Per 2 keywords Flashcards
corporate aims
a generalised statement of where a business is heading, from which objectives can be set
mission
the underpinning purpose behind the existence of a business
corporate objectives
specific targets set for the whole firm to reach in a given time period to achieve the corporate aims, they are SMART
mission statement
a qualitative statement of the business’ aims and is the underpinning purpose behind the existence of a business. It also says its vision for the future
corporate strategy
a medium to long term plan for achieving the corporate objectives
strategic decisions
they are large scale decisions that are hard to reverse
tactical objectives
they are short-term which do not rely on many resources and can be easily reversed
porter’s strategic matrix
a model showing alternative strategies for achieving competitive advantage
product differentiation
the extent to which consumers perceive on product as being distinct from its rivals
distinctive capabilities
a competency that is unique and difficult to copy that leads to a competitive advantage
diversification
when a company expands its activities outside its normal range by selling a new product in a new market
generic strategy
a strategic position that will prove effective in every market
competitive advantage
an advantage over competitors gained by offering consumers greater value, either by means of lower prices or through non-price strategies
ansoff’s matrix
a model showing alternative strategies for achieving growth
market penetration
selling more of an existing product into an existing market
market development
selling an existing product in a new market
product development
selling a new product into an existing market
repositioning
changing a product or its promotion to appeal to a different market segment
SWOT analysis
it identifies a business’ internal strengths and weaknesses along with the opportunities and threats it faces by the external environment
benchmarking
comparing your own performance with that of rivals, to try to identify and learn from best practise
key performance indicators (KPIs)
quantifiable measures of aspects of a business’ performance that the business considers to be the main determinants of its commercial success
PESTLE analysis
a framework for assessing the key features of the external environment facing a business
external influence
a factor beyond a firm’s control that can affect its performance, e.g. changes in laws and regulations
economies of scale
when unit costs fall as output increases
diseconomies of scale
when unit costs rise as output increases
internal economies of scale
these are the economies that can arise within the business as its scale of operation expands, such as purchasing or managerial economies
external economies of scale
they may arise outside the business, or more commonly, when an industry grows, when components from suppliers become cheaper
organic growth
growth that takes place naturally, rather than through merger or takeover, e.g. through opening new stores
overtrading
when a business faces liquidity problems as a result of expanding too quickly without sufficient cash reserves
quantitative sales forecasting
involves estimating possible future sales figures on the basis of available primary or secondary quantitative data
moving averages
a quantitative method used to find underlying trends in a set of raw data
extrapolation
using past data trends to predict future performance
time series analysis
a series of figures covering an extended period of time
trend
the general path a series of values follows over time, disregarding variations or random fluctuations
correlation
expresses a relationship between two variables
investment appraisal
it is a series of techniques designed to assist businesses in judging the financial desirability of an investment decision
payback
the length of time that it takes to recover the cost of an investment through the net returns provided by that particular investment
average rate of return
looks at the total return on a project and finds the annual average as a percentage of the initial investment cost
discounted cash flow (NPV)
a method of finding the present value of future income, by applying a discount factor to decrease the present value of future income
discounting
applying a discount factor to a money sum to take into account the opportunity cost of money over time
criterion level
a yardstick set by directors to enable managers to judge whether investment ideas are worth pursuing
decision tree
a mathematical model that sets out all the options available when making a decision, plus the probabilities of the outcomes occurring
expected values
the financial value of an outcome calculated through adjusting the estimated financial effect by the probability of its occurrence
net gain (expected monetary reward)
the value to be gained from taking a decision. it is calculated by adding together the expected value of each outcome and deducting the costs associated with the decision
critical path analysis
the process of planning the sequence of activities in a project in order to identify the most efficient way of completing an integrated task or project.
