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258 Cards in this Set
- Front
- Back
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Above the line
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Methods of promotion that allow a firm to reach a wide audience easily. These include methods such as advertising on television and in newspapers and magazines.
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ACAS (Advisory; Conciliation and Arbitration Service)
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An independent body established under the Employment Protection Act whose aim is to help employers and employees resolve trade disputes and improve industrial relations.
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Accounting ratios
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A way of analysing the performance of a company by comparing key items from its balance sheet and the profit and loss account. These are used to show performance in four areas: profitability; liquidity; productivity and investment.
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Advertising
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Advertising is designed to create an awareness of a product. It is the process of informing a customer about a product or service (informative advertising) and persuading that customer to buy it (persuasive advertising).
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Annual General Meeting (AGM)
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The statutory meeting of directors and shareholders held once a year. The shareholders are asked to vote on various proposals that the board of directors is making about the company but can also ask the directors questions about the business. Shareholders may also elect members of the board of directors.
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Annual report.
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A report issued by a limited company which contains written and financial statements about the progress of the company in the previous financial year. This is to ensure that the shareholders receive some information on an annual basis.
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Apprenticeship
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A system of on the job training for craft skills or a profession where young people are given training by working alongside a skilled worker.
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Assets
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What a company owns represented in the balance sheet. Fixed assets are long-term assets which are for use in the business and not for resale. Current assets are used in the course of the business and will be converted into cash within the next twelve months.
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Assisted areas
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Specific geographical areas of the UK that are eligible to receive financial assistance. The government has identified these areas by above average unemployment rates caused by the decline in traditional industries such as ship building; coal mining and steel production.
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Authority
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The capacity to give commands which others accept as legitimate in an organisation.
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Autocratic leadership
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A style of leadership where the power for making decisions is in the hands of one person or a small group of people. This is the opposite of democratic leadership.
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Average cost
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Also called unit cost. The total costs of producing a product divided by the number of units produced. Over a short period of time it is expected that as output increases; average costs will fall to start with and then rise again as the factory moves towards full capacity. See economies/diseconomies of scale
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Balance of payments
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A record of the overall results of a country’s trading activity with the rest of the world. It includes imports and exports of goods and services and capital flows into and out of the country.
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Balance sheet
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One of the final accounts. It shows the assets and liabilities of the business at a particular date. It is often called a ‘snap shot’ of the financial state of the business.
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Bank of England
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The central bank of the UK. It controls the money supply; interest rates and inflation.
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Bankruptcy
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The condition of being unable to meet the demands of creditors. When an individual is unable to pay his/her debts the creditors will apply to the court for that person to be declared bankrupt.
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Batch production
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A common method of organising production in a factory that falls between job and mass production. Quantities of one product will be produced and then the factors of production shifted to produce another good.
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Board of Directors
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Those persons elected by the shareholders of a company to control the company and look after the shareholders interests.
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Boycott
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A method of industrial action when workers avoid an aspect of their normal duties by refusing to work or perform a particular task. Or where a group of consumers refuses to purchase a good or service because they do not agree with the policies of a company. This could be related to political or ecological issues.
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Brand
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A trade name or trademark created for products in order to persuade the customers that this product is different from that of its competitors. It promotes product recognition and customer loyalty.
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Break-even
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"This is the level of sales/output where neither a profit nor a loss is being made. It is a simple model; often represented in the form of a graph that can show a business the level of sales/output required if its total revenue is going to cover its total costs. Can be calculated using the formula
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Capacity
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"A general term given for the resources that are available in a business for production including machinery; plant and labour.
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Capital
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The man made factor of production which refers to all the real assets which are used by a business (such as machinery) to produce goods and services. Also called capital goods. Or the money provided by the owners of the business to buy the assets needed for production to take place.
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Capital intensive
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Relating to the system of production where the process relies heavily on capital goods as a resource. The number of people employed (or the cost of labour) will be relatively low compared to the amount of capital used.
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Cash
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The most liquid of all the assets that a business employs and an important source of working capital for a business to help pay wages; bills and for supplies.
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Cash flow
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The flow of income and expenditure experienced by a business over a period of time. It is often drawn up in the form of a cash flow forecast.
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Cash flow forecast
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A month-by-month statement that outlines the planned flows of cash into and out of a business. The cash flown will indicate when a business needs to raise extra finance.
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Centralisation
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The organisation has a central body such as a head office where all the decisions are made. The decisions are then communicated to branches.
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Chain of command
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The path in an organisation along which decisions or orders will pass from the top of the organisation to any employee.
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Chain of production
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The various stages of production through which a good goes before reaching the consumer. The chain of production shows the links between the primary; secondary and tertiary sector.
