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Business A-level Edexcel > Unit 2 Key Terms > Flashcards

Unit 2 Key Terms Flashcards

1
Q

Internal finance

A

money generated from within the business e.g. owner’s capital, retained profits, sale of assets

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2
Q

Owners capital

A

money the owner(s) invest into the business, often from their personal savings

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3
Q

Retained profits

A

a source of internal finance kept by the business rather than distributed to the shareholders/owners

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4
Q

External finance

A

money that comes from outside the business e.g. banks, business angels

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5
Q

Peer to peer funding

A

where individuals lend money to other individuals/businesses without having to use the traditional banking sector

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6
Q

Business angels

A

wealthy individuals who invest money into new or innovative businesses that they think have the potential to be successful

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7
Q

Crowd funding

A

an external method of finance involving raising small amounts of money from a large number of people typically over the internet

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8
Q

Loans

A

an amount of money borrowed from a lender that is paid back with interest over a period of time

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9
Q

Share capital

A

where money is raised in exchange for a share in the business

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10
Q

Venture capital

A

where funding is provided by an investor in exchange for a share in the business

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11
Q

Overdraft

A

when a bank allows a business to have a negative bank balance

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12
Q

Leasing

A

where a business pays to use assets owned by someone else e.g. premises, equipment

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13
Q

Trade credit

A

where a firm receives stock from a supplier and does not have to pay for it until later

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14
Q

Grant

A

a fixed sum of money given to a business by a government

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15
Q

Business plan

A

details about how a business expects to develop over time and includes details such as the product, forecasts for cash flow and profit.

It can be used to persuade financial backers to invest

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16
Q

Cash flow

A

the movement of money into and out of a business

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17
Q

Cash flow forecast

A

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

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18
Q

Sales forecast

A

a prediction of the expected level of sales volume/value for a business for a future period of time using market research and past sales data

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19
Q

Consumer trends

A

habits/behaviour of those involved in the use of goods and services

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20
Q

Sales revenue

A

the amount of money a firm has earned in a given time period

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21
Q

Sales volume

A

the quantity of units sold

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22
Q

Fixed costs

A

costs that do not change when output/sales change e.g. rent, salaries

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23
Q

Variable costs

A

costs that change when output change e.g. raw materials

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24
Q

Profit

A

the surplus remaining from revenue after total costs have been deducted

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25
Q

Contribution

A

the difference between the selling price and the variable costs of a product

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26
Q

Break even

A

a situation where a business is neither making a profit or a loss

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27
Q

Break even output

A

the level of production where total costs equal total revenue

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28
Q

Margin of safety

A

the difference between the actual output and the breakeven output

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29
Q

Budget

A

a financial plan for income and expenditure for a given period of time or a target for costs and revenue a business or department must aim to reach over a given period of time

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30
Q

Historical budget

A

targets set for costs and revenue according to targets set in previous years

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31
Q

Zero based budget

A

a budget will be set at zero at the start of each yr and the budget holder will need to justify all the money that is allocated to it

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32
Q

Variance analysis

A

shows the difference between budgeted and actual figures as a way of judging how a business is performing

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33
Q

Adverse Variance

A

when a firm is performing worse than expected

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34
Q

Favourable variance

A

when a firm is performing better than expected

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35
Q

Statement of comprehensive income

A

a document to show income and expenditure of a business over a financial yr

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36
Q

Total revenue (AKA sales revenue or turnover)

A

the income earned from selling your product/service in a given period of time

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37
Q

Cost of sales (Direct costs)

A

the cost of raw materials/stock purchased to produce/supply a product/service

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38
Q

Gross profit

A

the difference between total revenue and cost of sales

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39
Q

Overheads (Indirect costs)

A

costs such as rent that dont directly relate to the production/sale of goods/services

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40
Q

Operating profits

A

the difference between gross profit and operating expenses

how much profit has been made in total from the trading activities of the business before any account is taken of how the business is financed.

41
Q

Net profit (PFTY)

A

the difference between operating profit and interest

what is left after all the costs of a business have been taken from its sales revenue.

42
Q

Profitability

A

the degree to which a business makes a profit from its activities usually by comparing the profit made in relation to its sales revenue

43
Q

Statement of financial position

A

a snapshot of a firms finances at a particular time

44
Q

Non current assets

A

an asset that the business is likely to keep for more than a yr

45
Q

Current assets

A

an asset that the business is likely to EXCHANGE for cash within the accounting yr

46
Q

Current liabilities

A

a debt which NEEDS to be paid off within a yr

47
Q

Non current Liabilities

A

a debt that the business will pay off over SEVERAL yrs

48
Q

Liquidity

A

how quickly a business can access cash in order to meet short-term debts (measured by the current ratio and acid test ratio)

