AS Level Business 9609 Definitions (revision notes)

Above-the-line promotion: a form of promotion that is undertaken by a business by paying for communication with consumers
Accounts payable: value of debts for goods bought on credit payable to suppliers; payable
Accounts receivable: the value of payments to be received by customers who have bought goods on credit; a.k.a. trade receivables
Acid-test ratio: (current assets – inventory)/current liabilities
Added value: the difference between the cost of purchasing raw materials and the price the finished goods are sold for.
Advertising: paid-for communication with consumers to inform and persuade
Articles of Association: this document covers the internal workings and control of the business – for example, the names of directors and the procedures to be followed at meetings will be detailed.
Arithmetic mean: calculated by totaling all the results and dividing by the number of results Asset: an item of monetary value that is owned by a business
Asset-led marketing: an approach to marketing that bases strategy on the firm’s existing strengths and assets instead of purely on what the customers want
Autocratic leadership: a style of leadership that keeps all decision-making at the center of the organization
Bad debt: unpaid customers’ bills that are now very unlikely to ever be paid
Balance sheet: an accounting statement that records the values of a business’s assets, liabilities and shareholders’ equity at one point of time
Bar chart: use bands of equal width but of varying length or height to represent relative values.
Batch production: producing a limited number of identical products – each item in the batch passes through one stage of production before passing on to the next stage

Below-the-line promotion: promotion that is not a directly paid-for means of communication, but based on short-term incentives to purchase

Brand: an identifying symbol, name, image or trademark that distinguishes a product from its competitors

Branding: the strategy of differentiating products from those of competitors by creating an identifiable image and clear expectations about a product

Break-even point of production: the level of output at which total costs equal total revenue – neither a profit nor loss is made

Buffer stocks: the minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or should production rates increase

Business plan: a detailed document giving evidence about a new or existing business, and that aims to convince external lenders and investors to extend finance to the business

Capital: factor of production including all man-made resources used by a business

Capital employed: the total value of all long-term finance invested in the business

Capital expenditure: involves the purchase of assets that are expected to last for more than one year, such as building and machinery

Capital goods: the physical goods used by industry to aid in the production of other goods and services, such as machines.

Cash flow: the sum of cash payments to a business (inflows) less the sum of cash payments (outflows)

Cash flow forecast: estimate of a firm’s future cash inflows and outflows

Cash flow statement: record of the cash received by a business over a period of time and the cash outflows from the business

Cash inflows: payments in cash received by the business

Cash outflows: payments in cash made by the business

Channel of distribution: the chain of intermediaries a product passes through from producer to final consumer

Closed questions: questions to which a limited number of pre-set answers is offered

Closing cash balance: cash held at the end of the month; it becomes next month’s opening balance

Cluster sampling: using one or a number of specific groups to draw samples from and not selecting from the whole population, e.g. using one town or region

Command economy: economic resources owned, planned and controlled by public sector

Commission: a payment to a sales person for each sale made

Competition-based pricing: a firm will base its price upon the price set by its competitors

Consumer goods: the physical and tangible goods sold to the general public; include durable (can be used more than once) consumer goods, such as cars and washing machines, and non­durable (can be used once) consumer goods, such as food and drinks.

Consumer markets: markets for goods and services bought by the final use of them

Consumer profile: a quantified picture of consumers of a firm’s products, showing proportions of age groups, income levels, location, gender and social class

Consumer services: the non-tangible products sold to the general public (include hotel accommodation, insurance, train journeys etc.)

Contribution per unit: selling price less variable cost per unit

Contribution-cost pricing: setting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and profit

Corporate social responsibility (CSR): this concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment

Cost of sales: a.k.a. cost of goods sold; the direct cost of purchasing the goods that were sold during the financial year

Credit control: monitoring of debts to ensure that credit periods are not exceeded

Creditors: suppliers who have agreed to supply products on credit and who have not yet been paid

Current assets: assets that are likely to be turned into cash before the next balance sheet date Current liabilities: debts of the business that will usually have to be paid within one year

Current ratio: current assets/current liabilities

Customer relationship marketing (CRM): using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained

Debtors: customers who have bought products on credit and will pay cash at an agreed date in the future

