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Business studies key terms > Theme 2 > Flashcards

Theme 2 Flashcards

1
Q

Economic Variables

A

Measures within the economy which have effects on business and
consumers e.g. unemployment, inflation and exchange rates

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2
Q

Internal Finance

A

The raising of capital/cash from within/inside the business e.g.
business/owner’s capital, personal savings, retained profit

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3
Q

Personal
savings/owner
s’ capital

A

A source of (internal) finance provided by the owner of a
business/personal money from the owner

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4
Q

Retained profit

A

Profit is re-invested back into/kept by the business which is not paid as
a dividend. It is an internal source of finance

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4
Q

Bank loan

A

An external method of finance/money borrowed from a bank paid back,
with interest (over a period of time)

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5
Q

Sale of assets

A

A type of internal finance, involves selling resources that belong to the
business

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6
Q

Business Angels

A

Individuals who typically may invest between £10,000 and £100,000 in
exchange for a stake in the business

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7
Q

Crowd funding

A

An external source of finance where large numbers of individuals
provides funding for a business or project in return for shares/free
products/discounts

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8
Q

External Finance

A

Money raised from outside the business

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9
Q

Grant

A

A sum of money given by a government or other organisation. It does
not need to be repaid and no interest is charged

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10
Q

Leasing

A

A contract to acquire the use of resources such as property or
equipment

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11
Q

Overdraft

A

When a business has a negative balance in their bank account
because the amount withdrawn is greater than the current balance.

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11
Q

Loan

A

An external source/method; amount of money borrowed, usually
repayable after a fixed term of more than 12 months

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12
Q

Peer-to-peer
funding

A

When a person lends money to other individuals or businesses via
online transactions

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13
Q

Share capital

A

The finance raised a business issuing/selling of new shares

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14
Q

Trade credit

A

Where a firm receives stock/inventory/raw materials from a supplier,
which it does not have to pay for until later

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15
Q

Venture capital

A

External source of finance when the business issues shares to a small
number of investor(s) in return for a capital injection into the company

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16
Q

Liability

A

Responsibility for the financial debts of the business

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17
Q

Limited liability

A

The amount of a company’s losses that a shareholder is liable for is
limited to the amount they have invested in the company.

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18
Q

Unlimited
liability

A

A legal status which means that business owners are liable for all
business debts

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19
Q

Business plan

A

A document giving details of a variety of aspects about the business in
order to provide a strategic look at the business and to attract
investors. It contains details such as the product, costs, revenues,
cashflow forecasts

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20
Q

Cash flow

A

The movement of cash into and out of a business over a period of time

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21
Q

Cash Inflow

A

The flow of money into a business

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21
Q

Cash outflow

A

The flow of money out of a business

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22
Q

Cash-flow
forecasts

A

The predicted flow of cash into and out of a business over a period of
time

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23
Q

Closing
balance

A

Money left in the account at the end of the month. Net cash flow +
Opening balance

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24
Q

Net cashflow

A

The difference between the cash flowing in and out of a business over
a period of time cash inflows- cash outflows

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25
Q

Opening
balance

A

What is in the bank on the first day of the month

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26
Q

Consumer
trends

A

Habits or behaviour of those involved in the use of goods and services

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27
Q

Economic
uncertainty

A

Where firms/consumers are unable to predict their future
sales/incomes

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27
Q

Sales forecast

A

A prediction of the expected level of sales volume/revenue for a
business for a future period based on past data

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28
Q

Average cost

A

The cost of producing one unit. Total costs/output

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29
Q

Fixed costs

A

Costs that do not change when output/sales changes

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30
Q

Revenue

A

The amount of income for a business generated from its sales. Selling
price x quantity sold

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31
Q

Sales revenue

A

Selling price x sales volume

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32
Q

Total costs

A

Total fixed costs plus total variable costs.

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33
Q

Variable costs

A

Costs that do change when output/sales change

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34
Q

Break-even

A

The level of output where the total revenue is equal to the total cost.
Fixed costs/Unit contribution

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35
Q

Unit
contribution

A

Selling price- variable cost per unit

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36
Q

Margin of
safety

A

The difference between the current or planned level of output/sales
and the break-even level of output

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37
Q

Adverse
variance

A

Negative variance e.g. higher costs than budget

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38
Q

Budget

A

A financial plan of income and expenditure prepared/agreed in
advance

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39
Q

Favourable
variance

A

Positive variance e.g. lower costs than budget

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40
Q

Historical
budgeting

A

A budget based upon previous financial figures

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41
Q

Variance
analysis

A

Shows the difference between budgeted and actual figures and can be
calculated at the end of a financial period, once actual figures are
known