critical path
the longest sequence of events on which any delay will cause a delay to the whole project, they have no float time
float time
the duration an activity can be extended or postponed so that the project still finishes within the minimum time
earliest start time
the EST of an activity is the earliest possible time at which it is possible to start an activity
latest finish time
the latest possible time by which an activity must be finished without it delaying the project
corporate culture
it sums up the spirit, the attitudes, the behaviours and the ethos of an organisation
strong culture
where values and beliefs are widely shared and significantly influences people’s behaviour
weak culture
values and beliefs don’t exist or are not widely shared so do not significantly influence people’s behaviour
power culture
where power is held by just a few individuals whose influence spreads throughout the organisation
role culture
where employees have clearly defined roles within a highly defined hierarchical structure
task culture
where teams are formed to complete specific tasks, and power derives from your role and abilities within each team
person culture
where individuals are unique and see themselves as superior to the organisation as they have unique expertise
bureaucratic
an organisation stifled by paperwork, checking and rechecking of decisions and actions
stakeholder
any individual or organisation who has a vested interest in the activities and decision making of a business
shareholder
someone who owns a proportion of a company’s share capital and therefore has voting rights at the annual general meeting
internal stakeholders
groups or individuals within an organisation who have an interest in the business, e.g. employees, managers
external stakeholders
groups or individuals outside of an organisation who have an interest in the business, e.g. customers, competitors
stakeholder approach
a long term approach which looks at profitability through investing in employees to improve productivity
shareholder approach
a short term approach that looks at profitability through spending as little as possible on employees, they are seen as a cost
pressure group
a group of people with a common interest who try to further that interest
business ethics
the morals and principles that underpin business behaviour
ethics
moral guidelines which govern acceptable behaviour
peer review
looking at other companies of a similar size salaries of CEO. The CEOs choose bigger companies to look at as this will mean their salary will rise, this can lead to collusion
corporate social responsibility
the desire to run a business in a morally correct way, attempting to balance the needs of all stakeholder groups
whistleblowing
when an employee decides they can’t accept a moral dilemma and exposes the unacceptable practise
statement of comprehensive income
this measures the business’ performance through showing a business’ revenue for a period of time along with the costs associated with generating that revenue
balance sheet
a financial document showing a business’ assets and liabilities at a point in time
cost of sales
the direct costs involved in generating a revenue, this includes the raw materials and the direct labour costs of production
liquidity
a measurement of a firm’s ability to pay its short-term bills
reserves
a company’s accumulated, retained profit; it forms part of the company’s total equity
corporation tax
a tax levied as a percentage of a company’s profits
gearing ratio
it measures the proportion of a business’ capital provided by debt
ROCE (return on capital employed)
a ratio that measures the efficiency of a business’ investments by measuring the return generated by the investments or capital employed by a business
inter-firm comparisons
comparisons of financial performance between firms, these comparisons should be with a firm of a similar size within the same market
net realisable value
the price that can be obtained for second-hand stock after deducting the selling costs
absenteeism
percentage of staff who are absent from work
labour turnover
the percentage of staff who leave a corporation within a given period
employee retention
the ability of a business to convince its employees to remain within the business
internal finance
places where a business may gain finance from within the business
retained profit
any profit left in the business after the cost of sales, fixed overheads, tax and financing costs have been paid. It is often used to re-invest in the business.
external finance
Places where a business may gain finance from outside the business
collateral
something of value that is used as security when a loan is offered
peer-to-peer funding
websites that match up businesses wanting to borrow with investors who are looking for a good return on their investment
business angels
individuals who invest in the early stages of a riskier business and take an equity share in return for providing finance, advice and guidance
crowdfunding
a way of getting lots of small investors to fund a new product over the internet
share capital
finance raised from the selling of shares
venture capital
high-risk capital invested in a combination of loans and shares, usually in a small, dynamic business in exchange for a substantial part of the ownership of the company
overdraft
A short-term loan where depositors can go into a negative balance in the bank account
leasing
when an asset is rented rather than purchased
trade credit
when a business obtains goods and services from another business but does not pay for these immediately
government grants
they are hand-outs to small firms who are making a positive difference in the community
seed corn capital
the early stage finance that might come from an angel investor
limited liability
when a business is a separate legal identity to its owners, which means that if the business goes bankrupt the owners only lose what they originally put into the business and not their personal belongings
unlimited liability
when a business and its owner are the same legal entity, in this case the debts of the business are the debts of the owners, and personal property can be sold to pay the debts of the business
liquidation
when a business fails and sells its assets off to pay its debts
creditors
those owed money by a business, for example suppliers and bankers
business plan
a document setting out a business idea, how it will be financed, marketed and put into practise
cash flow forecast
a prediction of all the money coming in and out of a business
cash inflow
money flowing into a business from activities such as selling goods and services
cash outflow
the planned payments each month, this includes both fixed and variable costs
net cash inflows
cash inflows – cash outflows
opening balance
how much money a business has in the bank at the start of the time period
closing balance
it shows the overall state of the bank account at the end of the month
sales forecasting
predictions about how much sales revenue will be made by a business in a time period
trend
the general path that a variable takes over a period of time
price elastic
when demand for a good is responsive to a change in its price
price inelastic
when demand for a good is not responsive to a change in its price
real incomes
changes for household incomes after allowing for changes in prices
fixed costs
any costs that do not vary directly with the level of output
variable costs
tenue hose costs which vary directly with the level of output
revenue
the value for total sales made by businesses within a period, usually a year
total costs
all the costs of producing a specific output level
break-even
it compares a firms revenue with its total costs to identify the minimum level of sales needed to cover costs. Occurs when total costs = total revenue. Formula – fixed cost / contribution
contribution
the difference between the variable cost per unit and the selling price per unit