Demand: the quantity of products consumers are willing and able to buy at a certain price particular period of time, ceteris paribus

Democratic leadership: a leadership style that promotes the active participation of workers in decision making

Direct costs: these costs can be clearly identified with each unit of production and can be allocated to a cost centre

Diseconomies of scale: factors that cause average costs of production to rise when the scale of operation is increased

Dismissal: being dismissed or sacked from a job due to incompetence or breach of discipline

Dividends: the share of the profits paid to shareholders as a return for investing in the company

Economic order quantity: the optimum or least-cost quantity of stock to re-order taking into account the delivery costs and stock-holding costs

Economies of scale: reduction in a firm’s average costs of production that results from an increase in the scale of operations

Effectiveness: meeting the objectives of the enterprise by using inputs productively to meet customers’ needs

Efficiency: producing output at the highest ratio of output to input

Emotional intelligence: the ability of managers to understand their own emotions, and those of the people they work with, to achieve better business performance

Employment contract: a legal document that sets out the terms and conditions governing a worker’s job

Entrepreneur: someone who takes the financial risk of starting and managing a new venture

Enterprise: a factor of production including the driving force of a business, the risk-taking and decision-making unit of a business which organizes the other three factors of production.

Equilibrium price: the market price that equates supply and demand for a product

Equity finance: permanent finance raised by companies through the sale of shares

Ethical code of conduct: a document detailing a company’s rules and guidelines on staff behavior that must be followed by all employees

Ethics: the moral guidelines that determine decision-making

Extension strategies: these are marketing plans to extend the maturity stage of the product before a brand new one is needed

Factoring: selling of claims over debtors to a debt factor in exchange for immediate liquidity – only a proportion of the value of the debts will be received as

Fixed costs: costs that do not vary with output in the short rui

Flexi-time contract: employment contract that allows staff to be called in at times most convenient to employers and employees, e.g. at busy times of the day

Flow production: producing items in a continually moving process

Focus groups: a group of people who are asked about their attitude towards a product, service, advertisement or new style of packaging

Franchise: a business that uses the business

Free market economy: economic resources owned largely by the private sector with no or little state intervention

Full-cost pricing: setting a price by calculating a unit cost for the product (allocated fixed and variable costs) and then adding a fixed profit margin

Goodwill: arises when a business is valued at or sold for more than the balance sheet value of its assets

Gross profit: equal to sales revenue less cost of sales Gross profit margin: gross profit/sales revenue * 100

Hard HRM: an approach of managing staff that focuses on cutting costs, e.g. temporary and part-time employment contracts, offering maximum flexibility but with minimum training costs

High-quality profit: profit that can be repeated and sustained

Hire purchase: an asset is sold to a company that agrees to pay fixed repayments over an agreed time period – the asset belongs to the company

Histograms: it is not the height of each bar that represents relative values, but the area of each bar.

Holding company: a business organization that owns and controls a number of separate businesses, but does not unite them into one unified company

Hourly wage rate: payment to a worker made for each hour worked

Human resource management (HRM): the strategic approach to the effective management of an organization’s workers so that they help the business gain a competitive advantage

Hygiene factors: aspects of a worker’s job that have the potential to cause dissatisfaction, such as pay, working conditions, status and over-supervision by managers

Income statement: records the revenue, costs and profit (or loss) of a bu< period of time

Indirect costs: costs that cannot be identified with a unit of production or allocated accurately to a cost center

Induction training: introductory training programme to familiarize new recruits with the systems used in the business and the layout of the business site

Industrial markets: markets for goods and services bought by businesses to be used in the production process of other products

Informal leader: a person who has no formal authority but has the respect of colleagues and some power over them

Insolvent: when a business cannot meet its short-term debts

Intangible assets: items of value that do not have a physical presence, such as patents and trademarks

Integrated marketing mix: the key marketing decisions complement each other and work together to give customers a consistent message about the product

Internal growth: expansion of a business by means of opening new branches, shops or factories (a.k.a. organic growth)

