Theme 2 Key Terms Flashcards
Budget
A quantitative economic plan prepared and agreed in advance
Budgetary control
A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences
Historical figures
Qualitative information based on past trading records
Production cost budget
A firm’s planned production costs for a future period of time
Sales budget
A firm’s planned sales for a future period of time
Can be measured in terms of volume or revenue
Variance
The difference between actual financial outcomes and those budgeted
Variance analysis
The process of calculating variances and attempting to identify their causes
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 (they are given a zero value)
Amortisation
The writing off of an intangible asset
Cost of sales
The direct costs of a business
Exceptional costs
A one-off cost, such as a large bad debt
Gross profit
The difference between revenue/turnover and cost of sales
Gross profit margin
Gross profit expressed as a percentage of revenue/turnover
Operating profit
The difference between gross profit and business overheads, such as selling and administrative expenses
Operating profit margin
Operating profit expressed as a percentage of revenue/turnover
Profit for the year (net profit)
The difference between operating profit and interest and exceptional items
Profit for the year (net profit) margin
Net profit after tax, expressed as a percentage of revenue/turnover
Statement of comprehensive income
A financial document showing a company’s income and expenditure over a particular time period, usually one year
Revenue or turnover
The total income of a business resulting from sales of goods or services
Batch Production
A method that involves completing one operation at a time on all units before performing the next
Capital Intensive
Production methods that make more use of machinery relative to labour
Capital productivity
The amount of output each unit of capital (e.g. one machine) produces
Cell production
Involves producing a family of products in a small self-contained unit ( a cell) within a factory
Division of labour
Specialisation in specific tasks or skills by an individual
Downsizing
The process of reducing capacity, usually by laying off staff
Efficiency
Producing a level of output where average cost is minimised
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
Job production
A method of production that involves employing all factors to complete one unit of output at a time
Kaizen
A Japenese term that means continuous improvement
Labour intensive
Production methods that make more use of labour relative to machinery
Labour productivity
The amount of output of each unit of labour (e.g. one worker) produces
Lean production
An approach to operations that focuses on the reduction of resource use
Outsourcing
Giving work to sub-contractors to reduce costs
Production
The transformation of resources into goods or services
Productivity
The output per unit of input per time period
Specialisation
In business, the production of a limited range of goods
Standardisation
Using uniform resources and activities or producing a uniform product
Buffer stocks
Stocks held as a precaution to cope with unforeseen demand
Kanban
A card or object that acts as a signal to move or provide resources in a factory
Lead time
The time between placing the order and the delivery of goods
Re-order level
The level of current stock when new orders are placed
Re-order quantity
The amount of stock ordered when an order is placed
Stock rotation
The flow of stock into and out of storage
Work-in-progress
Partly finished goods
Quality
Features of a product that allow it to satisfy customers’ needs. It may refer to some standard of excellence
Quality Assurance
A method of working for businesses that takes into account customers’ wants when standardising quality. It often involves guaranteeing that quality standards are met
Quality Chains
When employees form a series of links between customers and suppliers in business, both internally and externally
Quality Circles
Groups of workers meeting regularly to solve problems and discuss work issues
Quality Control
Making sure that the quality of a product meets specified quality performance criteria
Statistical Process Control
The collection of data about the performance of a particular process in a business
Total Quality Management (TQM)
A managerial approach that focuses on quality and aims to improve the effectiveness, flexibility and competitiveness of the business
Anti-competitive/restrictive pracctices
Attempts by firms to prevent or restrict competition
Barriers to entry
Obstacles that make it difficult for new firms to enter a market
Collusion
Two (or more) businesses agreeing to a restrictive practice, such as price fixing
Contract of employment
A written agreement between an employer and an employee in which each has certain obligations
Discrimination
Favouring one person over another. For example, in the EU it is unlawful to discriminate on grounds of race, gender, age and disability
Employment tribunal
A court that deals with cases involving disputes between employers and employees
National Minimum Wage
A wage rate set by the government below which it is illegal to pay people at work
Unfair dismissal
The illegal dismissal of a worker by a business
Cartel
A group of businesses (or countries) which join together to agree on pricing and output in a market in an attempt to gain higher profits at the expense of customers
Colluding
In business, where several businesses make agreements among themselves which benefit them at the expense of either rival businesses or customers
Market structures
The characteristics of a market, such as the size of the barriers to entry in the market, the number of businesses in the market or whether they produce identical products, which determine the behaviour of businesses within the market
