in put in the market
Growth- the amount of sales rise
Maturity- sales stop rising but don’t decrees
Decline- sales decrease

Question 14

random sampling

Answer 14

people are askes at random no set type of person to ask. This method is less bias but more expensive as you have to ask more people to be accurate.

Question 15

quota sampling

Answer 15

A set demographic is asked, companies can segment by age, gender, wealth, occupation.
less expensive . the results might not represent the whole population.

Question 16

sampling

Answer 16

is the method of choosing a smaller reportative group of respondents with which to conduct research instead of the whole population.

Question 17

Pros of the Product Life Cycle

Answer 17

• helps to forecasts sales trends
• helps to analyse and manage a product profile
• helps with knowing how to target/position a product in the market

Question 18

Cons of the Product Life Cycle

Answer 18

The major drawback of the product life cycle is that one can never predict the time that a product will take in each stage of the cycle.

Question 19

Breakeven

Answer 19

When a business profit is equal to its costs.

Question 20

margin of safety

Answer 20

the difference between the breakeven and the max a business could make.
eg. breakeven is 200 and max is 250 the the margin of safety is 50

Question 21

Contribution

Answer 21

• the money that goes towards the fixed costs.
• its selling price per product -
  variable cost per product=Contribution
• eg $15( selling price)- $5(variable cost)= $10 (Contribution)

Question 22

How to calculate breakeven

Answer 22

Fixed cost devised by Contribution (its selling price per product -
variable cost per product)= breakeven
eg
if rent is $6000
and $15( selling price)- $5(variable cost)= $10 (Contribution)
6000 divided by 10 is 600 so the business needs to sell 600 product to breakeven

Question 23

Benefits of Break-even

Answer 23

• Breakeven can be used in a business plan to gain a bank loan
• A break-even point can be used to help monitor the performance of the business. Easy to calculate and visualise
• Break-even point is often crucial for owners because once break-even is reached further sales generate profit!
• Can be used to help make decisions about the future – helps answer “What if” questions:
  -If the price went up – what would happen to the break even point?
  -How many products would the business have to sell if it introduced a new product line?

Question 24

Limitations of Break-even

Answer 24

• Break – even analysis assumes that all output is sold by the business. Some businesses may not sell all of their stock to cope with an increase in demand in the future
• The Break-even point is drawn for a given set of business conditions. It can not deal with sudden change in a business for example increases in wages, prices or a change in technology.
• Relies heavily on the accuracy of cost and price data. If fixed costs are underestimated the break even point will be higher in reality.
• It assumes total revenue and total cost lines are linear or straight. However, businesses may have to offer discounts on large orders = revenue falls at higher outputs!

Question 25

Test Marketing

Answer 25

A new product is only sold to a certain area to test how well it sells and to see if there are any problems before releasing it everywhere