Key Words Flashcards
Acid Test Ratio
A liquidity ratio which shows whether a firm has enough funds to pay bills by comparing liquid assets to current liabilities
Adverse Variance
Where the difference between a budgeted and actual figure will lead to lower profits for the organisation
Asset
An item owned by a business
Bank loan
An agreed amount of borrowing from the bank which the business repays over an agreed amount of time paying back the amount with interest added
Batch Production
Where production activities are performed on all units before the next production activity is carried out
Break even
The point at which revenue is equal to total costs so neither a profit or loss is made
Budget
A financial target for the future
Buffer stock
The minimum amount of stock held by a firm to avoid stock outs
Business cycle
Shows how economic output changes over time as measured by the GDP
The 4 stages of the business cycle
Boom, recession, slump and recovery
Business failure
Where a firm can no longer exist due to either internal or external factors
Business plan
A document detailing the financial, marketing, HR and operational implications of a new business venture
Capacity
The maximum amount of production output with the given resources
Capacity utilisation
The amount of capacity available which is currently being used as a percentage
Capital intensive production
Production relies heavily on capital equipment rather than labour
Cash flow
The difference between the cash coming in and out of the business in a given time period
Competitive environment
The amount and nature of competition surrounding a business
Contribution per unit
Shows the amount a product contributes towards the fixed costs of the business
Crowdfunding
Where a firm raises finance by advertising funds through an internet website and raises cash by crowds of people putting in finance until the firm achieves its target funding
Economic environment
The factors in the economy which can impact onto a business such as inflation, unemployment etc
Economic uncertainty
Where economic forecasts for the future are difficult to predict
Efficiency
Saving time or money in production
Exchange rates
The price of one currency expressed in terms of another
Expenditure budget
A financial target for the amount of costs in the future
External finance
Funds raised from outside the business such as from a bank loan or selling shares to investors
Favourable variance
Where the difference between the budgeted and actual figure leads to the firm making higher profits
Fixed costs
Costs that do not change in relation to output
Flow production
Where each operation is performed on each item one at a time and continuously before the next usually on a large scale production line
Government grant
Where the gov provides funding for the business normally in exchange for the firm helping society e.g. creating jobs
Government spending
Where the government funds various activities in the economy e.g. NHS or schools
Gross profit
The difference between revenue and variable costs
Historical budgeting
Setting a financial target for the future based on previous figures from last year
Income budget
A financial target for the future based on previous figures from last year
Inflation
Rises in the average price level over time as measured by the CPI
Internal finance
Finance raised from within the firm such as retained profits or selling an asset
Job Production
Producing one off items tailor made to the customers specification
Kaizen
Continuous improvement
Making many small changes to improve either quality or efficiency
Labour intensive production
Where production relies heavily on labour rather than capital equipment
Lead time
The time between placing an order and having the ordered delivered
Legislation
The different laws that can affect a businesses
Liquidity
The ability to turn an asset into cash
Margin of safety
The difference between the actual output and break even output
Shows how many sales can afford to be lost before firm makes a loss rather than a profit
Operating profit
The profit from normal business operations after all costs are deducted from revenue
Ordinary share capital
Finance raised from selling shares
Overdraft
An agreement with the bank to borrow up an agreed amount beyond what is in the bank account
Owners capital
Finance put into the business by the owner
Peer-to-peer funding
Where a business borrows funds from another person via an internet site rather than borrowing from the bank.
Productivity
Measuring the output per worker to measure efficiency
Profit budget
A financial target for the future profit to be made
Profit for the year
The final profit made by a business after all costs are deducted from revenue including any bank interest deductions and all overheads
Quality
Delighting the customer in all aspects of the product
Quality assurance
Building in quality at each stage of production using techniques like Total Quality Management to get products right first time
Quality circles
A small group of workers who meet up and discuss how quality can be improved
Rationalisation
Cutting back on the scale of output e.g. by laying off staff
Retained profit
Amount of profit ploughed back into the business for growth and expansion
Sales forecasting
Making predictions of future sales perhaps by looking at market research or past trends
Sales rev
Finance received from customers from selling goods/services
Sales volume
The amount of units sold to customers
Solvency
The ability of a firm to pay its bills and survive
