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IGCSE Business > Textbook Definitions > Flashcards

Textbook Definitions Flashcards

1
Q

need

A

a good or service essential for living

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2
Q

want

A

a good or service which people would have, but which is not essential for living: people’s wants are unlimited

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3
Q

the economic problem

A

there exist unlimited wants but limited resources to produce the goods and services to satisfy those wants, creating scarcity

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4
Q

factors of production

A

the resources needed to produce goods and services: land, labour, capital and enterprise

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5
Q

scarcity

A

the lack of sufficient products to fulfil the total wants of the population

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6
Q

opportunity cost

A

the next best alternative given up by choosing another item

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7
Q

specialisation

A

when people and businesses concentrate on what they are best at

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8
Q

division of labour

A

when the production process is split up into different tasks: it is a form of specialisation

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9
Q

businesses

A

combine factors of production to make products (goods and services) which satisfy people’s wants

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10
Q

added value

A

the difference between the selling price of a product and the cost of bought in materials and components

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11
Q

the primary sector of industry

A

extracts and uses the natural resources of the earth to produce raw materials used by other businesses

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12
Q

the secondary sector of industry

A

manufactures goods using the raw materials provided by the primary sector

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13
Q

the tertiary sector of industry

A

provides services to consumers and the other sectors of industry

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14
Q

de-industrialisation

A

when there is a decline in the importance of the secondary, manufacturing sector of industry in a country

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15
Q

mixed economy

A

has both a private sector and a public (state) sector

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16
Q

capital

A

the money invested into a business by the owners

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17
Q

entrepreneur

A

a person who organises, operates and takes the risk for a new business venture

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18
Q

business plan

A

a document containing the business objectives and important details about the operations, finance and owners of the new business

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19
Q

capital employed

A

the total value of capital used in the business; the total long-term and permanent capital invested in a business: shareholders equity plus non-current liabilities

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20
Q

internal growth

A

when a business expands its existing operations

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21
Q

external growth / integration

A

when a business takes over or merges with another business

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22
Q

merger

A

when the owners of two businesses agree to join their firms together to make one business

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23
Q

takeover acquisition

A

when one business buys out the owners of another business which then becomes part of the ‘predator’ business (the firm which has taken it over)

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24
Q

horizontal integration

A

when one firm merges with or takes over another one in the same industry at the same stage of production

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25
Q

vertical integration

A

when one firm merges with or takes over another one in the same industry but at a different stage of production; vertical integration can be forward or backward

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26
Q

conglomerate integration / diversification

A

when one firm merges or take over a firm in a completely different industry

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27
Q

sole trader

A

a business owned and operated by one person

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28
Q

limited liability

A

the liability of shareholders in a company is only limited to the amount they invested

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29
Q

unlimited liability

A

the owners of a business can be held responsible for the debts of the business they own: their liability is not limited to the investment they made in the business

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30
Q

partnership

A

a form of business in which two or more people agree to jointly own a business

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31
Q

partnership agreement

A

the written and legal agreement between business partners; it is not essential for partners to have such an agreement but it is always recommended

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32
Q

unincorporated business

A

a business that doesn’t have a separate legal identity: sole traders and partnerships are unincorporated businesses

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33
Q

incorporated business

A

a company that has separate legal status from its owners

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34
Q

shareholders

A

the owners of a limited company, they buy shares which represent part ownership of a company

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35
Q

Annual General Meeting

A

a legal requirement for all companies; shareholders may attend and vote on who they want on the Board of Directors for the coming year

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36
Q

dividends

A

payments made to shareholders from the profits (after tax) of a company: they are the return to shareholders for investing in the company

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37
Q

franchise

A

a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business: the franchisee buys the license to operate this business from the franchisor

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38
Q

business objectives

A

the aims or targets that a business works towards

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39
Q

profit

A

total income of a business (sales revenue) less total costs; the surplus after total costs have been subtracted from sales revenue

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40
Q

market share

A

the proportion/percentage of total market sales achieved/held by one business/brand

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41
Q

social enterprise

A

has social objectives as well as an aim to make a profit to reinvest back into the business

