THEME 2- Definitions Flashcards
What is a budget?
A quantitative economic plan prepared and agreed in advance
What is meant by budgetary control?
A business system that involves making future plans, comparing the actual results with the planned results and investigating the cause of any differences
What is meant by historical figures?
Quantitative information based on past trading records often used by businesses when producing budgets
What is meant by a production cost budget?
A firms planned production costs for a future period of time
What is a sales budget?
A firms planned production costs for a future period of time
What is meant by variance?
The difference between actual financial outcomes and those budgeted
What is a variance analysis?
The process of calculating variances and attempting to identify their causes
What is meant by Zero-based budgeting?
A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder, often a manager (they are given a zero value)
What is amorisation?
The writing off of an intangible asset
What is meant by cost of sales?
The direct costs of a business
What is exceptional costs?
A one off cost, such as a large bad debt
what is gross profit?
The difference between revenue/turnover and cost of sales
What is gross profit margin?
Gross profit expressed as a % of revenue/turnover
What is operating profit?
The difference between gross profit and business overheards, such as selling and administrative expenses
What is an operating profit margin?
Operating profit expressed as a % of revenue/turnover
What is net profit? (Profit for the year)
The difference between operating profit and interest and exceptional items
What is a net profit margin? (Profit for the year)
Net profit after tax, expressed as a % of revenue/turnover
What is a statement of comprehensive income?
A financial document showing a company’s income and expenditure over a particular period of time, usually a year
What is revenue/turnover?
The total income of a business resulting from sales of goods or services
What is meant by administration?
A failing business appoints a specialist to rescue the business or wind it up
What is meant by a external factor?
Factors beyond the control of the business causing it to collapse
What is meant by a internal factor?
A factor that a business is able to control, which can cause it to collapse
What is meant by overtrading?
The situation where a business does not have enough cash to support its production and sales, usually because its growing too fast
What is “batch production”?
A method that involves completing one operation at a time on all units before performing the next
What is meant by “capital intensive”?
Production methods that make more use of machinery relative to labour
What is meant by “capital productivity”?
The amount of output each unit of capital (e.g one machine) produces
What is cell production?
Involves producing a family of products in a small self-contained unit (a cell) within a factory
What is meant by “division of labour”?
Specialisation in specific tasks or skills by an individual
What is downsizing?
The process of reducing capacity, usually by laying off staff
What is meant by “efficiency”?
Producing a level of output where average cost is minimised
What is flow production?
Large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line
What is meant by “job production”?
A method of production that involves employing all factors to complete one unit of output at a time
What is a “kaizen”?
A Japanese term that means continuous improvement
What is meant by “labour intensive”?
Production methods that make more use of labour relative to machinery
What is labour productivity?
The amount of output each unit of labour (e.g one worker) produces
What is meant by “lean production”?
An approach to operations that focuses on the reduction of resource use
What is outsourcing?
Giving work to sub-contractors to reduce costs
What is meant by “production”?
The transformation of resources into goods or services
What is specialisation?
In business, the production of a limited range of goods
What is standardisation?
using uniform resources and activities or producing a uniform product
What is capacity utilisation?
The use that a business makes of its resources
What is it meant by “excess” or “surplur capacity”?
When a business has too many resources, such as labour and capital, to produce its desired level of output
What is full capacity?
The point where a business cannot produce any more capacity
What does the term “mothballing” mean?
Leaving machines, equipment or building space unused, but maintained, so they could be brought back into use if necessary
What is Over-utilisation?
The position where a business is running at full capacity and ‘straining’ resources
What is rationalisation?
Reducing the number of resources, particular labour and capital, put into the production business process, usually undertaken because a business has excess capacity
What is under-utilisation?
The position where a business is producing at less than full capacity
What is meant by ‘buffer stocks’?
Stocks that are held as a precaution to cope with unforeseen demand
What is ‘kanban’?
A card or an object that acts as a signal to move or provide resources in a factory
What is meant by ‘lead time’?
The time between placing the order of stock and the delivery of goods
What is a ‘re-order level’?
The level of current stock when new orders are placed
What is a ‘re-order quantity’?
The amount of stock ordered when an order is placed
What is ‘stock rotation’?
The flow of stock into and out of storage
What is ‘work-in-progress’?
Partly finished goods
