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Business Studies Edexcel Unit 3/4 > Keywords > Flashcards

Keywords Flashcards

0
Q

What are tactical decisions?

A

Shorter term steps taken to achieve the strategy.

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1
Q

What are takeovers?

A

One business succeeds in buying more than half the shares of another business. This may happen as an agreement or a long battle.

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2
Q

What is a strategy?

A

A plan of action that is designed to fulfil an objective.

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3
Q

What is a strategic decision?

A

A decision made in order to meet objectives of the business; usually long term.

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4
Q

What is Return On Capital Employed (ROCE)?

What is the formula?

A

Measures the amount of profit made as a percentage of the money invested into the business. For every £1 invested, you get X% pence back.

Formula: Net profit/capital employed X 100

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5
Q

What is ratio analysis?

A

Using information from financial statements and turning it into numbers which are easy to understand and can be used to compare performance over time.

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6
Q

What is a product portfolio?

A

Range of products/services a business produces.

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7
Q

What is a profit margin?

A

The percentage of turnover that is actually profit.

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8
Q

What is a profit and loss account?

A

Shows a companies profit and loss over a given period.

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9
Q

What is product development?

A

Selling a new product to the same customers.

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10
Q

What is payback?

What is the formula?

A

The length of time it takes to get your money back from the original investment.

Amount invested/predicted annual cash flow.

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11
Q

What is portfolio analysis?

A

Appraisal of the product portfolio to determine its worth and contribution to the business.

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12
Q

What is organisational restructuring?

A

Changing roles, responsibilities and relationships within a managerial structure to meet the needs of the expanding business.

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13
Q

What is organic growth?

A

Occurs when the business grows from within by using its own resources to produce and sell more.

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14
Q

What are mergers?

A

When two businesses combine by mutual agreement, then operate under a unified management structure.

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15
Q

What is operating profit?

A

Gross profit minus the overheads.

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16
Q

What is a mission statement?

A

Inspirational and motivating version of an aim; short relevant and specific to convey value of the brand.

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17
Q

What is market penetration?

A

Selling more of the same products to the same customers.

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18
Q

What is market development?

A

Selling the same products to new customers.

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19
Q

What is liquidity?

A

How much cash a business has and the ease with which it can pay its debts.

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20
Q

What are liabilities?

A

Debts that must be repaid sometime in the future.

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21
Q

What is free float?

A

Amount of time an activity can be delayed without affecting not the EST of the next activity.

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22
Q

What is labour productivity?

What is the formula?

A

How much each employees produces on average over a given time period.

Formula: Output per time period/Number of employees.

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23
Q

What is labour turnover?

What is the formula?

A

The proportion of employees who leave over a certain time period.

Formula: Number of staff leaving/number of staff employed X 100

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24
Q

What is latest finish time (LFT)?

A

Latest time a task can be completed without holding up the next task.

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25
Q

What is investment appraisal?

A

Range of analytical techniques designed to aid decision making, helping a business decide on decision making.

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26
Q

What are intangible assets?

A

No physical existence, include brands/patents/managerial experience the business has.

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27
Q

What is inorganic growth?

A

Involves taking over or merging with another company in order to increase output and sales.

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27
Q

What is gross profit?

A

Turnover minus the cost of sales.

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28
Q

What is gearing?

What is the formula?

A

Measure the proportion of money in a business that is from a long term loan. For every £1 invested in the business, £X is borrowed.

Formula: Loan capital/capital employed X 100

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30
Q

What is float time?

A

Amount of time available between the time an activity takes and the time it must be completed by.

31
Q

What is horizontal integration?

A

When two businesses in the same industry join together.

32
Q

What are fixed assets?

A

Assets of lasting value to the business; land, building and machinery.

33
Q

What is total float?

A

The total time by which an activity can be delayed without delaying the scheduled end date of the project.

34
Q

What is a financial statement?

A

A document based on financial information generated by the business.

35
Q

What is economies of scale?

A

A reduction in average costs brought about by an increased in the size of the business.

36
Q

What is diversification?

A

Selling new products to new customers.

37
Q

What are distinctive capabilities?

A

Resources and capabilities that a business possesses that are better than those of its competitors.

38
Q

What is diseconomies of scale?

A

When the costs of expansion outweigh the benefits. Dealing with the difficulties associated with expansion will cause average costs to rise.

39
Q

What is discounted cash flow?

What is the formula?

A

Discounted cash flow takes into account the future value of money.

Formula: Present value X Discount factor.
Add all up - original investment.

40
Q

What are decision trees?

A

Mathematical model that uses probabilities to determine the best outcome.

41
Q

What are current liabilities?

A

Debts that have to be repaid within a year; tax, overdrafts and dividends.

42
Q

What is current ratio?

What is the formula?

A

A measure of the ability of a business to meet its short term debt obligations. Between 1.5 and 2 is considered normal. For every £1 the business owes, has £X worth of assets to pay the next 12 months.

Formula: Current assets/current liability.

43
Q

What are current assets?

A

Assets that a business has for a short period of time such as stocks, debtors and cash.

44
Q

What is critical path analysis?

A

A technique used to work out the fastest and most cost effective way to complete a project.

45
Q

What are corporate objectives?

A

Specific, realistic and measurable goals which an organisation plans to achieve in a given period of time.