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42
Q

stakeholders

A

any person or group with a direct interest in the performance and activities of a business

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43
Q

motivation

A

the reason why employees want to work hard and effectively for the business

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44
Q

wage

A

a payment for work, usually paid weekly

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45
Q

salary

A

a payment for work, usually paid monthly

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46
Q

commission

A

payment relating to the number of sales made

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47
Q

profit sharing

A

a system whereby a proportion of the company’s profits is paid out to employees

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48
Q

bonus

A

an additional amount of payment above basic pay as a reward for good work

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49
Q

performance-related pay

A

pay which is related to the effectiveness of the employee where their output can be easily measured

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50
Q

share ownership

A

where shares of the company are given to employees so that they become part owners in the company

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51
Q

appraisal

A

a method of assessing the effectiveness of an employee

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52
Q

fringe benefits

A

non-financial rewards given to employees

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53
Q

job satisfaction

A

the enjoyment derived from feeling that you have done a good job

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54
Q

job rotation

A

workers swapping around and doing a specific task only for a limited time then changing round again

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55
Q

job enlargement

A

extra similar tasks of a similar level of work are added to a worker’s job description

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56
Q

job enrichment

A

adding tasks that require more skill or responsibility to a worker’s job description

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57
Q

organisational structure

A

the levels of management and division of responsibilities within an organisation

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58
Q

chain of command

A

the structure in an organisation which allows instructions to be passed down from senior management levels to lower levels of managament

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59
Q

span of control

A

the number of subordinates working directly under a manager

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60
Q

line managers

A

directly responsible for people below them in the hierarchy of an organisation

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61
Q

staff managers

A

specialists who provide support, information and assistance to line managers

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62
Q

delegation

A

when a subordinate is given the authority to perform particular tasks

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63
Q

leadership styles

A

the different approaches to dealing with people when in a position of authority: autocratic, democratic or laissez-faire

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64
Q

autocratic leadership

A

the manager expects to be in charge of the business and to have their orders followed

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65
Q

democratic leadership

A

other employees are involved in the decision-making process

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66
Q

laissez-faire leadership

A

the broad objectives of the business are made known to the employees, but then they make their own decisions and organise their own work

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67
Q

trade union

A

a group of workers who have joined together to ensure their interests are protected

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68
Q

closed-shop

A

all employees must be a member of the same trade union

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69
Q

recruitment

A

the process from identifying that the business needs to employ someone up to the point at which applications have arrived at the business

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70
Q

job analysis

A

identifies and records the responsibilities and tasks relating to a job

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71
Q

job description

A

outlines the responsibilities and duties to be carried out by someone employed to do a specific job

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72
Q

job specification

A

a document which outlines the requirements, qualifications, expertise, physical characteristics, etc. for a specified job

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73
Q

internal recruitment

A

when a vacancy is filled by someone who is an existing employee of the business

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74
Q

external recruitment

A

when a vacancy is filled by someone who isn’t an existing employee and will be new to the business

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75
Q

part-time employment

A

often considered to be between 1 and 30-35 hours a week

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76
Q

full-time employment

A

employees will usually work 35 hours or more a week

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77
Q

induction training

A

an introduction given to a new employee, explaining the firm’s activities, customs and procedures and introducing them to their fellow workers

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78
Q

on-the-job training

A

occurs by watching a more experienced worker doing the job

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79
Q

off-the-job training

A

involves being trained away from the workplace, usually by specialist trainers

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80
Q

workforce planning

A

establishing the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required

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81
Q

redundancy

A

when an employee is no longer needed and so loses their job, not due to any aspect of their work being unsatisfactory

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82
Q

ethical decision

A

a decision taken by a manager or a company because of the moral code observed by the firm

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83
Q

industrial tribunal

A

a legal meeting which considers workers’ complaints of unfair dismissal or discrimination at work

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84
Q

contract of employment

A

a legal agreement between employer and employee listing the rights and responsibilities of workers

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85
Q

communication

A

the transferring of a message from the sender to the receiver, who understands the message