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Channel of distribution
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An important element of the marketing mix relating to how a business gets its products to the consumer.
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Closed shop
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An agreement whereby an employee has to belong to a particular trade union or group of unions in order to work in a certain job. Now illegal in the UK.
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Collective bargaining
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The process by which representatives of employers and employees (often trade unions) come together to decide upon wages; salaries and other conditions of employment.
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Commission
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A type of piece rate payment used to reward staff working in shops or who travel between customers. Payment is based on the number or value of sales achieved.
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Communication
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The Sending of messages via a channel or medium of communication to a target person or group. It can take the form of verbal; visual or written communication.
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Competition
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The idea that in a market there should be more than one producer to ensure that prices are kept low and the customer is not exploited.
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Conditions of service
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The terms on which an employee has been employed by an organisation. These are contained in writing in a contract of employment. They inform the employee of their rights; rates of pay; holiday and sick pay entitlement and pension schemes.
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Conglomerate
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An organisation that operates in several unconnected product or market areas. This brings diversification and therefore risk-bearing economies of scale.
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Consumer goods
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Products that are purchased by households. They can be classified as single use goods (such as food); which are used up as they are consumed or as consumer durables.
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Consumer panels
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A form of market research where a group of consumers are surveyed on a regular basis to find out about their buying habits.
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Consumer protection
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Safeguarding the interests of the consumer. The areas where consumer protection has been seen as most important are related to how goods are described; labelled and advertised; the quality and safety of goods and buying on credit.
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Contribution
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"Calculated using the following formula:
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Co-operative
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A type of business organisation with limited liability for the owners; but where each owner or member only holds one share of the business and therefore have only one vote in controlling the company. There are two main types of co-operative: worker (or producer) and retail.
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Costs
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The money a business spends in order to produce goods and services for its consumers. They can be classified as variable; fixed; direct; indirect; total; average (or unit) and marginal.
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Cost plus pricing
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The basis of a pricing decision. The costs of production are calculated and then a percentage mark-up is added to make sure a profit is made.
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Credit
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The practice of allowing a fixed period of time to pay for a good or service. Credit can be given to business from suppliers and is known as trade credit. Consumers can also receive credit in the form of loans; credit card and overdrafts.
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Credit card
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A card for consumers that makes it easier to buy goods on credit. A customer can use the card for many different purchases in many different stores and then receives a monthly statement detailing their purchases and the amount of money (plus interest); which needs to be repaid.
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Creditor
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Someone to whom an individual or business owes money. Found in the current liabilities section of the balance sheet.
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Current account
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A facility offered by banks that allows customers to use cheques and credit cards to make payments and purchases.
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Current assets
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An asset that a business owns which is likely to be turned into cash in the next twelve months. They are found on the balance sheet and are written in the descending order of liquidity. They are stock debtors; bank and cash
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Current liability
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Money that a business owes to a creditor that is likely to be paid back in the next twelve months. This can include trade credit and overdrafts. It is found beneath the current assets on the balance sheet.
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Curriculum vitae
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Also known as a CV. This is a brief history of an individual stating personal details such as their qualifications and personal interests. It is used when applying for job vacancies.
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Customs and excise duties
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Specific indirect taxes paid when goods or services are purchased or traded. Customs duties; also known as tariffs; are taxes on imported products. Excise duties are taxes raised on the sale of demerit goods such as tobacco and alcohol; and on petrol.
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Database
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A computer programme that enables a large amount of information to be stored. It contains records made up of a series of fields of information. A company might keep a database of its customers.
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Day release
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A system whereby employees are given time during the working week to attend a local college or training centre to study for a qualification. This is off-the-job training.
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Debtor
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A business or individual who owes money to another business or individual in return for goods or services provided on credit. They are treated as current assets on the balance sheet.
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Decentralisation
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The situation when the branches of an organisation are allowed to make their own decisions instead of relying on a head office.
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Delegation
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The passing down of authority in an organisation from a person to a subordinate lower down the chain of command.
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Demand
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The quantity of goods and services that buyers are willing and able to purchase at a particular price over a period of time. It can be represented by a demand curve which shows how a consumers demand may react to a change in the price.
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Democratic leadership
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A style of leadership in an organisation which attempts to involve everyone in the decision making process.
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Depreciation
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A term given to the reduction in the value of fixed assets like machinery due to age; wear and tear or obsolescence as new technology is introduced. Can be calculated using the straight line or reducing balance method.
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Development areas
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An assisted area; which has a very high level of long-term unemployment.
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Direct costs
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The costs which are allocated specifically to a product; machine or department in a business; and which will increase or decrease in relation to the output of that section. These include raw materials and labour costs.
