Unit 1 Definitions

Question 0

Internal sources of finance

Answer 0

Profits and sales of assets

Question 1

Types of sources of finance

Answer 1

External, Internal

Question 2

External sources of finance

Answer 2

Overdraft, loans, selling shares, government incentives

Question 3

Overdraft

Answer 3

A deficit in a bank account caused by drawing more money than the card holds

Question 4

Profit

Answer 4

Total revenue minus total costs

Question 5

Total revenue

Answer 5

Price multiplied by quantity

Question 6

Total costs

Answer 6

Fixed costs plus variable costs

Question 7

Fixed costs

Answer 7

Do not change with output e.g. rent

Question 8

Variable costs

Answer 8

Do change with output e.g. material costs

Question 9

Break even

Answer 9

The minimum output at which total revenue equals total costs

Question 10

Liquid

Answer 10

Being liquid means a firm can meet its short term liabilities.

Question 11

Measures of a firm’s success

Answer 11

Profit, growth, sales, number of employees

Question 12

Revenue

Answer 12

Value of a firm’s sales

Question 13

Loan

Answer 13

An external source of finance e.g. borrowing from a bank

Question 14

Economies of scale

Answer 14

Fall in long run average costs, as the scale of production increases

Question 15

Types of economies of scale

Answer 15

Purchasing, technical, managerial, marketing, financial

Question 16

Diseconomies of scale

Answer 16

When unit costs rise as the scale of production increases

Question 17

Division of labour

Answer 17

Where individual employees are given specialist tasks to undertake in the production process

Question 18

Franchise

Answer 18

When one firm grants another firm the right to supply its products

Question 19

Private limited company (ltd.)

Answer 19

A business owned by shareholders with limited liability, but not quoted on the Stock Exchange

Question 20

Public limited company (plc.)

Answer 20

A company that has its shares quoted on the Stock Exchange

Question 21

Privatisation

Answer 21

Transfer of assets from the public sector to the private sector

Question 22

Limited liability

Answer 22

Investors may lose the money invested in the business, but not their personal possessions

Question 23

Dividend

Answer 23

The amount paid out of profits to shareholders

Question 24

Productivity

Answer 24

Output per worker per period of time

Question 25

Diversification

Answer 25

When a business moves into a new business area to spread the risk by being in different markets

Question 26

Primary sector

Answer 26

Involves the extraction of raw materials e.g. oil and agriculture

Question 27

Secondary sector

Answer 27

Where raw materials manufactured into goods

Question 28

Tertiary sector

Answer 28

The service sector of the economy

Question 29

Interventionism

Answer 29

When the government tries to control the economy

Question 30

Resource

Answer 30

Something used to produce output

Question 31

Equilibrium

Answer 31

The point where demand and supply meet

Question 32

Average revenue

Answer 32

Total revenue divided by the output