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86
Q

message

A

the information or instructions being passed by the sender to the receiver

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87
Q

internal communication

A

communication between members of the same organisation

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88
Q

external communication

A

communication between the organisation and other organisations or individuals

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89
Q

transmitter / sender

A

the person starting off the process of communication by sending the message

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90
Q

medium of communication

A

the method used to send a message

91
Q

receiver

A

the person who receives the message

92
Q

feedback

A

the reply from the receiver which shows whether the message has arrived, been understood and, if necessary, acted upon

93
Q

one-way communication

A

a message which does not call for or require a response

94
Q

two-way communication

A

when the receiver gives a response to the message and there is a discussion about it

95
Q

formal communication

A

when messages are sent through established channels using professional language

96
Q

informal communication

A

when information is sent and received casually with the use of everyday language

97
Q

communication barriers

A

factors that prevent effective communication of messages

98
Q

mass market

A

where there is a very large number of sales of a product

99
Q

niche market

A

a small, usually specialised, segment of a much larger market

100
Q

market segment

A

an identifiable sub-group of a whole market in which consumers have similar characteristics or preferences

101
Q

product-orientated business

A

a business whose main focus of activity is on the product itself

102
Q

market-orientated business

A

a business which carries out market research to find out consumer wants before a product is developed and produced

103
Q

marketing budget

A

a financial plan for the marketing of a product or product range for some specified period of time: it specifies how much money is available to market the product or range, so that the Marketing department know how much they may spend

104
Q

market research

A

the process of gathering, analysing and interpreting information about a market

105
Q

primary research / field research

A

the collection and collation of original data via direct contact with potential or existing customers

106
Q

secondary research / desk research

A

information that has already been collected and is available for use by others

107
Q

questionnaire

A

a set of questions to be answered as a means of collecting data for market research

108
Q

sample

A

the group of people who are selected to respond to a market research exercise

109
Q

random sample

A

when people are selected at random as a source of information for market research

110
Q

quota sample

A

when people are selected on the basis of certain characteristics as a source of information for market research

111
Q

focus group

A

a group of people who are representative of the target market

112
Q

marketing mix

A

a term used to describe all the activities which go into the marketing of a product or service: product, price, place and promotion

113
Q

Unique Selling Point

A

the special feature of a product that differentiates it from the products of competitors

114
Q

brand name

A

the unique name of a product that distinguishes is from other brands

115
Q

brand loyalty

A

when consumers keep buying the same brand again and again instead of choosing a competitor’s brand

116
Q

brand image

A

an image or identity given to a product which gives it a personality of its own and distinguishes it from its competitors’ brands

117
Q

packaging

A

the physical container or wrapping for a product, it is also used for promotion and selling appeal

118
Q

product life cycle

A

describes the stages a product will pass through from its introduction through its growth until it is mature and then finally its decline

119
Q

cost-plus pricing

A

the cost of manufacturing the product plus a mark-up determines the product’s price

120
Q

competitive pricing

A

when the product is priced in line with or just below competitors’ prices to try to capture more of the market

121
Q

penetration pricing

A

when a price is set lower than the competitors’ prices in order to be able to enter a new market

122
Q

price skimming

A

when a high price is set for a new product on the market

123
Q

promotional pricing

A

when a product is sold at a very low price for a short period of time

124
Q

price elasticity

A

a measure of the responsiveness of demand to a change in price

125
Q

informative advertising

A

the emphasis of advertising or sales promotion is to give full information about the product

126
Q

persuasive advertising

A

advertising or promotion which is trying to persuade the consumer that they really need the product and should buy it

127
Q

target audience

A

people who are potential buyers of a product or service

128
Q

sales promotion

A

incentives such as special offers or special deals aimed at consumers to achieve short-term increases in sales

129
Q

distribution channel

A

the means by which a product is passed from the place of its production to the customer or retailer

130
Q

agent

A

an independent person or business that is appointed to deal with the sales and distribution of a product or range of products

131
Q

e-commerce

A

the buying and selling of goods and services using computer systems linked to the internet

132
Q

marketing strategy

A

a plan to combine the right combination of the four elements of the marketing mix (product, price, place and promotion) for a product or service to achieve a particular marketing objective