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Direct tax
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The tax that a government raises on the basis of the income of an individual or a business. The most important example is income tax (a tax on workers wages and salaries); but there is also corporation tax (a tax on the profits made by business).
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Discount
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A reduction in the price of a good or service often expressed as a percentage. It is given to customers who buy in bulk (and therefore benefit from economies of scale) or who pay cash or who are loyal customers.
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Diseconomies of scale
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An increase in the average costs that may occur as a firm’s output reaches its maximum capacity level.
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Economic growth
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The increase in a countries real output over a period of time. A country’s output is measured by its gross national product and “real” growth would mean growth not just caused by a change in prices i.e. inflation has been accounted for.
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Electronic Point Of Sale (EPOS)
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A system used in retailing: which links the cash desk to a computer. Each product sold has a bar code; which is read by the computer using a scanner. This bar code stores the price of the item and often other information such as its name.
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Employers associations
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Groupings of employers from the same industry or trade who represent employers’ interests in discussions and negotiations with unions; other industries and the government.
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Equity
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A general term for any claims on a business by people who have contributed funds to that business to allow it to acquire assets. A share in the ownership of the business or an asset.
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Exchange rate
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The rate that one currency trades for another currency on the foreign exchange markets. Businesses will be interested in changes in the exchange rate because they will affect the price paid for imports and exports.
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Exports
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Goods or services produced in one country but sold to another. Represented by a flow of money into the country.
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External economies of scale
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Types of economies of scale that arise for a group of firms; or a whole industry; rather than for an individual firm. They occur as a result of the firms being located or organised together and cause the costs of production for all firms involved to be reduced.
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Factors of production
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The resources that are employed to allow the production of goods and services to take place. They are divided into four types: land; labour; capital and enterprise.
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"Finance
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sources of"
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Fiscal policy
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An economic policy pursued by a government that regulates the level of government expenditure and taxation.
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Fixed assets
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Items that a business owns which make a long-term contribution to its activity. Examples are machinery and vehicles.
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Flow production
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A production process where the product in question is uniform in nature and produced in huge quantities on custom made production lines. Sometimes called line production. Used to manufacture cars; TV’s etc.
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Fixed costs
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Those costs of a business; which remain unchanged at whatever level of output the business is producing at over a period of time. These include rent; depreciation and salaries.
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Franchising
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A method of selling that has become popular in the retail sector. A large company gives permission to a person to market their product in a certain area in return for that person paying a sum of money to use the product name. Examples are McDonalds and Benetton.
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Free market economy
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A type of economy where decisions about what to produce; how to produce and in what quantities to produce are made by the market in response to demand and supply. The factors of production are privately owned and individuals will organise them to produce goods most wanted by the consumer.
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Free trade
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The exchange of goods and services between countries; without ant barriers being erected which might alter the direction or quantity of that trades. Such barriers might be tariffs or quotas.
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Fringe benefit
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A benefit or perk; which an employee receives in addition to their wages. Examples include private health insurance; company cars or discounts. Fringe benefits are intended to increase employee’s levels of motivation.
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General union
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A type of trade union that recruits its members from across a number of industries. It represents semi skilled and unskilled workers in a variety of occupations. Examples are TGWU (Transport and General Workers Union) and Unison (The union for public sector workers).
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Goods
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A general term used to represent the wide variety of tangible items; which are produced as a result of economic activity. Goods are classified as either consumer goods or capital goods.
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Gross pay
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An individuals earnings for work done before any deductions have been made for income tax; national insurance or pensions.
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Gross profit
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The final figure obtained on the trading account when the cost of goods sold has been deducted form the sales revenue of a business. This does not take into account any expenses of running the business such as wages or administration costs.
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Hierarchy
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The number and pattern of levels of authority in an organisation. In a hierarchy each superior will have a clear position with a span of control over a number of subordinates and each person will have a clear job description.
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Hire purchase
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A way for consumers to buy on credit which involves paying a deposit on a product and then paying off the balance in a series of instalments. These will cover the price of the good and any interest or service charges applicable
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Horizontal merger or integration
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The joining of two or more companies that operate at the same level in the chain of production and produce the same type of product. An example of this type of merger would be McDonalds and Burger King.
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Import controls
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Any of the methods that a government can employ to reduce the level of imports coming into a country in order to reduce the balance of payments deficit or protect domestic business. Methods include tariffs and quotas.
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Imports
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Those goods and services that are consumed in one country but which have been purchased from another country. Represented by a flow of money out of the country.
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Incentive scheme
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A method that employers use to motivate the workforce; involving financial bonuses if a certain level of output or sales is achieved.
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Indirect costs
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Those costs that cannot be directly identified with a particular cost centre in a business. The costs of energy; administration and security are examples.
