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Business - Theme 2 > Keywords > Flashcards

Keywords Flashcards

1
Q

Acid Test Ratio

A

(Current Assets - Inventories) / Current Liabilities

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2
Q

What are assets?

A

Resources owned by a business.

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3
Q

What is a balance sheet?

A

Financial document that summarises net worth of a business. Records assets and liabilities. NOTHING TO DO WITH PROFIT.

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4
Q

What is batch production?

A

Makes a limited number of one identical product, then stops to reorganise and make a batch of something else.

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5
Q

What is break even?

A

Total sales revenue = Total costs

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6
Q

What is break-even output?

A

Fixed Costs / Contribution per Unit

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7
Q

What are budgets?

A

Financial plan concerning the revenue and costs of a business. Provides targets for costs or revenue that the business must aim to reach

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8
Q

What is a business plan?

A

Document setting out the strengths, aims and strategies of a business. Important planning tool and also used to apply for loans.

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9
Q

What is capacity?

A

Measures the maximum amount of output a firm can produce at a given moment.

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10
Q

What is capacity utilisation?

A

(Current Output / Maximum Possible Output) x 100

95% is a healthy level.

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11
Q

What is capital?

A

Funds provided by the shareholders to set up the business, fund expansion and purchase fixed costs. PART OF EQUITY.

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12
Q

What is capital expenditure?

A

Spending on business resources that can be used repeatedly over a period of time. To improve fixed assets

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13
Q

What is capital intensive?

A

Businesses that rely more heavily upon capital equipment e.g. machinery and computer rather than labour.

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14
Q

What is cash flow?

A

Flow of money in and out of the business in a given period of time.

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15
Q

What is cash inflow?

A

Money coming into the business, e.g. sales, interest payments received.

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16
Q

What is cash outflow?

A

Money going out of the business, e.g. payments to suppliers, rent.

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17
Q

What is cell production?

A

Where work is organised into teams. Teams are given responsibility of doing a part of production process as product moves through assembly line.

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18
Q

What is collateral?

A

Asset that might be sold to pay a lender when a loan can’t be repaid.

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19
Q

What is contribution per unit?

A

Selling price - variable cost per unit

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20
Q

What is current ratio?

A

Current Assets / Current Liabilities.

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21
Q

What is economies of scale?

A

Spreading fixed costs over many products. Falling unit cost falls as output increases.

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22
Q

What is the efficiency equation?

A

Total Production Cost / Total Output

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23
Q

What is external finance?

A

Funded from outside the business.

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24
Q

What is efficiency?

A

Making best possible use of all business’s resources, producing a level of output where average cost is minimised.

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25
Q

What is extrapolation?

A

Assuming that past trends will continue into the future.

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26
Q

What are fixed costs?

A

Cost that doesn’t change when output changes. E.g. factory rent.

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27
Q

What is flow production?

A

Producing as many identical products as possible for a mass market. Flow production is usually highly automated and product moves continuously through production process.

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28
Q

What is forecasting?

A

Business process, assessing the probable outcome using assumptions about the future.

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29
Q

What is a gross profit margin?

A

(Gross Profit / Revenue) x 100

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30
Q

What is an income statement?

A

Financial document summarising a business’s trading activity (sales and revenue) and expenses to show if it made a profit or a loss.

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31
Q

What is an incorporated business?

A

Business model in which the business and the owner(s) have separate legal identities.

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32
Q

What is internal finance?

A

Money generated by the business or current owners. E.g. sale of assets or retained profits.

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33
Q

What is job production?

A

Making one thing at a time, used for individual, unique products, normally made to customers’ specification. E.g. Rolls Royce.

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34
Q

What is labour intensive?

A

Businesses that rely more heavily on their workforce rather than capital equipment.

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35
Q

What are liabilities?

A

Debts of the business, what it owes to others.

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36
Q

What is limited liability?

A

Shareholders can only lose the original amount they invested.

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37
Q

What is liquidity? (ability)

A

Ability to convert an asset into any form without any delay. Most liquid asset is cash.

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38
Q

What is liquidity (amount)

A

Amount of cash that a business has and shows whether the business can pay its debts over the coming months.

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39
Q

What are long term finance?

A

Money borrowed for more than one year.

40
Q

What are net assets?

A

Total Assets - Total Liabilities

41
Q

What is net-profit margin?

A

Net Profit (before tax) / Revenue x 100

42
Q

What is operating profit margin?

A

Operating Profit / Revenue x 100

43
Q

What is productivity?

A

Output per input per hour

44
Q

What is profit?

A

Difference between total cost and total revenue

45
Q

What is revenue expenditure?

A

Spending on business resources that have already been consumed or shortly will be.

46
Q

What is rights issue?

A

Issuing new shares to existing shareholders at a discount.

47
Q

What is sales forecasting?

A

Projection of future sales revenue, based on previous sales data or market research.

48
Q

What is sales revenue?

A

Price x Quantity sold

49
Q

What is sales volume?

A

Quantity of output sold in a particular period of time.