133
Q

productivity

A

the output measured against the inputs used to create it

134
Q

buffer inventory level

A

the inventory held to deal with uncertainty in customer demand and deliveries of supplies

135
Q

lean production

A

a term used for the techniques employed by businesses to cut down on waste and thereby increase efficiency

136
Q

Kaizen

A

a Japanese term meaning ‘continuous improvement’ through the elimination of waste

137
Q

just-in-time

A

a production method that involves reducing or virtually eliminating the need to hold inventories of raw materials or unsold inventories of the finished product: supplies arrive just at the time they are needed

138
Q

job production

A

where a single product is made at a time

139
Q

batch production

A

where a quantity of one product is made, then a quantity of another item will be produced

140
Q

flow production / mass production

A

where large quantities of a product are produced in a continuous process

141
Q

fixed costs / overhead costs

A

costs which do not vary with the number of items produced in the short run: they have to be paid whether the business is making any sales or not

142
Q

variable costs

A

costs which vary directly with the number of items sold or produced

143
Q

total costs

A

the sum of fixed and variable costs combined

144
Q

average cost per unit / unit cost

A

the total cost of production divided by total output

145
Q

economies of scale

A

the factors that lead to a reduction in average costs as a business increases in size

146
Q

diseconomies of scale

A

the factors that lead to an increase in average costs as a business grows beyond a certain size

147
Q

break-even level of output / break-even point

A

the quantity of output that must be sold or produced for total revenue to equal total costs; the level of sales at which the total costs are equal to the total revenue

148
Q

break-even charts

A

graphs which show how costs and revenues of a business change with sales: they show the level of sales the business must make in order to cover its costs, or ‘break even’

149
Q

(sales) revenue

A

the income during a period of time from the sale of goods and services
Total Revenue = Quantity Sold x Price

150
Q

(unit) contribution

A

a product’s selling price less its variable cost

151
Q

quality

A

the production of a good or service which meets customer expectations

152
Q

quality control

A

the checking for quality at the end of the production process

153
Q

quality assurance

A

the checking for quality standards throughout the production process

154
Q

Total Quality Management

A

the continuous improvement of products and processes by focusing on quality at each stage of production

155
Q

start-up capital

A

the finance needed by a new business to pay for essential fixed and current assets before it can begin trading

156
Q

working capital

A

the finance needed by a business to pay its day-to-day costs; the capital available to a business in the short term to pay for day-to-day expenses

157
Q

capital expenditure

A

money spent on fixed assets which will last for more than one year

158
Q

revenue expenditure

A

money spent on day-to-day expenses which do not involve the purchase of a long-term asset

159
Q

internal finance

A

finance that is obtained from within the business itself

160
Q

external finance

A

finance that is obtained from sources outside of and separate from the business

161
Q

micro-finance

A

the provision of financial services - including small loans - to poor people not served by traditional banks

162
Q

cash flow

A

the cash inflows and outflows of a business over a period of time

163
Q

cash inflows

A

the sums of money received by a business during a period of time

164
Q

cash outflows

A

the sums of money paid out by a business during a period of time

165
Q

cash flow cycle

A

shows the stages between paying out cash for labour, materials, etc. and receiving cash from the sales of goods

166
Q

cash flow forecast

A

an estimate of future cash inflows and outflows, usually on a month-by-month basis, showing the expected cash balance at the end of each month

167
Q

opening cash balance / opening bank balance

A

the amount of cash held by a business at the start of the month

168
Q

net cash flow

A

the difference, each month, between inflows and outflows

169
Q

closing cash balance / closing bank balance

A

the amount of cash held by a business at the end of each month, becoming the next month’s opening balance

170
Q

accounts

A

the financial records of a firm’s transactions

171
Q

accountants

A

the professionally qualified people who have responsibility for keeping accurate accounts and for producing the final accounts

172
Q

final accounts

A

produced at the end of the financial year, these give details of the profit or loss made over the year and the worth of the business

173
Q

income statement / profit and loss account

A

a document that records the income of a business and all costs incurred to earn that income over a period of time