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Indirect tax
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A source of the government’s revenue that is based upon the expenditure of people rather than on their income. Such tax is paid where consumers purchase goods. The main example is VAT (Value added tax).
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Induction
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Training given to new employees starting a job. This introduces him or her to colleagues and provides information about the firm’s activities; rules and practices.
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Industrial action
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The activities carried out by a trade union in pursuit of an industrial dispute with employers. It occurs when industrial relations break down. A strike is one example.
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Industrial relations
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The whole range of relationships that exist between management and employees; the government and trade unions.
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Inflation
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A progressive increase in the general level of prices in an economy. The rate of inflation is the rate at which the general price level is rising. In the case of the prices of consumer goods; the RPI (Retail Price Index) is used to measure the rate. It can be cost-push or demand-pull.
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Informal groups
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A network of social and friendship groups that exist in a business. Informal communications is known as the grapevine and occurs within informal groups.
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Interest rate
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The price an individual or business pays for borrowing money. Or; the reward they receive for investing money in a financial institution such as a bank.
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Job description
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A statement describing the type of work a job involves. It contains the job title; department or place in the organisation; duties and responsibilities.
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Job enlargement
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Widening the scope of employees responsibilities within their job and bringing into play a wider variety of skills from them. A form of motivation.
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Job enrichment
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The process of trying to make a job more satisfying and motivating for an employee by changing the nature of the jobs. This could include job rotation and job enlargement.
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Job production
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A way of organising production where a series of different products is made to customer’s orders. Such production involves more skilled work than mass production and; as such; average costs tend to be higher. Examples are handcrafted furniture and made to measure clothing.
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Job rotation
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Changing the job completed by employees every few weeks so that they do not get bored completing the same tasks over and over again. This widens their skills; makes them more flexible and keeps them motivated.
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Just in Time (JIT) production
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A principle developed in Japan that involves stock being delivered ‘just in time’ to be used. This reduces the need for large expensive warehouses and improves cash flow.
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Joint venture
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A joint venture is when two or more businesses agree to undertake a project together. This could also be businesses and the Government co-operating together i.e. to build a new bridge or an airport.
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Labour
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The human factor of production. While the amount of labour in an economy is determined by the labour supply; the quality of labour is dependent upon the level of skills and education in a country. The payment made for the use of labour is wages.
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Labour intensive
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Where an industry or a particular system of production relies on the use of labour rather than capital. Service industries such as retailing require large quantities of labour to ensure good customer service.
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Labour supply (or the working population)
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Those members of the countries population willing and able to work. It includes those currently in employment and self-employed and those who are registered as unemployed.
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Labour turnover
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The rate at which a labour force leaves a business. It is measured by dividing the total number of workers leaving in a year by the total workforce. To a business; a high turnover leads to large costs in recruitment and selection and the training of new staff.
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Land
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The natural resource that forms one of the factors of production. This includes both the physical land (including the seabed) and also the natural resources that are found in the land; such as oil and minerals) The payment made for the use of land is rent.
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Lateral merger
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The joining together of two firms at the same stage of production which produce similar; but not identical; goods. They will also have employees with similar skills and employ similar capital goods. Examples are a biscuit and a chocolate manufacturer.
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Leadership
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An attribute required of anyone in charge of a group of people. Good leadership may involve people having certain traits such as intelligence and initiative. Styles of leadership can be democratic; autocratic; bureaucratic and laissez-faire.
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Lean production
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A production technique that originated in Japan and aims to employ the minimum of inputs in terms of employees; machines buildings and materials.
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Leasing
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A method which businesses use to acquire the use of a fixed asset without incurring a large capital outlay.
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Liabilities
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What a business owes to those outside the business. Liabilities are classified as either long-term (which are due for payment after more than one year) or current (which are due within one year.
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Limited company
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A type of business organisation that is owned by shareholders. The shareholders have limited liability. There are two types of limited company; a private limited company (Ltd) and a public limited company (PLC).
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Limited liability
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A situation where the owners of a company are only liable for the amount of capital they have invested; in the event that the business fails. This is applicable to owners of private and public limited companies.
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Liquidity
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A measure of how well prepared a company is to repay its current liabilities. This will depend upon the level of current assets the business holds i.e. stock; debtors; money in the bank and cash.
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Loan
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A general term for the borrowing of a sum of money by a person or organisation from another person or organisation. Loans might be for a short term or a long-term period. The lender will usually charge an interest rate for the loan. This varies according to how much is borrowed and who borrows it.
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Logo
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A symbol or picture often base on a brand name or trademark; which is used by a company to help consumers identify and remember their products. Some logos are internationally recognised such as Coca Cola.