Internet marketing: the marketing of products over the Internet

Inter-quartile range: the range of the middle 50% of the data
Inventory: stock held by the business in the form of materials, work in progress and finished goods
Job description: a detailed list of the key points about the job to be filled – stating all its key tasks and responsibilities
Job enlargement: attempting to increase the scope of a job by broadening or deepe tasks undertaken
Job enrichment: aims to use the full capabilities of workers by giving them th do more challenging and fulfilling work
Job redesign: involves the restructuring of a job – usually with empl agreement – to make work more interesting, satisfying and challenging
Job production: producing a one-off item specially designed for the customer
Job rotation: increasing the flexibility of the workforce and the variety of work they do by switching from one job to another: £ M ^
Joint venture: two or more businesses agree to work closely together on a particular project and create a separate business division to do so
Just-in-time: this stock-control method aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order
Labor: factor of production, including the workforce of a business, both skilled and unskilled
Laissez-faire leadership: a leadership style that leaves much of the business decision making to the workforce-a “hands-off’ approach and the reverse of the autocratic leadership
Land: factor of production, including all natural resources used by a business
Lead time: the normal time taken between ordering new stocks and their delivery
Leadership: the art of motivating a group of people towards achieving a common objective
Leasing: obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. This avoids the need for the business to raise long-term capital to buy the asset. Ownership remains with the leasing company.
Liability: a financial obligation of a business that it is required to pay in the future

Limited liability: the only potential loss a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder

Line graphs: most commonly used for showing changes in variables over a period of timp: thp<;p are time-series graphs

Liquidation: when a firm ceases trading and its assets are sold for cash to pay supply other creditors

Liquidity: the ability of a firm to be able to pay its short-term debts

Long-term bonds: bonds issued by companies to raise debt finance, often with a fixed rate of interest

Long-term loans: loans that do not have to repaid for at least one year

Low-quality profit: one-off profit that cannot easily repeated or sustained

Management by objectives (MBO): a method of coordinating and motivating all staff in an organization by dividing its overall aim into specific targets for each department, manager and employee     £ M ^

Manager: responsible for setting objectives, organizing resources and motivating staff so that the organization’s aims are met

Margin of safety: the amount by which the sales level exceeds the break-even level of output Marginal costs: the extra cost of producing one more unit of output Market capitalization: the total value of a company’s issued shares

Market growth: the percentage change in the total size of a market (volume or value) over a period of time

Market orientation: an outward-looking approach basing product decisions on consumer demand, as established by market research

Market research: this is the process of collecting, recording and analyzing data about the customers, competition and the market

Market segment: a sub-group of a whole market in which consumers have similar characteristics

Market segmentation: identifying different segments within a market and targeting different products or services to them

Market share: sales of the business as a proportion of total market sales

Market size: the total level of sales of all producers within a market

Market skimming: setting a high price for a new product when a firm has a unique or highly differentiated product with low elasticity of demand

Marketing: the management task that links the business to the customer by identifying and meeting the needs of customers profitably – it does this by getting the right product at the right price to the right place at the right time

Marketing mix: the four key decisions that must be taken in the effective marketing of a product

Marketing objectives: the goals set for the marketing department to help the business achieve its overall objectives

Marketing strategy: long-term plan established for achieving marketing objectives

Mark-up pricing: adding a fixed mark-up for profit to the unit price of a product

Mass customization: the use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass production cost levels

Mass marketing: selling the same products to the whole market with no attempt to target groups within it

Median: the value of the middle item when data have been ordered or ranked. It divides the data into two equal parts

Memorandum of Association: a document stating the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorization and the declared aims of the business

Mission statement: a statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups

Mixed economy: economic resources are owned and controlled by both private and public sectors

Mode: the value that occurs most frequently in a set of data

Motivating factors: aspects of a worker’s job that can lead to positive job satisfaction, such as achievement, recognition, meaningful and interesting work and advancement at work