174
Q

gross profit

A

it is made when sales revenue is greater that the cost of goods sold

175
Q

cost of goods sold

A

the cost of producing or buying in the goods actually sold by the business in a time period

176
Q

trading account

A

shows how the gross profit of a business is calculated

177
Q

net profit

A

the profit made by a business after all costs have been deducted from sales revenue
Gross profits - Overhead costs = Net profit

178
Q

depreciation

A

the fall in value of a fixed asset over time

179
Q

retained profit

A

the net profit reinvested back into a company, after deducting tax and payments to owners

180
Q

balance sheet / statement of financial position

A

shows the value of a business’ assets and liabilities at a particular time

181
Q

assets

A

the items of value which are owned by the business; they may be fixed (non-current) or short-term current assets

182
Q

liabilities

A

debts owned by the business

183
Q

non-current assets

A

items owned by the business for more than one year

184
Q

current assets

A

items owned and used by the business within one year

185
Q

non-current liabilities

A

long-term debts owed by the business

186
Q

current liabilities

A

short-term debts owed by the business

187
Q

liquidity

A

the ability of a business to pay back its short-term debts

188
Q

illiquidity

A

assets are not easily convertible into cash

189
Q

inflation

A

the increase in the average price level of goods and services over time

190
Q

unemployment

A

when people who are willing and able to work cannot find a job

191
Q

economic growth

A

when a country’s Gross Domestic Product increases - more goods and services are produced than in the previous year

192
Q

balance of payments

A

records the difference between a country’s exports and imports

193
Q

real income

A

the value of income, it falls when prices rise faster than money income

194
Q

Gross Domestic Product

A

the total value of output of goods and services in a country in one year

195
Q

recession

A

a period of falling Gross Domestic Product

196
Q

exports

A

goods and services sold from one country to other countries

197
Q

imports

A

goods and services brought in by one country from other countries

198
Q

exchange rate

A

the price of one currency in terms of another

199
Q

exchange rate depreciation / currency depreciation

A

the fall in the value of a currency compared with other currencies; when the value of a currency falls - it buys less of another currency

200
Q

fiscal policy

A

any change by the government in tax rates or public sector spending

201
Q

direct taxes

A

paid directly from incomes

202
Q

indirect taxes

A

are added to the prices of goods and taxpayers pay the tax as they purchase the goods

203
Q

disposable income

A

the level of income a taxpayer has after paying income tax

204
Q

import tariff

A

a tax on an imported product

205
Q

import quota

A

a physical limit to the quantity of a product that can be imported; a restriction on the quantity of a product that can be imported

206
Q

monetary policy

A

a change in interest rates by the government or central bank

207
Q

exchange rate appreciation / currency appreciation

A

the rise in value of a currency compared to other currencies; when the value of a currency rises - it buys more of another currency

208
Q

social responsibility

A

when a business decision benefits stakeholders other than shareholders

209
Q

environment

A

our natural world

210
Q

private costs (of an activity)

A

the costs paid for by the business

211
Q

private benefits (of an activity)

A

the gains to a business

212
Q

external costs

A

costs paid for by the rest of society, other than the business, as a result of business activity

213
Q

external benefits

A

the gains to the rest of society, other than the business, resulting from business activity

214
Q

social costs =

A

external costs + private costs

215
Q

social benefits =

A

external benefits + private benefits

216
Q

sustainable development

A

development which doesn’t put at risk the living standards of future generations

217
Q

sustainable production methods

A

those that do minimum damage to the environment

218
Q

pressure group

A

made up of people who want to change business (or government) decisions and they take action

219
Q

consumer boycott

A

when consumers decide not to buy products from businesses that do not act in a socially responsible way

220
Q

ethical decisions

A

based on a moral code, sometimes referred to as ‘doing the right thing’

221
Q

globalisation

A

the term used to describe increases in worldwide trade and movement of people and capital between countries

222
Q

free trade agreements

A

exist when countries agree to trade imports/exports with no barriers

223
Q

protectionism

A

when a government protects domestic firms from foreign competition using tariffs and quotas

224
Q

multinational businesses / transnational businesses

A

those with factories, production or service operations in more than one country

IGCSE Business (2 decks)

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