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Long term liability
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A debt owed by a business to a person or individual outside the business that is due to be repaid in more than one year’s time. Common examples are debentures; bank loans and mortgages.
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Loss leader
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A product sold at a loss in order to attract customers into a store. This loss will be covered by the price of other goods bought by customers.
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Management
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The employees of an organisation who are responsible for its day-to-day running. Managers carry out the decisions made by the directors and the shareholders by organising and co-ordinating resources (both human and physical) to achieve a desired outcome.
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Managing Director (MD)
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The person appointed by the board of directors to be responsible for the management team that runs a business on a day-to-day basis. The managing director will also be a member of the board.
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Margin of safety
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The number of units of production above the break-even point produced by a firm. Calculated by: Output – break-even point
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Marginal cost
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The extra cost a firm incurs when it produces one extra unit of output. This is also known as the contribution cost.
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Marketing
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The identification or anticipation of customer demand and the satisfaction of that demand by the development; distribution and exchange of goods and services. Marketing is now seen as the central function of many organisations that have developed a market oriented approach to decision making.
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Marketing mix
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The combination of marketing plans and policies that is employed by an organisation in order to achieve its marketing objectives. In its simplest form it can be represented by the four P’s (Product; Price; Place and Promotion).
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Market orientated
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Directed towards the demands of the market. A market orientated firms approach to developing a product is one that puts the desires of the customer; as reflected in market research; at the centre of decision making about what to produce.
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Market research
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The finding out of information to help with the making of marketing decisions. This can be done either by desk research; which is collecting existing data; or field research; which is the collection of original data for a specific purpose.
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Market segment
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That part of a market consisting of consumers with similar characteristics. Ways in which a market might be segmented include age; income; socio-economic grouping; gender or geographical location.
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Market share
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A measure of the proportion of the total sales of a market that a particular product; brand or business holds. This is often used as a measure of business success.
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Mark-up
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A method of pricing whereby the seller takes the basic average cost of the product and adds a fixed percentage to determine the selling price.
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Merchandising
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The aspect of marketing that tries to pull the consumer to a specific product. Examples are sales; free gifts; competitions and special offers.
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Merger
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The joining together of two or more firms. This might be because one business has taken over another or because two firms have agreed to join. There are several types including horizontal; vertical; lateral and conglomerate.
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Merit goods
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These are goods and services provided by the government for everybody because if the provision were left to the free market they would not be provided at the right price in the right quantity. Examples are state education; health care and the social services.
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Mixed economy
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An economy; such as the UK; where some decisions about production are made by the private sector and some by the public sector. It has some of the characteristics of both the free market and the planned economy.
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Monetary policy
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One of the major economic policies that a government can employ. It involves the control by the government or its central bank of the availability of money (money supply) or the cost of money (interest rate).
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Monopoly
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A market situation in which one firm has at least 25% control over production and in which other firms are prevented from competing by barriers to entry.
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Monopolies and Mergers Commission (MMC)
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A body set up by the UK government in 1948 which; when directed by the Office of Fair Trading; will examine a business or industry to see if it is using its monopoly power against the public interest.
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Mortgage
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A type of long-term finance used to buy property. Normally this is paid back over 25 years.
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Motivation
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The reason; or incentive; for doing something. It is especially important when assessing the reasons why people work. An owner or manager of a business needs to be aware of ways of motivating individuals at work so as to make the best use of the factor of production; labour.
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Multinational corporations (MNC’s)
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A company which is based in one country but which operates to a substantial degree in a number of other countries where it owns and operates factors of production.
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Nationalised industries
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Industries owned and run by the government; which form part of the public sector. An Act of Parliament sets them up; a minister of the government decides policy but day-to-day management is left up to the chairman of the board.
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Needs
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The goods and services that are considered to be essential for survival. These basic needs are identified as air; food and drink; clothing and shelter.
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Net pay
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The amount of money an employee receives after deductions have been made for income tax; national insurance and for various voluntary contributions such as pensions and trade union subscriptions.
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Net profit
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This is the amount of sales revenue a business earns less all of the costs involved in achieving that revenue including both direct and indirect costs.
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Non-profit making organisation
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Any of the organisations; such as those often found in the voluntary sector; whose major objectives are other that to achieve profit. Charities such as Oxfam or the Red Crescent are examples.
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Off the job training
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The process of learning new skills and attitudes about a job when employed but where learning takes place off the premises of the employer.
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On the job training
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The process of learning job skills at the place of work. Most introductory; inductive type courses for new employees will be based at the employer’s premises and the majority of training for unskilled and semi skilled workers will be based on hands on experience at the workplace.
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Opportunity cost
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The benefit that could have been gained from an alternative use of the same resource.
