Key Terms - Unit 1.1 - Understanding The Nature And Purpose Of Business

Question 1

Mission

Answer 1

An organisation’s aims or long-term intentions, its ultimate purpose; a business mission is sometimes the same as its corporate aims

Question 2

Mission Statement

Answer 2

A qualitative statement of an organisation’s aims that uses language intended to motivate employees and convince customers, suppliers and those outside the firm of its sincerity and commitment

Question 3

Business Objectives

Answer 3

Goals that must be achieved in order to realise the stated aims of an organisation, department or individual team.
Business objectives tend to be medium to long term.
They can be corporate or functional objectives

Question 4

Corporate Objectives

Answer 4

Goals of the whole organisation rather than of different elements of the organisation
They are set in order to co-ordinate the activities of, give a sense of direction to, and guide the actions of the whole organisation.
They are dictated by the mission or corporate aims of an organisation They

Question 5

Functional Objectives

Answer 5

Goals of each of the functional areas of a business
They are designed to ensure that the business achieves its corporate objectives and thus its overall aims or mission
Like corporate objectives, functional objectives are set in order to co-ordinate the activities of, give a sense of direction to, and guide the actions of a division or department

Question 6

Strategy

Answer 6

The medium- to long- term plans through which an organisation intends to achieve its objectives

Question 7

Cash Flow

Answer 7

The amounts of money flowing into and out of the business over a period of time

Question 8

Price

Answer 8

The amount paid by a consumer to purchase one unit of a product

Question 9

Total Revenue (Turnover or Sales Revenue)

Answer 9

The income received from an organisation’s activities
Total Revenue = Price Per Unit X Quantity of units sold

Question 10

Fixed Costs

Answer 10

Costs that do not vary directly with output in the short run
Rent

Question 11

Variable Costs

Answer 11

Costs that vary directly with output in the short run
Raw Materials

Question 12

Total Costs

Answer 12

The sum of fixed costs and variable costs

Question 13

Profit

Answer 13

The difference between the income of a business and its total costs