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42
Q

Zero based
budget

A

A type of budget where no money is allocated for spending unless it
has firstly been justified

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43
Q

Cash

A

Normally takes time to catch up. Cash inflows and outflows will be
recorded after the respective debtor and creditor periods have elapsed

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44
Q

Cost of sales

A

Direct costs of a business

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45
Q

Gross profit

A

Revenue - cost of sales

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46
Q

Gross profit
margin

A

Gross profit/Sales revenue x100

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47
Q

Operating
profit

A

Gross profit- other operating expenses

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48
Q

Operating
profit margin

A

Operating profit/Sales revenue x100

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49
Q

Profit

A

Is recorded straight away after sales. Total revenue -total costs

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50
Q

Profit for the
year margin

A

Net profit/Sales revenue x100

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51
Q

Profit for the
year/net profit

A

Operating profit- interest

52
Q

Profitability

A

The ability of a business to generate profit from its activities

53
Q

Statement of
comprehensiv
e income

A

A document to show income and expenditure of a business over a
financial year

54
Q

Tax

A

A charge made by governments on activities, earnings and income of
individuals and businesses

55
Q

Acid test ratio

A

Current assets-Inventory/Current liabilities

56
Q

Assets

A

Resources that belong to a business

57
Q

Capital

A

Money put into the business by the owner

58
Q

Current assets

A

Liquid assets, those assets that will be converted into cash within 12
months e.g. inventories, trade receivables and cash

59
Q

Current
liabilities

A

Any money which is owed by a business that must be repaid within one
year

60
Q

Current ratio

A

Current assets/Current liabilities

61
Q

Liabilities

A

Money owed by the business to banks and suppliers

62
Q

Liquidity

A

The ability to pay bills in cash when they fall due or The ability to meet
current liabilities with current assets

63
Q

Net assets

A

Total assets-Total liabilities

64
Q

Non current
assets

A

Long term resources that will be used by the business for more than
one year e.g. Property and equipment

65
Q

Non current
liabilities

A

Money owed by the business for more than one year e.g. Loans

66
Q

Shareholders
equity

A

The amount of money owed by the business to the shareholders

67
Q

Statement of
financial
position/
Balance sheet

A

A summary at a particular point in time of the value of a firms assets,
liabilities and capital

68
Q

Total equity

A

Share capital + Retained profit

69
Q

Working
capital

A

The amount of money needed to pay for the day to day trading of a
business or current assets – current liabilities.

69
Q

External
causes for
business
failure

A

Factors beyond the control of businesses cause for collapse e.g.
competition, legislation, customer tastes and economic conditions

70
Q

Financial
factors for
business
failure

A

Often rising from poor cash flow management or working capital

71
Q

Internal
causes for
business
failure

A

Factors which a business can contro

71
Q

Non financial
factors for
business
failure

A

Can come from inside or outside the business e.g. poor management,
external shocks

72
Q

Overtrading

A

The situation where a business does not have enough cash to support
its production and sales, usually because it is growing too fast

73
Q

Batch
production

A

A manufacturing process in which components or goods are produced
in groups (batches). The manufacturing of a limited number of identical
products

74
Q

Capital
intensive

A

This is where output of the firm is made primarily using
machinery/capital goods relative to the use of labour

75
Q

Cell
production

A

A method of manufacturing where employees are organised into
multiskilled teams, with each team responsible for a particular part of
the production process

76
Q

Efficiency

A

The ability to minimise waste therefore reducing the cost of production.
Making the best use of its resources

77
Q

Flow
production

A

The manufacture of an item/product in a continuous process

78
Q

Job production

A

A method of production where the production of a single good/service
is carried out one at a time that involves producing this good/service to
the specific requirements of the customer

79
Q

Labour-intensive
production

A

A production method that requires a higher proportion of labour than
capita

80
Q

Productivity

A

Output per person/machine per period of time

81
Q

Standardisation
n

A

Using uniform resources and activities or producing a uniform product

82
Q

Capacity
utilisation

A

The current output of a factory measured as a percentage of the total
maximum potential output. Current output/maximum possible output
x100

83
Q

Downsizing

A

Involves reducing capacity, such as making employees redundant.
This would reduce costs, such as wages

84
Q

Full capacity

A

The point where a business cannot produce any more output

85
Q

Over utilisation

A

The position where a business is running at full capacity and straining
resources

86
Q

Under
utilisation

A

The position where a business is producing at less than full capacity

87
Q

Buffer stocks

A

Stock held as protection in case of reduction in supply

88
Q

Inventory

A

The raw materials/work-in-progress held by a business

89
Q

Just in time
(JIT)