46
Q

What is corporate culture?

A

How things are done around here; a set of important assumptions shared by people working in a particular business and influence the way decision are made.

47
Q

What is conglomerate integration?

A

When two businesses with nothing in common join together.

48
Q

What is competitive advantage?

A

Any feature of a business that enables it to compete effectively.

49
Q

What is the Boston matrix?

A

Method of analysing products in terms of their market share and growth potential.

50
Q

What is a balance sheet?

A

Assets, liabilities and net worth of a business.

51
Q

What is average rate of return?

What is the formula?

A

A method of comparing the average annual level of profit with the original investment.

Formula: (Add returns - Original investment / years) / original investment X 100

52
Q

What are aims?

A

Very broad long term ideas as to how the business is to develop; can be rather vague.

53
Q

What is the acid test ratio?

What is the formula?

A

Measures the ability of a business to pay its debts immediately, figure 1 is seen as normal. For every £1 owed the business has £X available to pay immediately.

Formula: Current assets - stocks / current liabilities.

54
Q

What is the gross profit margin?

What is the formula?

A

Compares gross profit with value of sales, showing the COST OF SALES. For every £1 the business makes, X% is gross profit.

Formula: Gross profit/turnover X 100

55
Q

What is net profit margin?

What is the formula?

A

Compared the net profit with the value of sales, used to assess how well OVERHEAD COSTS are managed.

Formula: Net profit/turnover X 100

56
Q

What is corporate social responsibility?

A

Taking decisions in a way that takes account of all stakeholders interests.

57
Q

What does economies of scale mean?

A

A reduction in average costs of production brought about by an increase in the size and scale of the business.

58
Q

What is ethical decision making?

A

Following codes of practice that embody moral values; the objective is to do the right thing acting with integrity and honesty.

59
Q

Describe two characteristics of a power culture?

A
  1. Organisation power and decision making authority is centred on one individual.
  2. Autocratic leadership style.
60
Q

Describe two characteristics of a role culture?

A
  1. Structure will be hierarchical with power and authority defined by job title.
  2. Leadership style is paternalistic.
61
Q

Describe two characteristics of a task culture?

A
  1. Teams created for specific tasks and then disbanded, power lies with main departments and teams.
  2. Leadership style is democratic.
62
Q

Describe two characteristics of a persons culture?

A
  1. Loose organisation of individuals often share common skills.
  2. Leadership style is laissez-afire.
63
Q

State two advantages and two disadvantages of mission statements?

A

Advantages:

  • Informs the customer
  • Staff motivation, sense of purpose/direction

Disadvantage:

  • PR exercise, creates a good public image
  • May be rather vague
64
Q

State two signs of a strong corporate culture and two signs of a weak corporate culture?

A

Strong:

  • Employees support culture so loyal and reduced staff turnover
  • Increased motivation/productivity

Weak:

  • Employees don’t support culture, staff leave high turnover
  • Poor motivation and productivity
65
Q

State two advantages and two disadvantages of decision trees?

A

Advantages:

  • Based on quantitative/objective data rather than ‘gut feeling’
  • Information shown in a clear visual format

Disadvantages:

  • Important qualitative factors may be ignored
  • Based on predictions so may be inaccurate
66
Q

State two advantages and two disadvantages of critical path analysis?

A

Advantages:

  • Helps find the shortest completion time of complex projects
  • Clear visual aid helps managers

Disadvantages:

  • Based on estimates, can be inaccurate
  • Takes a lot of time and careful planning
67
Q

What does a high hearing indicate?

What does a low gearing indicate?

A

High gearing:

  • Business takes risks and is expanding.
  • Lead to higher profits

Low gearing:

  • Business is risk averse, not expanding
  • May miss expansion opportunities, lower profits
68
Q

What does a high labour productivity indicate?

What does a low labour productivity indicate?

A

High labour productivity:

  • Current policies are working and the business is becoming competitive
  • Quality may suffer

Low labour productivity:

  • Increase in average costs
  • May be due to technology/equipment
69
Q

State two advantages and two disadvantages of high labour turnover?

A

Advantages:

  • New staff bring new ideas, increase productivity
  • New staff may be enthusiastic and refresh the culture

Disadvantages:

  • Shortage of loyal/experienced staff
  • Expensive recruiting/training new staff
70
Q

State two advantages and two disadvantages of organic growth?

A

Advantages:

  • Achieve economies of scale
  • Increase turnover and profits

Disadvantages:

  • Can be very slow
  • Growth may be limited
71
Q

State two advantages and two disadvantages of inorganic growth?

A

Advantages:

  • Greater pool of experience and skills
  • Customers, sales, assets and market position acquired immediately

Disadvantages:

  • Difficult to combine cultures and management styles
  • Possibility of diseconomies of scale
72
Q

What is an extension strategy?

A

Aim to extend the life of a product by making small changes to it, finding new uses for it or finding new markets.

73
Q

What is inorganic growth?

A

When a business expands by taking over or merging with another company.

74
Q

What is a merger?

A

Combining with another company on a collaborative basis.

75
Q

What are stakeholders?

A

People who have an interest or stake in a particular business.

76
Q

What is a takeover (acquisition)?

A

One company buys another, maybe a cooperative process or involve a hostile bid.

Business Studies Edexcel Unit 3/4 (1 decks)

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