All Key Words Flashcards
(30 cards)
Asset
Something the business owns; it has a value.
Average rate of return
The average profit for the year as a percentage of the original investment. Average rate of return = average return per annum/initial × 100
Break-even chart
A diagrammatic representation of the costs and revenue for a product; it plots total costs against total sales revenue, showing the break-even point where they cross.
Break-even output
The point at which the business’ total sales equals the total costs. There is neither profit nor loss.
Buffer stock
A stock of raw materials held in reserve to protect the production process from unforeseen shortages
Business plan
A detailed statement of how the business intends to operate, either at start-up or during a given period of time. Business plans are based on forecasts and so cover only a short time.
Centralisation
Maintaining control by keeping authority at the senior levels of the organisation.
Commission
An amount of money paid to an employee that is based on a percentage of the sales he/she achieved; paid in addition to a basic salary.
Cost-plus pricing
Setting the price of a good or service at an amount higher than the cost of producing it so that a profit is made.
Decentralisation
Where authority is spread widely through the organisation.
Diseconomies of scale
When a business grows too large, leading to a possible increase in unit cost.
E-commerce
Business transactions carried out electronically on the internet.
Economies of scale
The cost advantage of producing on a large scale. As output increases the unit cost decreases.
Employment law
Rulings that relate to the rights and responsibilities of people who work for a business; they affect the recruitment and selection process and how the business deals with its workers.
Equality Act (2010)
Protects people from discrimination in the workplace and in wider society. It sets out the different ways in which it is unlawful to treat someone.
Ethical objectives
A business’ goals that relate to fair business practice or moral guidelines and make a positive contribution to the business’ reputation.
Exchange rates
The price of one currency based on another or the cost of buying one currency from another, for example £1 = $1.21.
Factors of production
The elements that combine in the production process: land, labour, capital and enterprise.
Fringe benefits
Additional ‘perks’ that are in addition to a wage/salary; they are liable to income tax.
Globalisation
The trend for large businesses to operate on a worldwide scale; money, goods and services can be transferred across national borders.
Government grants
Money available from the government to fund projects that it wants to support; the money is not repaid, but there are conditions and often progress reports are required.
Limited liability
The owners are not responsible for the debts of the business. The limit of their liability for the business’ debts is the amount they invested.
Loss leader
A good or service sold at below cost price to bring customers into the shop with the intention that, once there, they may purchase full-priced items too.
Margin of safety
The amount by which current sales exceed the break-even level of output.