A

A stock control system that organises operations so that items of stock
arrive immediately before they are needed for production or sale

90
Q

Lean
production

A

A production method that involves using as few resources as possible
in the production of a good or service. It can include concepts such as
waste minimisation, Just in Time (JIT) and TQM

91
Q

Re order level

A

The level of current stock when new orders are placed

92
Q

Re order
quantity

A

The amount of stock ordered when an order is placed

93
Q

Stock

A

Items held by the business for future sale/processing such as raw
materials/work in progress (WIP)/finished products

94
Q

Stock control

A

The optimum quantity of goods/components a business holds for the
purpose of resale/production

95
Q

Stock control
diagram

A

Shows details of inventory movements such as minimum and
maximum inventory levels, reorder level and quantity and lead times

96
Q

Stock rotation

A

The flow of stock into and out of storage

97
Q

Waste
minimisation

A

Producing goods and services at a given quality using as few
resources as possible/identification of an impact of waste minimisation

98
Q

Work in
progress

A

Partially finished goods

99
Q

Quality

A

A positive feature of a product that makes it stand out from competitors

99
Q

Quality
assurance

A

A system where the product is checked/tested at each stage of the
production process. It focuses on preventing faults with products during
production

100
Q

Kaizen/continu
ous
improvement

A

A Japanese philosophy which places emphasis on making small
improvements in all business processes as it tries to achieve a culture
of continuous improvement; good processes bring good results

101
Q

Quality circles

A

Small groups of workers who meet regularly to discuss and resolve
problems in production

102
Q

Quality control

A

A method that uses quality inspectors as a way of finding any faults.
Checking that final products are of a good enough standard, capable of
doing what they were intended to do

103
Q

Quality
management

A

The process of a business maintaining a desired level of excellence in
a product/service by paying attention to each stage of the process

104
Q

Total Quality
Management/
TQM

A

A right first time approach ensuring that at every stage of production
clothing is checked for quality, rather than a sample, which should
eliminate any defects

105
Q

Barriers to
entry

A

Obstacles that make it difficult for new firms to enter the market

106
Q

Appreciation

A

The rise in price of one currency against another currency

107
Q

Boom/peak

A

The high point in the business cycle where GDP is growing quickly

108
Q

Business cycle

A

Measures economic activity over time and shows stages of boom,
downturn (where there is rising unemployment), recession and
recovery

108
Q

Consumer
Prices Index

A

Consumer price index. The measure of average prices in an economy

109
Q

Deflation

A

A fall in the general price level

110
Q

Depreciation

A

A fall in the value of a currency

111
Q

Downturn

A

A period in the economic cycle where GDP grows but slowly

112
Q

Economic
influences

A

Economic variables such as economic growth, inflation, interest rates
and unemployment

113
Q

Exchange rate

A

The price of one currency in terms of another.

114
Q

Inflation

A

The general increase in the level of prices in an economy in a year

114
Q

Government
expenditure

A

The amount spent by the government in its provision of public service

115
Q

Recovery

A

A period where economic growth begins to increase again after a
recession

116
Q

Interest rate

A

The price of borrowing money/the return on saving money

117
Q

Recession

A

When GDP falls for two or more quarters (6 months)

118
Q

Unemploymen
t

A

The % of the working population who are without a job and actively
seeking work

119
Q

Consumer
legislation

A

Legislation that is designed to protect consumers from poor-quality
products and poor business practices.

120
Q

Consumer
protection
legislation

A

Is legislation aimed against any business’ unfair selling practices. The
consumer has basic legal rights if the product/service is given a
misleading description, of an unsatisfactory quality, unfit for purpose

121
Q

Discrimination

A

Favouring one person or group over another

122
Q

Employee
protection
legislation

A

Laws that a business must follow that give employees basic rights to
prevent them from being exploited, e.g. minimum wages, redundancy
payments, maternity leave, etc.

123
Q

Environmental
protection
legislation

A

Legislation designed to reduce the impact of businesses and protect
the environment

124
Q

Health and
safety

A

Measures put in place by businesses to prevent accident or injury in
the workplace

125
Q

Legislation

A

A collective name for laws and regulations used by governments to
restrict certain activities

126
Q

National
minimum
wage

A

A wage rate set by the government. It is illegal to pay below this

127
Q

Market
structure

A

The characteristics of a market, such as the size of the barriers to entry
to the market, the number of businesses in the market, which
determines the behaviour of businesses within the market

Business studies key terms (4 decks)

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