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Ordinary shares
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Those shares that give the shareholder a part-ownership of the company in which they have invested. They form the largest single source of long-term capital for companies.
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Organisation chart
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A diagram that is used to represent the formal structure of relationships with an organisation.
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Output
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The goods and services produced by a business. Output is a flow; measured over a period of time.
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Overdraft
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The excess of cash allowed by a bank to a business or personal customer; permitting the withdrawal of more from a current account that is there; up to a limit. The customer may pay interest on that amount. It is used as a short-term method of finance.
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Overtime
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The period of time worked by an employee over and above what is agreed to be a standard working week in their contract of employment. The employee is likely to receive a rate of pay for overtime that is greater than their normal hourly rate.
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Packaging
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The purpose of packaging is to protect the product; attract customer’s attention and display a description of what the package contains.
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Partnership
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A type of legal organisation. There can be between two to twenty owners. There is unlimited liability for the debts of the business by at least one partner and there is usually a partnership agreement.
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Pay
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The reward for labour providing its services; usually comprising either a weekly wage or a monthly salary. Pay is seen as one of the most important forces in motivating the workforce but is also one of the major causes of disputes between the management and workers.
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Payment systems
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A method of organising the payment of employees. This could include time rate; piece rate and bonus payments.
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Penetration pricing
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A low price is set initially to enable a firm to gain market share when entering a competitive market.
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Performance related pay.
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Payment systems for motivating white collar and service sector workers who are not directly involved in production or sales. It links an employee’s salary to their standard of work or performance.
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Person specification
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A description of the ideal person for the job. It identifies the qualifications; skills; experience and personal qualities required of the applicant.
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Personal selling
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The promotion of a product through direct contact between the customer and the seller.
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Personnel department
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The department within a firm (often called human resources) that is responsible for relations between the employer and employee; and for the employee’s general welfare.
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Piece rate
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A system of payment whereby a person (or group; if appropriate) is rewarded according to output i.e. how much he or she produces.
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Place
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The element of the marketing mix that refers to the distribution of goods.
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Planned economy
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A type of economic system where the factors of production are owned by the state; and where decisions about what to produce and how to produce it are made by the government.
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Pressure group
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An organisation that exists to influence public opinion about a particular issue; with the hope that local or national government will change their policies to achieve the objectives of the pressure group. Examples are trade unions; Greenpeace or Consumers’ Associations.
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Price
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The element of the marketing mix that refers to pricing policies. Price is the market value of goods and services that are bought by consumers and firms.
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Price discrimination
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The charging of different prices to different market segments in order to maximise sales revenue. Hairdressers may charge lower prices to old-age pensioners and children to attract customers. This is also called differential pricing when applied to segmenting by time such as charging higher prices for peak seasons holidays. This is related to elasticity.
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Price elasticity of demand (PEd)
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The responsiveness of demand for a product or service to changes in the price of that product. When price rises it is usual for demand to fall and vice versa.
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Primary data
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Information collected through market research for a particular purpose.
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Primary production
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The stage of economic activity that involves the extraction of natural resources from the land so that they can be used in the secondary stage of production. The extraction of oil and gas is an example.
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Private benefits
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The gain an individual consumer or business receives from a business activity. The benefits can be either financial i.e. profit or non-financial i.e. the service a consumer gains.
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Private costs
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The loss that an individual consumer of business experiences as a result of a business activity.
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Private Limited Company (Ltd)
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A limited company that does not issue share on the stock market and where only certain individuals can purchase the shares.
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Private sector
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That part of a mixed economy in which private individuals make decisions about what to produce; how to produce and where to produce based on free market information.
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Privatisation
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The process of government transference of a business or industry from the public sector to the private sector. It does this by offering shares in the business to the public.
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Production
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The process by which an organisation transforms raw materials; using financial and human resources into an end product that is consumed by someone else.
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Production line
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A method of organising machinery and labour in mass production where the parts of a product pass directly from one operation to another until the final product is produced.
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Productivity
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A measure used by business for the level of output in relation to the use of factors of production such as labour and capital. This is often measured with the use of accounting ratios.
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Product life cycle
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A model of how the sales of a typical product might behave over the life of that product. Stages include birth; growth; maturity; saturation and decline.
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Product mix
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The variety of different products a business produces at any time. To maintain sales revenue; there should be a balance between products in different stages of the product life cycle.
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Product orientated
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Directed towards the product and its efficiency. In a product orientated business; the nature of the product itself forms the most important element in the development; production and selling of the product.
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Product range
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The different designs of a basic product; which will attract different market segments. For example; a company will produce a range of cars to satisfy customer’s different tastes and levels of income.