49
Q

Working capital

A

the amount of cash that the business has available to pay its day to day debts

50
Q

Job production

A

a production method in which one off items are made

51
Q

Batch production

A

small volumes of different products are produced in groups with products in each batch being identical

52
Q

Flow production

A

Products are made in a continuously moving process

53
Q

Productivity

A

a measure of output of a person, machine or process over a given time period

54
Q

Cell production

A

an assembly line is divided into sets of tasks, each of which is completed by a work group

55
Q

Efficiency

A

making the best possible use of all business resources to minimise average costs

56
Q

Average costs

A

the cost per unit manufactured in a production run

57
Q

Labour intensive production

A

the use of more WORKERS in the production process compared to the use of machinery

58
Q

Capital intensive production

A

the use of more MACHINERY in the production process compared to the use of labour

59
Q

Capacity

A

the maximum output that it can produce in a given period

60
Q

Capacity utilisation

A

the current level of business output as a percentage of maximum output

61
Q

Under utilisation

A

not using machines or resources to the fullest

62
Q

Over utilisation

A

using resources so close to 100% that they might be over-stretched

63
Q

Stock/inventory

A

items held by a business for future sales/processing such as raw materials, work in progress and finished products

64
Q

Stock control chart

A

a diagram that shows details of inventory movements such as minimum and maximum inventory, reorder level and quantity and lead times

65
Q

Buffer stock

A

the minimum stock level held in reserve to protect against surges in demand or late deliveries by suppliers

66
Q

Usage rate

A

the quantity of a product/service consumed by a user in a given period

67
Q

Lead time

A

how long it takes from an order being placed with the supplier and the items arriving

68
Q

Reorder level

A

the level of stocks at which orders need to be placed

69
Q

Reorder quantity

A

the amount the business orders from its suppliers

70
Q

Just in time

A

stock arrives immediately before it is needed for production or sale in order to minimise costs

71
Q

Lead time

A

The time it takes for goods to arrive after ordering them from a supplier

72
Q

Quality

A

the extent to which a good/service meets customer requirements

(how “fit for purpose” a good is)

73
Q

Quality management

A

techniques intended to reduce wastage as well as increase the quality of finished goods

74
Q

Quality control

A

uses quality inspectors to check products at the end of production to ensure they are suitable for consumption

DETECTS FAULTS NOT PREVENTING THEM

75
Q

Quality assurance

A

systems that ensure products produced/sold are fit for purpose as products are checked and tested at each stage of the production process

PREVENTS FAULTS FROM OCCURING

76
Q

Quality circles

A

a meeting of a group of employees to discuss quality

77
Q

Total quality management (TQM)

A

a quality system that places the responsibility of quality with every employee in the organisation

78
Q

Kaizen

A

making small improvements in all business processes to achieve a culture of continuous improvement

79
Q

Inflation

A

a sustained rise in the average price level in the economy

80
Q

Consumer price index (CPI)

A

an index that tracks the changes in the average cost of a “basket” of goods and services that an average household regularly buys

81
Q

Interest rates

A

the cost of borrowing and the reward for saving expressed as a percentage of the money borrowed/saved

82
Q

Exchange rates

A

the price of one currency in terms of another

83
Q

Exchange rate appreciation

A

when the value of currency increases relative to that of another

84
Q

Exchange rate depreciation

A

a currency is worth less in terms of another foreign currency

85
Q

Taxation

A

how the government raises money to finance expenditure

86
Q

Business cycle

A

this measures economic activity over time and shows stages of boom, recession, slump and recovery

87
Q

Gross domestic product (GDP)

A

the total market value of goods and services produced within a nation over a period of time (usually a yr)

88
Q

Economic growth

A

an increase on the output of goods and services produced in an economy over time

89
Q

Recession

A

a temporary decline in a country’s economic activity

90
Q

Economic uncertainty

A

economic factors that make it difficult for businesses to predict their future performance (costs, sales and profits)

91
Q

Legislation

A

the making of laws for people to follow

92
Q

Consumer legislation

A

legislation that aims to prevent businesses using unfair selling practices

93
Q

Health and safety legisaltion

A

legislation that makes employers responsible for the health, safety and welfare at work of all employees so that accidents should be minimised through training, risk assessment and safe working conditions

94
Q

Employee legislation

A

legislation to ensure businesses comply with laws such as the national minimum wage, rights for redundancy, equal opportunities and heath and safety

95
Q

Environmental legislation

A

legislation design to protect the environment against negative impacts caused by business’s production

96
Q

Competition policy

A

aims to protect the interests of consumers and businesses as well as aiming to restrict anti-competitive practices such as abusing market power

97
Q

Competitive environment

A

the number of similar companies within the same market

98
Q

Competitive market

A

a large number of producers compete with one another to meet the needs and wants of consumers

Business A-level Edexcel (14 decks)

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