Unit 1 Key Terms

Front 1

Added Value

Back 1

The difference between the price of a good or service and the cost of its material inputs.

Front 2

Autocratic management

Back 2

A style of managment where decisions are made by the individual, with little or no consultation.

Front 3

Break Even Point

Back 3

The level of output where neither a profit nor a loss is being made. The point at which Total Revenue equals Total Costs.

Front 4

Business Plan

Back 4

A format document that sets out the details of the business and acts as a planning aide for the busines itself and as a means of attracting potential investors or providers of finance. It will also usually include a marketing plan and financial plans including Profit & Loss accounts and a Cash Flow forecast.

Front 5

Cash Flow

Back 5

The movement of cash into (cash inflow) and out of (cash outflow) a business. They both need to balance and require careful management to avoid running out of cash at crucial times.

Front 6

Cash Flow Forecast

Back 6

A speadsheet that projects expected flows of cash income and cash expenditure over a period of time. It will help identify when cash may be short and allow the business to make plans to deal with it.

Front 7

Competitive Advantage

Back 7

Any feature of a business that enables it to compete effectively. It may be based on price, quality, service, reputation or innovation.

Front 8

Debenture

Back 8

A form of external finance for a business that takes the form of a long term loan often secured on the company's property.

Front 9

Demand

Back 9

The amount of a good or service that consumers are willing and able to buy, at a given price and at a given time.

Front 10

Democratic Management

Back 10

A style of managements where decisions are made by a manager after consulting with colleagues and listening to differing points of view.

Front 11

Entrepreneur

Back 11

A person who takes the risk of organising and operating a new business venture. Usually carries the connotation of being creative, self-motivated, and visionary.

Front 12

Equilibrium Price

Back 12

The price at which quantity demanded is the same as quantity supplied, sometimes called the market of clearing price.

Front 13

Exchange Rate

Back 13

The price of one currency expressed in terms of another.

e.g the exchange rate of the pound in terms of the dollar might be $1.97c

Front 14

Fixed Costs

Back 14

These costs or expenses incurred by a business that do not change with the level ofoutput. Example, including rent, interest payments, manager's salaries and rates.

Front 15

Government Spending

Back 15

The money spent in the economy over a period of time on a range of goods and services such as education, healthcare and social security. Mostly financed by taxation.

Front 16

Gross Profit

Back 16

What is left after the cost of sales has been subtracted from turnover. Overheads, interest and tax have not yet been taken into account.

Front 17

Gross Profit Margin

Back 17

Gross Profit shown as a percentage of turnover

Gross profit

----------------- X 100

Turnover

Front 18

Inflation

Back 18

A sustained rise in the general price level or a fall in the value of money. Expressed as a percentage figure it was 4.7% in September 2008.

Front 19

Leasing

Back 19

A long term rental agreement that allows businesses to use assets without having to pay for them, thereby freeing up funds for other uses. Often used for vehicles, machinery, photocopiers etc.

Front 20

Limited Liability

Back 20

In the event of financial problems and the closure of a business the responsibility for any outsanding debts is limited to the original investment.

Front 21

Loan

Back 21

The use of someone else's money for a period of time. Usually involves regular repayments and the additional payment of interest.

Front 22

Ltd

Back 22

Signifies a Private Limited Company. This is a form of company organisation with limited liability but whose shares are not available to the public and are not quoted on the stock exchange.

Front 23

Market

Back 23

Any medium in which buyer and sellers interact and agree to trade at a price.

Front 24

Market Growth

Back 24

An expansion of the market usually measured in increases in sales.

Front 25

Market Mapping

Back 25

The plotting onto a grid of features that characterise a market, such as price and consumer age. When individual brands or businesses are added to the grid it can show potential niches or gaps in the market. It also helps place products in relation to each other.

Front 26

Market Mapping

Back 26

Where the needs of the customer are the overriding priority in the production and marketing of products and services.

Front 27

Market Orientation

Back 27

Where the needs of the customer are the overriding priority in the production adn marketing of products and services

Front 28

Market Positioning

Back 28

How individual products or brands are seen in relation their competition by the consumers. Business may well attempt to re-position their products in an attempt to boost sales.

Front 29

Market Segmentation

Back 29

The splitting up of the market into groups of consumers with similar characteristics. Common groupings include; age, gender, income, interests, location etc. This enables products and services to be more effectively produced and targeted for a particular segment.

Front 30

Marketing Plan

Back 30

The setting out of a range of strategies that will be used to promote and sell the product or service. This may well include details on price, promotional and distribution.

Front 31

Operating Profit

Back 31

The profit made on a business' ordinary trading activites. It is calculated by subtracting all admin and selling expenses for Gross Profit.

Front 32

Operating Profit Margin

Back 32

Operating profit shown as a percentage of turnover.