margin of safety
the amount by which current output exceeds the break-even level of output
overhead costs
costs which do not change with output, e.g. rent
budgeting
the process of setting targets, covering all aspects of costs and revenues
budget
a target for costs or revenue that a business must aim to reach over a given period of time
historical budget
treating last year’s budget figures as the main determinant of this year’s budget
zero-based budget
it sets departments budgets as zero and works it way up with budget holders having to justify for every pound they spend
variance analysis
the difference between the budget and actual values
adverse variance
when the variance is negative for the business as costs are higher and revenues are lower than budget
favorable variance
when the variance is positive for the business as costs are lower and revenues are higher than budget
profit
the financial gain of a business which can be seen by deducting expenditure from revenue
cost of sales
the collective name given to the costs directly associated to making a product/service
fixed overheads
costs that have to be paid no matter how well the business is doing, such as rent
profit for the year (net profit)
operating profit + net financing costs – tax
net financing cost
interest received from deposits in the ban – interest on loans and overdrafts
corporation tax
a levy on the incomes of companies, it is tax payed by businesses out of profit
statement of comprehensive income
a document produced by PLCs that shows revenue, gross profit, net profit and operating profit
profitability
states profit as % of sales
liquidity
it measures the ability for a firm to find the cash to pay its bills
current assets
assets that are owned for a short-time period, they are quickly turned into cash
current liabilities
debt that must be paid within a year
working capital
it is the finance available for the day-to-day running of the business, current assets – current liabilities
current ratio
looks at the relationship between current assets and current liabilities
acid test ratio
examines the business’ liquidity position by comparing the current assets and current liabilities but omitting the stock
contingency finance
planning for the unexpected by either keeping a cash cushion in the firm’s current account or keeping an overdraft facility little-used
working capital cycle
how long it takes for a complete cycle from cash out to cash back in from a customer payment
business failure
the inability to keep the business going, either because of inability to keep up with the bills/liabilities or because the profits being made are too meagre to be worth continuing
administration
when the directors of a business feel forced by the threat of insolvency to hand over management control to an administrator
productivity
the output per unit over a time period
job production
producing a one-off item for a one-off customer, it is a bespoke service to suit the specific requirements of the customers
batch production
making a group of identical items at a time, it usually involves the division of labour
flow production
continuous production of a single standardised product
cell production
organising workers into self-contained units where they can produce a range of different products more quickly than job production allows, it ensures efficiency
automation
using machines or computers to complete tasks instead of humans
efficiency
the extent to which production resources generate output without wastage, resulting in producing at the lowest unit cost
labour-intensive production
when production mainly uses labour rather than automation and machines
capital-intensive production
when production is mainly focused around machinery and automation
lean production
focusing on minimising wastage of resources throughout the supply process
capacity
the maximum possible output of a business
capacity utilisation
it measures a firm’s output level as a percentage of the firm’s maximum output level
excess capacity
when there is more capacity than justified by current demand
under-utilisation of capital
when the capacity utilisation % is low
over-utilisation of capital
when capacity utilisation is close to 100% or even above
downtime
any period when machinery is not being used in production, too much may suggest incompetence
excess capacity
when there is more capacity than justified by current demand
rationalisation
reorganising in order to increase efficiency. It often implies cutting capacity to increase the percentage utilisation
subcontracting
where another business is used to perform or supply certain aspects of a business’ operations
stock/inventory
this includes raw materials, semi-finished goods and finished goods
buffer stock
the amount of stock held as a contingency in case of unexpected orders
re-order level
the level that stock has to fall to before more is ordered
lead time
the amount of time between when the stock is ordered and when it is received
JIT production
a Japanese system whereby no buffer stocks are held and stocks are ordered as and when they are needed
waste minimisation
an aspect of lean production that focuses on reducing waste in production, e.g. wasted time, labour or stock/raw materials
stockholding cost
the overheads resulting from the stock levels held by a firm
kaizen
empowering staff to make a series of small suggestions to improves processes in production
quality control
checking output to remove any faulty goods at the end of the production process
quality assurance
a system to prevent quality problems from arising through checking quality after each production process
total quality management
it is a philosophy that considers quality in every part of the business process, it is an attitude to quality where the aims are zero defects and total customer satisfaction
quality circle
a group of staff who meet regularly to find quality improvements
zero defects
eliminating quality defects by getting things right first time
inflation
a rise in the aggregate price level over a time period, measured as a percentage
exchange rates
the cost of a currency in terms of another
appreciation of a currency
when the currency has strengthened, the rate at which one currency can be swapped for another increases, you can buy more dollars with a pound
depreciation of a currency
when a currency weakens, the rate at which one currency can be swapped for another decreases, you can buy fewer dollars with a pound
interest rate
the cost of borrowing and the reward for saving
business cycle
the pattern of economic growth, followed by a boom, recession, recovery and back to growth an economy follows
boom
when economic growth is high, employment is high and inflation may also be high
recession
when economic growth is negative, unemployment is high and inflation is usually low
recovery
the period immediately after a recession, when there is positive growth but this is slow
unemployment
when a worker is willing and able to work, but cannot find a job
discretionary income
a person’s income after deducting taxes and fixed payments such as rent and utility bills
legislation
the laws initiated by government but passed by parliament that relate to business operations and therefore employees, the general public and the environment
sale of goods act
the law that states that goods must be fit for the purpose for which they are sold
cartel
a group of companies operating in the same market who make agreements to control supply and thus prices
barrier to entry
anything that makes it more difficult for new firms to enter a market, such as patents
monopoly
when a single business dominates a market
oligopoly
when a few large firms dominate a market
competitive market
when there are a large number of similar firms selling similar goods/services to a similar target market
collusion
when managers from different firms get together to discuss ways to work together to restrict supply and/or raise prices