50
Q

What is short term borrowing?

A

Money borrowed for 12 months or less

51
Q

What is stock?

A

E.g. raw materials, products-in-progress and finished products held by firm to enable production and meet customer demand.

52
Q

What is stock control charts?

A

Overall objective of stock control is to maintain stock levels so that the total cost of holding stock is minimised.

53
Q

What is total contribution?

A

Contribution per unit x units sold

54
Q

What is total cost?

A

Entire cost of producing a given level of output

55
Q

What is total equity?

A

Total amount invested into the business from share capital and retained profit.

56
Q

What is a trend?

A

Patterns indicated by figures of sales.

57
Q

What is under-capitalised?

A

Business isn’t raising enough capital when setting up.

58
Q

What is unincorporated?

A

Business model in which there is no legal difference between owners and the business.

59
Q

What is unlimited liability?

A

Legal status which means the business owners are liable for all business debts, therefore they may have to sell assets to pay back debt.

60
Q

What is variable cost?

A

Cost that rises as output rises.

61
Q

What is variance analysis?

A

Calculating and investigating the differences between actual results and the budget.

62
Q

What is venture capital?

A

Specialist providers of funds for small or medium sized companies that may be too risky for other investors.

63
Q

What is working capital?

A

Current Assets - Current Liabilities

Pays for day-to-day running costs such as wages and sales on credit.

64
Q

What insolvency?

A

When a company can’t pay its debts because it is making a loss.

65
Q

What is zero-based budgeting?

A

No budget is set and no money is allocated to cover costs. Managers must be prepared to bid for and justify spending on their departments.

66
Q

What is over trading?

A

When a business expands too quickly and tries to engage in more business than the investment in working capital will allow.

67
Q

What is outsourcing?

A

Business buys some inputs from other businesses.

68
Q

What is buffer stocks?

A

Level of stock kept just in case. There may be a problem with delivery and the new stock may not arrive so buffer stocks allow the business to continue production.

69
Q

What is just-in-time?

A

Stock control system that does away with the need to hold large quantities of stocks or raw materials. Stocks arrive as and when they are needed.

70
Q

What is waste minimisation?

A

Seeks to increase productivity by examining every stage of production or operational systems to see if they can be improved, so making efficiency gains.

71
Q

What is lean production?

A

General term given to any system of production that tries to minimise waste during the production process, which helps to cut costs.

72
Q

What is total quality management?

A

System whereby everybody throughout the business takes responsibility for quality.

73
Q

What is kaizen?

A

A system of continuous improvement at every stage of production no matter how small the improvements might be.

74
Q

What is lead time?

A

The time taken between the idea for a product and its being ready for sale - it should be as short as possible.

75
Q

What is quality control?

A

Traditional method of checking that products are of a good enough standard.

76
Q

What is quality assurance?

A

Takes customers’ needs into account and involves employees in looking at every aspect of the business, in an attempt to improve the quality of the product or service.

77
Q

What are quality circles?

A

Small groups of employees that meet regularly and look at how quality can be improved.

78
Q

What is inflation?

A

Sustained increase in the average price level in the economy. The value of money falls.

79
Q

What are exchange rates?

A

Strong Pound - Cheaper Import

Weak Pound - Cheaper Export

80
Q

What are exchange rates?

A

Price of borrowing money. Lower interest rates means higher investment and spending.

81
Q

What is direct taxation?

A

Income tax, National Insurance and corporation tax.

82
Q

What is indirect taxation?

A

VAT, excise duties (e.g. alcohol), car tax, etc.

83
Q

What is a business cycle?

A

Boom, Downturn, Recession, Recovery

84
Q

What is a boom?

A

Time of rapid growth and expansion in the economy.

85
Q

What is a downturn?

A

Boom slows and the rate of growth decreases

86
Q

What is recession?

A

At least two consecutive quarters of negative growth.

87
Q

What is recovery?

A

Positive growth returns, slowly at first then picking up pace.

88
Q

What is economic forecasting?

A

Process of predicting future economic variables and events.

89
Q

What is a contingency plan?

A

Devised in advance to cope with a range of possible situations

90
Q

What is trade descriptions act?

A

Devised in advance to cope with a range of possible situations

91
Q

What is sale of goods act?

A

Prevents businesses from misleading consumers by claiming qualities the goods do not possess. Products must be as described, fit for purpose and of a satisfactory quality.

92
Q

What is consumer protection act?

A

Designed to make sure that products reach a reasonable level of safety.

93
Q

What is regulation?

A

Government rules that set standards for organisations. These standards protect consumers, employees and the environment.

94
Q

What is cartels?

A

Agreements between two or more firms to fix prices or carve up markets or reduce output. They reduce competition and drive up prices. Illegal in most developed economies.

95
Q

What is the monetary policy?

A

Management of money supply and interest rates by the government.

96
Q

What is the Fiscal Policy

A

Government adjusts its spending levels and tax rates to monitor and influence the national economy.

Business - Theme 2 (22 decks)

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