Operating Profit
----------------------- X 100

Turnover

Front 33

Opportunity Costs

Back 33

Is the cost of the next best alternative that has been sacrificed.

e.g The opportunity cost of a business buying a new delivery van may be the new computer system that they have had to forego.

Front 34

Ordinary Share Capital

Back 34

The money raised by the selling or ordinary shares in plc businesses. These are stakes in the business and the shareholders will receive a dividend (if the business if profitable!)

Front 35

Overdraft

Back 35

A facility that allows a business (or an individual) to borrow up to an agreed limit. A flexible and useful form of finance that is particularly suited to cashflow problem. Interest is only paid on the amount borrowed and the time it is used.

Front 36

Paternalistic

Back 36

A leadership stle that is based on a 'fatherly' approach. Closely linked to an autocratic approach. Decisions are usually based on what is best for the workforce but close consultation or delegation is unlikely.

Front 37

Plc

Back 37

Stands for Public Limited Company. this is a form of company organisation with limited liability but whose shares are available to the public and are quoted on the stock exchange.

Front 38

Pricing Strategy

Back 38

The decision made by a business as to what its price will be. Many factors influence this decision such as the cost of production, the level of competition, the desirability of the product, the need to break into a market and external economic factors.

Front 39

Primary Research

Back 39

The gathering of orignial information about the market from first hand sources. Sometimes called Field Research.

Front 40

Product Trial

Back 40

The launching of a procudt or service to asses likely demand levels., this may involve heavy promottion particularly where there are already many existing similar brands.

Front 41

Production Plan

Back 41

The details of how a product or service is to be developed and produced for consumption.

Front 42

Profit

Back 42

The difference between Total Revenue and Total Costs

Front 43

Profit and Loss Account

Back 43

A financial document that shows the amount of profit (or loss) that a firm has made over a period of time.

Front 44

Qualitative Research

Back 44

Market research term. It involves finding out about the motivation of consumers.

e.g. why consumers might prefer a blue car to a red car.

Front 45

Quantitative Research.

Back 45

Market research term. It involves measuring numbers.

e.g. how many consumers might prefer a blue car to a red car.

Front 46

Retained Profit

Back 46

An important source of finance to businesses. It is all the money that is left after all deductions have been taken away from total sales revenue including any dividends paid to shareholders. It can then be re-invested into the business.

Front 47

Secondary Research

Back 47

The use of information that already exists about the market from other sources. Sometimes called Desk Research.

Front 48

Sole Trader

Back 48

The simplest form if business organisation that is owned and operated by an individual. It has unlimited liability.

Front 49

Stakeholder

Back 49

Any individual or group with an interest in the actions of a business. Stakeholders include: employees, owners & stakeholders, customers, suppliers, the local community and competitors.

Front 50

Supply

Back 50

The amount of a good or service that producers are willing and able to provide, at a given price and at a given time.

Front 51

Taxation

Back 51

Payments made to the Government by a wide range of people that makes up the revenue needed to finance Government spending. The level of taxation can be varied to influence the economy. Common forms include: income tax, VAT, corporation tax and excise duty.

Front 52

Theory X

Back 52

Theory X managers believe that workers are inherently lazy and dislike work, they need to be directed and coerced and they will avoid responsibility. It does NOT describe the workers themselves but the manager's attitude towards them.

Front 53

Theory Y

Back 53

Theory Y managers believe that workers are inherently trustworthy and respond to responsibility, in fact, the opposite viewpoint ot Theory X. It does NOT describe the workers themselves but the manager's attitude towards them.

Front 54

Trade Credit

Back 54

The period of time allowed by a business before payment is due, after supplying a customer. Commonly 30 days. It helps the customer's cash flow at the expense of the business'

Front 55

Trade-Off

Back 55

A situation where having more of one thing leads to less of another, it is often thought that more unemployment means less inflation and vice versa. Linked to the concept of Opportunity Cost.

Front 56

Turnover

Back 56

The total income generated by a business' sales of its goods and services over a period of time.

Front 57

Unemployment

Back 57

The problem of a people (or resources) that are not working. This means that the economy is not producing as much as it could. The level of unemployment is measured as a percentage of the workforce. There are several different ways of measuring this and care must be taken when making comparisons.

Front 58

Unlimited Liability

Back 58

The owner(s) of a business is (are) responsible for all the debt of a business should it fail. Usually associated with sole trader or partnerships.

Front 59

Variable Costs

Back 59

Costs of production that vary with the level of output.

e.g. raw materials and distribution costs.

Front 60

Venture Capital

Back 60

A form of business finance, unsecured funding provided by specialist firms in return for a proportion of the company's shares. Venture capital investments are seen as relatively high risk because they are unsecured. They also involve a higher rate of interest to compensate for the risk involved.