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Profit
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What is left when all costs incurred in the making and selling of a product are deducted from the revenue gained from the sale.
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Profit and loss account
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One of the final accounts that a business prepares that shows the level of net profit or loss made by the business over a given period of time.
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Profit sharing
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A scheme whereby employees are given a share of the profits they have helped to generate as a bonus.
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Psychological pricing
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A price set to encourage customers to believe they are gaining an advantage i.e. £9.99 not £10.
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Public limited company
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A form of limited company where the public are invited to buy shares and so become owners of the business through the issue of those shares on the stock exchange.
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Public sector
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That part of a mixed economy where a central authority rather than private individuals makes decisions about what to produce; how to produce and where to produce.
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Quality circle
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A small group of workers who meet regularly to discuss problems related to quality; efficiency and work in general. The idea originated in Japan and aims to develop teamwork and improve motivation.
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Quality control
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The methods businesses use to make sure that the product will meet the standards expected by the customer. This could include inspecting finished goods or introducing quality circles.
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Quota
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A restriction on the amount of a product that can be imported into a country over a certain period of time.
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Recruitment
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The process of obtaining a supply of new workers to enter an organisation; which is the responsibility of the personnel department. Methods of recruitment could include careers fairs; advertisements or the use of employment agencies.
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Redundancy
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That situation that results when an employees contract of employment is ended because that job no longer exists (due to new technology for example) or is no longer needed due to a down turn in demand.
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Rent
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The reward paid to the owners of land as a factor of production used in economic activity. Thus the rent paid for offices and the rent paid for factories are the prices that a business is paying to the owners of those offices and factories for the use of their land and buildings.
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Research and development (R&D)
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The use by an organisation of part of its resources to investigate and experiment with new products or process development; with a view to introducing them at a later date into the organisation.
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Responsibility
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The obligation to carry out specified duties and tasks. Failure to do so can result in action being taken against the person.
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Retailing
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The last stage in the channel of distribution; which involves the final selling of the goods and services that have been produced to customers.
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Retail Price Index (RPI)
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A measure commonly used to indicate the rate of inflation in an economy. The index shows the average price rise or fall in goods and services sold in shops over a period of time.
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Retained profit
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The amount of profit after tax that directors of a business decide not to distribute to shareholders but to keep within the business. It is held as an increase in capital and is used to expand operations through the purchase of fixed assets.
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Risk
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All business decisions involve an element of risk; because there are a number of possible outcomes from a decision. An entrepreneur is a risk taker.
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Salary
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A type of payment to an employee where a certain sum is negotiated on an annual basis and paid in monthly parts. Salaries are the common forms of payment for white-collar workers in professional; managerial and scientific employment.
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Sales promotion
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A below the line method of persuading customers to buy goods. It is generally aimed at increasing sales in the short term. Examples include money-off coupons; competitions and free samples.
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Sales revenue
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The income that a business receives as a result of selling its products. It is calculated as price multiplied by the quantity sold.
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Seasonal demand
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The variations in the level of purchasing of a product by consumers according to the time of year.
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Secondary data
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This is existing information that has been gathered from previous research and investigations. These could include marketing reports and government statistics.
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Secondary production
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The stage of economic activity where raw materials are transformed into semi finished or finished goods. This includes the manufacturing and construction industries.
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Services
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Intangible; non-physical products produced for households. They are usually consumed at the time of purchase; for example; a haircut; although for some services such as holidays; consumers may be asked to pay in advance.
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Share capital
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The money contributed by shareholders to a business; which stays in the business as long as it exists. It may take the form of ordinary or preference shares.
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Shareholder
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Someone who has a part-ownership of a company by holding a number of shares in return for providing some capital for the company.
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Skimming pricing
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A pricing policy where initially a high price will be charged for a new product so that the firm will recover costs quickly. Often used in high tech industries i.e. when Sony launched the first DVD player.
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Social benefits
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All the benefits that are gained by a society as a result of business activity. Made up of private benefits + external benefits.
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Social costs
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All of the costs that are incurred by society as a result of business activity. Made up of private costs + external costs.
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Sole trader
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A type of business organisation where one person is the owner and where that person is responsible for the decisions of the business. They have unlimited liability.
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Span of control
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The range of people within an organisation for whom one person is directly responsible.
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Specialisation
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Can be national (Oil in Kuwait); regional; local or individual. On a large scale it makes best use of the factors of production of an area and; on an individual level; it allows labour to focus on one set of skills or occupation i.e. teacher; doctor
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Stakeholders
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A person or group who can influence or is affected by an organisation.
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Stock
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Materials or products kept by business. There are three types of stock: raw materials; work in progress and finished goods. It is found on the trading account and the balance sheet and is the least liquid of all the current assets.
