Keywords Flashcards
What are tactical decisions?
Shorter term steps taken to achieve the strategy.
What are takeovers?
One business succeeds in buying more than half the shares of another business. This may happen as an agreement or a long battle.
What is a strategy?
A plan of action that is designed to fulfil an objective.
What is a strategic decision?
A decision made in order to meet objectives of the business; usually long term.
What is Return On Capital Employed (ROCE)?
What is the formula?
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
What is ratio analysis?
Using information from financial statements and turning it into numbers which are easy to understand and can be used to compare performance over time.
What is a product portfolio?
Range of products/services a business produces.
What is a profit margin?
The percentage of turnover that is actually profit.
What is a profit and loss account?
Shows a companies profit and loss over a given period.
What is product development?
Selling a new product to the same customers.
What is payback?
What is the formula?
The length of time it takes to get your money back from the original investment.
Amount invested/predicted annual cash flow.
What is portfolio analysis?
Appraisal of the product portfolio to determine its worth and contribution to the business.
What is organisational restructuring?
Changing roles, responsibilities and relationships within a managerial structure to meet the needs of the expanding business.
What is organic growth?
Occurs when the business grows from within by using its own resources to produce and sell more.
What are mergers?
When two businesses combine by mutual agreement, then operate under a unified management structure.
What is operating profit?
Gross profit minus the overheads.
What is a mission statement?
Inspirational and motivating version of an aim; short relevant and specific to convey value of the brand.
What is market penetration?
Selling more of the same products to the same customers.
What is market development?
Selling the same products to new customers.
What is liquidity?
How much cash a business has and the ease with which it can pay its debts.
What are liabilities?
Debts that must be repaid sometime in the future.
What is free float?
Amount of time an activity can be delayed without affecting not the EST of the next activity.
What is labour productivity?
What is the formula?
How much each employees produces on average over a given time period.
Formula: Output per time period/Number of employees.
What is labour turnover?
What is the formula?
The proportion of employees who leave over a certain time period.
Formula: Number of staff leaving/number of staff employed X 100
What is latest finish time (LFT)?
Latest time a task can be completed without holding up the next task.
What is investment appraisal?
Range of analytical techniques designed to aid decision making, helping a business decide on decision making.
What are intangible assets?
No physical existence, include brands/patents/managerial experience the business has.
What is inorganic growth?
Involves taking over or merging with another company in order to increase output and sales.
What is gross profit?
Turnover minus the cost of sales.
What is gearing?
What is the formula?
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
What is float time?
Amount of time available between the time an activity takes and the time it must be completed by.
What is horizontal integration?
When two businesses in the same industry join together.
What are fixed assets?
Assets of lasting value to the business; land, building and machinery.
What is total float?
The total time by which an activity can be delayed without delaying the scheduled end date of the project.
What is a financial statement?
A document based on financial information generated by the business.
What is economies of scale?
A reduction in average costs brought about by an increased in the size of the business.
What is diversification?
Selling new products to new customers.
What are distinctive capabilities?
Resources and capabilities that a business possesses that are better than those of its competitors.
What is diseconomies of scale?
When the costs of expansion outweigh the benefits. Dealing with the difficulties associated with expansion will cause average costs to rise.
What is discounted cash flow?
What is the formula?
Discounted cash flow takes into account the future value of money.
Formula: Present value X Discount factor.
Add all up - original investment.
What are decision trees?
Mathematical model that uses probabilities to determine the best outcome.
What are current liabilities?
Debts that have to be repaid within a year; tax, overdrafts and dividends.
What is current ratio?
What is the formula?
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.
What are current assets?
Assets that a business has for a short period of time such as stocks, debtors and cash.
What is critical path analysis?
A technique used to work out the fastest and most cost effective way to complete a project.
What are corporate objectives?
Specific, realistic and measurable goals which an organisation plans to achieve in a given period of time.
What is corporate culture?
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.
What is conglomerate integration?
When two businesses with nothing in common join together.
What is competitive advantage?
Any feature of a business that enables it to compete effectively.
What is the Boston matrix?
Method of analysing products in terms of their market share and growth potential.
What is a balance sheet?
Assets, liabilities and net worth of a business.
What is average rate of return?
What is the formula?
A method of comparing the average annual level of profit with the original investment.
Formula: (Add returns - Original investment / years) / original investment X 100
What are aims?
Very broad long term ideas as to how the business is to develop; can be rather vague.
What is the acid test ratio?
What is the formula?
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.
What is the gross profit margin?
What is the formula?
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
What is net profit margin?
What is the formula?
Compared the net profit with the value of sales, used to assess how well OVERHEAD COSTS are managed.
Formula: Net profit/turnover X 100
What is corporate social responsibility?
Taking decisions in a way that takes account of all stakeholders interests.
What does economies of scale mean?
A reduction in average costs of production brought about by an increase in the size and scale of the business.
What is ethical decision making?
Following codes of practice that embody moral values; the objective is to do the right thing acting with integrity and honesty.
Describe two characteristics of a power culture?
- Organisation power and decision making authority is centred on one individual.
- Autocratic leadership style.
Describe two characteristics of a role culture?
- Structure will be hierarchical with power and authority defined by job title.
- Leadership style is paternalistic.
Describe two characteristics of a task culture?
- Teams created for specific tasks and then disbanded, power lies with main departments and teams.
- Leadership style is democratic.
Describe two characteristics of a persons culture?
- Loose organisation of individuals often share common skills.
- Leadership style is laissez-afire.
State two advantages and two disadvantages of mission statements?
Advantages:
- Informs the customer
- Staff motivation, sense of purpose/direction
Disadvantage:
- PR exercise, creates a good public image
- May be rather vague
State two signs of a strong corporate culture and two signs of a weak corporate culture?
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
State two advantages and two disadvantages of decision trees?
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
State two advantages and two disadvantages of critical path analysis?
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
What does a high hearing indicate?
What does a low gearing indicate?
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
What does a high labour productivity indicate?
What does a low labour productivity indicate?
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
State two advantages and two disadvantages of high labour turnover?
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
State two advantages and two disadvantages of organic growth?
Advantages:
- Achieve economies of scale
- Increase turnover and profits
Disadvantages:
- Can be very slow
- Growth may be limited
State two advantages and two disadvantages of inorganic growth?
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
What is an extension strategy?
Aim to extend the life of a product by making small changes to it, finding new uses for it or finding new markets.
What is inorganic growth?
When a business expands by taking over or merging with another company.
What is a merger?
Combining with another company on a collaborative basis.
What are stakeholders?
People who have an interest or stake in a particular business.
What is a takeover (acquisition)?
One company buys another, maybe a cooperative process or involve a hostile bid.