Motivation: the internal and external factors that stimulate people to take actions that lead to achieving a goal
Multi-site location: a business that operates from more than one location
Multinational: a business with operations and production based in more than one country Net monthly cash flow: estimated difference between monthly cash inflows Net profit: gross profit minus overheads Net profit margin: net profit/sales revenue * 100
Niche marketing: identifying and exploiting a small segment of a larger mark* products to suit it
Non-current assets: assets to be kept and used by the business for more than one year; a.k.a. fixed assets
Non-current liabilities: value of debts of the business that will be payable after more than one year
Off-the-job training: all training undertaken away from the business, e.g. work-related college courses
Offshoring: the relocation of a business process done in one country to the same or another company in another country
On-the-job training: instruction at the place of work on how a job should be carried out
Open questions: those that invite a wide-ranging or imaginative response – the results will be difficult to collate and present numerically
Opening cash balance: cash held by the business at the start of the month
Operational flexibility: the ability of a business to vary both the level of production and the range of products following changes in customer demand
Operations planning: preparing input resources to supply products to meet expected demand
Opportunity cost: the benefit of the next most desired option which is given up
Optimal location: a business location that gives the best combination of quantitative and qualitative factors

Outsourcing: not employing staff directly, but using an outside agency or organization to carry out some business functions

Overdraft: bank agrees to a business borrowing up to an agreed limit as and when required

Overtrading: expanding a business rapidly without obtaining all of the necessary finant a cash-flow shortage develops

Partnership: a business formed by two or more people to carry on a business together shared capital investment and, usually, shared responsibilities

Part-time employment contract: employment contract that is for less than the normal full working week of, say, 40 hours, e.g. eight hours per week

Paternalistic leadership: a leadership style based on the approach that the manager is in a better position than the workers to know what is best for the organization

Penetration pricing: setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales

Performance-related pay: a bonus scheme to reward staff for above-average work performance

Person specification: a detailed list of the qualities, skills and qualifications that a successful applicant will need to have

Personal selling: a member of the sales staff communicates with one customer with the aim of selling the product and establishing a long-term relationship between company and consumer

Pie chart: used to display data that need to be presented in such a way that the proportions of the total are clearly shown

Piece rate: a payment to worker for each unit produced

Price elasticity of demand: a numerical measure showing the responsiveness of quantity demanded to a change in price

Primary research: the collection of first-hand data that is directly related to a firm’s needs

Primary sector: a sector of economic activity including businesses engaged in extraction of natural resources

Private limited company: a small or medium-size business that is owned by shareholders who are often members of the same family; cannot sell shares to the general public

Private sector: comprises of businesses owned and controlled by individuals or groups of individuals

Process innovation: the use of a new or much improved production method or service delivery method

Product: the end result of the production process sold on the market to satisfy a customer

Product differentiation: making a product distinctive so that it stands out from competitor products in consumers’ perception

Product orientation: an inward-looking approach that focuses on making products that can be made – or have been made for a long time – and then trying to sell them

Product positioning: the pattern of sales recorded by a product from launch to withdrawal from the market

Production: converting inputs into outputs

Productivity: the ratio of outputs to inputs during production, e.g. output per worker per time period £ M ^

Profit after tax: operating profit minus interest costs and corporation tax

Profit sharing: a bonus for staff based on the profits of the business – usually paid as a proportion of basic salary

Promotion: the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform consumers and persuade them to buy

Promotion budget: the financial amount made available by a business for spending on marketing/promotion during a certain time period

Promotion mix: the combination of promotional techniques that a firm uses to sell a product

Public corporation: a business enterprise owned and controlled by the state (a.k.a. nationalized industry)

Public limited company: a limited company, often a large business, with the legal right to sell shares to the general public – share prices are quoted on the national stock exchange

Public relations: the deliberate use of free publicity provided by newspapers, TV and other media to communicate with and achieve understanding by the public

Public sector: comprises of organizations accountable to and controlled by central or local government

Qualitative factors: non-measurable factors that may influence business decisions

Qualitative research: research into the in-depth motivations behind consumer buying behavior or opinions

Quality circles: voluntary groups of workers who meet regularly to discuss work-related problems and issues

Quantitative factors: these are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability

Quantitative research: research that leads to numerical results that can be statistically analyzed

Quota sampling: when the population has been stratified and the interviewer selects an appropriate number of respondents in each stratum

Random sampling: every member of the target population has an equal chance of being selected          £ M ^

Range: the difference between the highest and the lowest value

Recruitment: the process of identifying the need for a new employee, defining the job to be filled and the type of person needed to fill it, attracting suitable candidates for the job and selecting the best one

Reorder quantity: the number of units ordered each time

Redundancy: when a job is no longer required, so the employee doing this job becomes redundant through no fault of his or her own

Retained profit: the profit left after all deductions, including dividends, have been made. This is “plowed back” into the company as a source of finance.

