Key words & definitions Flashcards
Mechanisation
machinery is used but labour is still required
Automation
machinery is used and a computer controls it
Lean production
A Japanese production system which ensures that waste is kept to a minimum
Just in time (JIT)
Stocks of materials are not stored and are used immediately
job production
Involved producing each product individually
Batch production
used when there are set stages that the production needs to go through. One stage has to be finished before the next stage of production can begin
Flow production (mass production)
continuous movement of items through production. When one task finishes, the next task starts immediatley
Division of labour
organisation of production into a number of specialised , simple repetitive processes
specialisation
workers specialise in carrying out simple production tasks
Process production
involves a series of automated processes that are applied to a variety of raw materials. Resulting in a large quantity of products
added value
increase the worth that a business makes for a product. It’s the difference between what it costs to produce and the price charged to customers
Efficiency
achieving maximum productivity with minimum wasted effort or expense
Total quality management (TQM)
Process where all workers are responsible for quality throughout the process
Opportunity cost
the costs of missing out on something else
internal finance
finance comes from within the business
External finance
finance comes from outside of the business
Variable costs
costs which change when the output of a business changes
fixed costs
costs which remain the same- regardless of output
total costs
total costs made by the business
average costs
cost for each unit that a business sells
Revenue (turnover)
money a business receives for selling it’s goods/ services
Break even
the point at which the sales are exactly the same as the costs
margin of safety
the difference between the actual level of output and the break even output
semi- variable cost
a cost which has both fixed and variable qualities
cash flow
movement of money in and out of a business account
inflows (income)
money received by a business
outflows (expenditure)
money paid out of a business
Net cash flow
difference between inflows and outflows
Positive net cash flow
inflows are greater than outflows
Negative net cash flow
inflows are not enough to cover outflows
Opening/ closing balance
amount of money in a business account at any particular time
cash flow forecast
prediction at the start of the year
cash flow statement
what actually happened
gross profit
amount of profit made by a business by selling goods or services, without paying any of the day-to-day running of the business
net profit
profit made as a result of buying and selling goods; makes an allowance for the costs of running the business
accounting
the process of keeping financial records
expenses
costs of running a business that occur as part of a company’s operated activities during a specific accounting period
Profit margins
ratio of profit over revenue; expressed as a percentage. Mainly an indication of the ability of a company to control costs
exchange rates
value of currency in terms of another
strengthening exchange rates
if the pound increases, the value is said to strengthen. the pound will buy MORE of a foreign currency
weakening exchange rates
if the pound is decrease in value, it is said to have weakened. the pound will buy LESS of a foreign currency
imports
goods and service bought from other countries; MONEY GOING OUT OF THE UK
exports
goods and services which are sold to other countries; payments/ money INTO THE UK
Interest rate
cost of borrowing
The European Union
a political and economic union of 28 members/ states that are located in Europe
Eurozone
group of countries in the EU that share the same currency
Single market
Based on the ‘four freedoms’: free movement of people, goods, services and capital
tariffs
A tax paid on IMPORTS
Quotas
limit on the total quantity of products that can be supplied to the market
Globalisation
the process by which business activities in different countries are becoming more and more connected
international trade
companies in one country produce goods and services and sell them in other countries
production abroad
firms may decide to set up their own factories and offices abroad
exploitation of workers
employees may be paid very low wages and have to work long hours in dangerous conditions
pollution
developing countries offer suffer from negative impacts of lots of production
Culture
local culture is being affected by global branding
inflation
Prices of goods are GENERALLY rising
Income tax
tax on a person’s income.
Sole traders and partnerships pay income tax
national insurance
dedicated to support the NHS and sate partnerships
paid by sole traders and partnerships
corporation tax
paid my limited companies
business rates
payed by businesses on the property owned
council tax
payed by home owners/ tenants on the property they live in
VAT (value added tax)
tax on spending; currently charged at 20%.
VAT is on most goods and services that we buy
monopoly
a market dominated by one seller
exists when a business has a market share of at least 25%
Perfect competition
a market where there are a large number of sellers
external costs
negative externalities
costs of a third party
private costs
costs to a customer/ business as a result of business production
social cost
total external costs
costs to anyone in society
ethics
what is considered morally right and morally wrong
purchasing economies of scale
a business is given a discount for buying in large quantaties
economies of scale
unit costs fall as output increases
financial economies of scale
as a firm gets bigger, it will gain more assets
Bigger firms are more likely to get cheaper loans (low interest rates) as they have more security to offer the bank
managerial economies of scale
large businesses can afford to employ specialist managers who will increase efficiency
Marketing economies of scale
larger firms can benefit from being able to use more effective methods of marketing, which reach more people
technical economies of scale
as a firm gets bigger, it can use better methods and equipment
risk bearing economies of scale
large firms can spread risk by diversifying into different products or taking over supplies
Dis-economies of scale
unit costs do not always fall as the scale of production is increased.
if they rise, a firm is said to experience dis- economies of scale.
This usually occurs because the firm becomes too big to be managed efficiently.