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Stock control
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The process of trying to establish the best level of stocks to hold. An organisation has to balance the costs of holding stock against the costs of not doing so. This is an opportunity cost.
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Stock exchange
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A market for long-term capital where both buyers and sellers come together to raise capital for business and to invest money.
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Strike
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The withdrawal of labour. It is the last resort that a group of employees can take if they feel that their demands about their work are unlikely to be met. A strike occurs when collective bargaining has broken down.
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Subsidy
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A form of negative taxation where the government pays a sum of money to a producer to enable that company to sell a product at a lower price than the market would normally allow.
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Supply
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The amount of a good or service that producers are willing to bring onto the market at each and every price. Usually; the higher the price; the higher the level of supply.
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Survey
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A method of field research carried out to establish the opinion and attitudes of individuals. In business; the most common type of survey is used for market research.
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Takeover
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A situation where one company takes control of the ownership of another company by persuading the owners to sell their equity (either a sole trader; partners of shareholders).
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Tariff
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A tax imposed by a government on the price of goods being imported into the country. The tax is a barrier to trade.
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Taxation
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The compulsory contribution of money to the government. It is the major source of income for the government. Taxation is used to finance spending and investment in the public sector.
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Tertiary production
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The provision of services; which helps to support the other two sectors of the economy. The tertiary sector includes professional services; administration; transport and distribution.
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Test market
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A trial launch of a new product within a limited geographical area as part of the development of a new product.
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Time rate
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A payment system in which employees are paid a set rate per hour or per week. The level of pay is therefore determined by the number of hours worked irrespective of how much work is completed.
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Trade credit
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A system whereby the supplier of a good or service to a business allows that business a period of time before it has to pay. This is a method of short-term finance.
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Trade union
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A body representing a group of employees joined together in a single unit in order to represent their views and claims in negotiation with their employers. The main types of union are craft; general and white collar.
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Trading account
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The first part of the final accounts that shows the sales revenue less the cost of goods sold. This gives the gross profit for the time period concerned.
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Training
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The process of improving or extending a persons skills or knowledge. An organisation may provide the opportunity for an employee to acquire new knowledge and skills relating to his or her job. Such training can be on the job or off the job.
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Turnover
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"The value of sales over a period of time (sales revenue) or
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Unemployment
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The state of being without work. A situation where someone who is actively seeking work; but is unable to obtain it. Types of unemployment include seasonal; structural; cyclical and frictional.
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Unfair dismissal
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The ending of a person’s employment by an employer without good reason.
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Unlimited liability
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A form of liability in which the owners of a business are personally responsible for all the losses of the business irrespective of the amount of capital they have invested in it. This is true of sole traders and partnerships.
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Value Added Tax (VAT)
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The basic form of indirect tax; which is used within the European Union. In the UK the rate of VAT is 17.5% although some goods are exempt (such as food; books and children’s clothes).
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Variable costs
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The costs that change directly with the output of a business. They are likely to include wages and raw materials.
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Venture capital
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A source of finance available to businesses where there is a larger than usual amount of risk involved. Venture capitalists are companies that are willing to support risky projects; often in return for a seat on the board of directors or a significant shareholding.
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Vertical merger
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The joining of two companies from different levels of production in a merger to become one company. The oil industry is an example of a vertically integrated industry; with oil companies owning businesses at all three stages of production (oil wells; oil refineries and petrol stations).
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Visible trade
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This is used to refer to the export and import of physical goods.
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Wage
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The basic reward for the provision of labour as a factor of production. A wage is usually paid on an hourly or weekly basis.
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Want
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The desire of a consumer to buy a good or service. If this is backed by the ability to pay for it then it becomes effective demand.
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Wholesaler
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The middle person in a channel of distribution between the producer and the retailer. They store large quantities of goods in warehouses and break down the size of the quantities sold to retailers into more manageable sizes.
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Worker participation
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Situations where members of the workforce have some say in the decision-making of an organisation. One form of this is quality circles.
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Working capital
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This represents the amount of short-term capital that a business has available to meet day-to-day cash requirement. It is calculated by subtracting current liabilities from current assets.
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Working conditions
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A general term used to describe both the physical working environment in which an employee works and various other non-monetary factors such as how many people do the same job and what breaks are allowed.
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Working population
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Those people in a countries economy who offer themselves for work. This would include employees in employment and in self-employment as well as those registered unemployed.
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Work-to-rule
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A type of industrial action where in pursuing a trade dispute the members of a trade union make sure that they are carrying out their duties exactly as laid down in their job description. They refuse to complete extra work.
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Written communication
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The basis of much communication in business. This includes letters; reports; memos and notices.
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