Revenue expenditure: spending on all costs and assets other than fixed assets and includes wages and salaries and materials bought for stock

Rights issue: existing shareholders are given the right to buy additional shares at a discounted price

Salary: annual income that is usually paid on a monthly basis

Sales promotion: incentives such as special offers or special deals directed at consumers or retailers to achieve short-term sales increases and repeat purchases by consumers
Sales turnover: total value of sales made by a business in a given time period; a.k.a. sales revenue; equal to selling price X quantity sold
Sample: the group of people taking part in a market research survey selected to be representative of the overall target market
Scale of operation: the maximum output that can be achieved using the available inputs (resources) – this scale can only be increased in the long term by employing more of all inputs
Secondary research: collection of data from second-hand sources
Secondary sector: a sector of economic activity where resources extracted by primary sector
businesses are processed and manufactured into final goods
Self-actualization: a sense of self-fulfillment reached by feeling enriched and developed by what one has learned and achieved
Share: a certificate confirming part ownership of a company and entitling the shareholder owner dividends and certain shareholder rights
Share capital: the total value of capital raised from shareholders by the issue of shares Shareholder: a person or institution owning shares in a limited company
Shareholders’ equity: total value of assets minus total value of liabilities
Social audit: a report on the impact a business has on society (it could cover pollution levels, health and safety record, source of supplies, customer satisfaction and contribution to the community)
Social enterprise: a business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners
Societal marketing: this approach considers not only the demands of consumers but also the effects on all members of the public (society) involved in some way when firms meet these demands
Soft HRM: an approach to managing staff that focuses on developing staff so that they reach self-fulfillment and are motivated to work hard and stay with the business

 

sale traders: a business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profit

sponsorship: payment by a company to the organizers of an event so that the company name becomes associated with the event staff appraisal: the process of assessing the effectiveness of an employ set objective

start-up capital: capital needed by an entrepreneur to set up a business

stock: materials and goods required to allow for and supply of products to the customer stratified sampling: this draws a sample from a specified sub-group or segment of the population and uses random sampling to select an appropriate number from each stratum

Supply: the quantity of products producers are willing and able to sell at a certain price for a particular period of time systematic sampling: <ill give a required rate of return at a certain level of output/sales-teleworking: staff

systematic sampling: <ill give a required rate of return at a certain level of output/sales-teleworking: staff wong Trom nome out Keeping contact with the office by means of modern IT communication temporary employment contract: employment contract that lasts for a fixed time period, e.g. six months-tertiary sector: a sector of economic activity including businesses engaged in providing services to customers team working: production is organized so that groups of workers undertake complete units of work

temporary employment contract: employment contract that lasts for a fixed time period, e.g. six

months-tertiary sector: a sector of economic activity including businesses engaged in providing services to customers team working: production is organized so that groups of workers undertake complete units of work

team working: production is organized so that groups of workers undertake complete units of work

Trade barriers: taxes (tariffs) or other limitations on the free international movement of goods and services
Training: work-related education to increase workforce skills and efficiency
Triple bottom line: the three objectives of social enterprise (economic, social and environmental)
Unfair dismissal: ending a worker’s employment contract for a reason that the law n being unfair
Unique selling point (USP): the special feature of a product that differentiates it from competitors’ products
Variable costs: Costs that vary with a change in output
Venture capital: risk capital invested in business start-ups or expand have good profit potential but do not find it easy to gain fi
Viral marketing: the use of social networking is awareness or sell products
Window dressing: presenting the company accounts in a favorable light – to flatter the business performance
Worker participation: workers are actively encouraged to become involved in decision making within the organization
Workforce audit: a check on the skills and qualifications of all existing managers/employees
Workforce planning: analyzing and forecasting the numbers of workers and the skills of those workers that will be required by the organization to achieve its objectives
Working capital: the capital needed to pay for day-to-day running costs and credit offered to is equal to current assets minus current liabilities.