Business Paper 3 Vocab Flashcards
(171 cards)
1
Q
Break-even
A
When a business generates just enough revenue to cover its total costs.
2
Q
Corporation Aim
A
The specific goal a corporation hopes to achieve
3
Q
Corporate Objectives
A
The objectives of a medium to large sized business as a whole
4
Q
Departmental and functional objectives
A
The objectives of a department within a business.
5
Q
Hierarchy
A
The order or levels of responsibility in an organisation, from lowest to highest
6
Q
Mission Statement
A
A brief statement written by the business, describing its purpose and objectives, designed to cover its present operations.
7
Q
Objective
A
A target of or outcome for a business that allows it to achieve its aims.
8
Q
Shareholder
A
Somebody who owns shares in a company or business.
9
Q
SMART
A
Acronym for the attributes of a good objective. Specfic, Measurable, Agreed, Realistic and Time-specific.
10
Q
Stakeholder
A
Somebody who has invested money in a business or has an important connection with it. They are therefore affected by the success/failure of the business
11
Q
Vision
A
A view of what the corporation wants to be like in the future.
12
Q
Corporate strategy
A
The plans and polices developed to meet a company’s objectives.
13
Q
Customer base
A
A group of customers that make continual purchases from a business.
14
Q
Diversification
A
Developing new products in new markets.
15
Q
Market Development
A
The marketing of exisiting products in new markets.
16
Q
Market Penetration
A
Using tactics such as the marketing mix to increase the growth of existing products in an existing market.
17
Q
Portfolio Analysis
A
A method of categorising all the products of a firm to decide where each one fits within the strategic plans.
18
Q
Product Development
A
Marketing new or modified products in existing markets.
19
Q
Theoretical model
A
A situation that could exist.
20
Q
External Audit
A
An assessment of the external environment in which a business finds itself, such as the market within which it operates or government restrictions on its operations.
21
Q
Internal audit
A
An analysis of the business itself and how it operates.
22
Q
SWOT Analysis
A
An analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by its external environment.
23
Q
Trade Association
A
An organisation whose members are all involved in the same industry or trade. The organisation pursues the interests of these businesses.
24
Q
Cartel
A
A group of businesses that act together to reduce the competition in a market - by fixing prices, for example
25
Peer-to-Peer Lending (P2P)
Providing loans to individuals or businesses through online services that match lenders and borrowers.
26
PESTLE Analysis
Analysis of the external political, economic, social, technological, legal and environmental factors affecting a business.
27
Predatory Pricing
Setting a low price to force rivals out of business.
28
Rivalry
The competition that exists between businesses operating in the same market.
29
Diseconomies of Scale
Rising long-run average costs as a business expands beyond its minimum efficient scale.
30
Inorganic Growth
A business growth strategy that involves two (or more) businesses joining together to form one much larger one
30
Economies of Scale
The reductions in average costs experienced by a business as output increases.
31
External Economies of Scale
The cost reductions available to all businesses as the industry grows.
32
Internal Economies of Scale
The cost reductions experienced by a single business as it grows
33
Minimum Efficient Scale
The output that minimises long-run average costs
34
Organic Growth
A business growth strategy that involves a business growing gradually using its own resources
35
Sole Trader
A business organisation which has a single owner
36
Venture Capitalist
Provider of funds for small- or medium-sized companies that may be considered too risky for other investors
37
Backward Vertical Integration
Joining with a business in the previous stage of production
37
Franchising
A business model where a business owner allows another person to trade under their name.
38
Retained Profit
After tax that is 'ploughed back' into the business.
39
Stake
A financial interest in a business which entitles the investor to part-ownership.
40
Acquisition
The purchase of one company by another
41
Conglomerate
A very large single business organisation made up of many different businesses through unrelated products.
42
Forward Vertical Integration
Joining with a business in the next stage of production
43
Horizontal Integration
The joining of businesses that are in exactly the same line of business
44
Integration
The joining together of two businesses as a result of a merger or takeover
45
Merger
Occurs when two (or more) businesses join together and operate as one
46
Synergy
The combining of two or more activities or businesses which creates a better outcome than the sum of the individual parts
47
Takeover
The process of one business buying another
48
Overtrading
A situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast.
49
Centring
A method used to calculate the moving average, where the average is plotted or calculated in relation to the central figure.
50
Correlation
The relationship between two sets of variables
51
Correlation Coefficient
A measure of the extent of the relationship between two sets of variables.
52
Extrapolation
Forecasting future trends based on past data.
53
Line of Best Fit
A straight line down through the centre of a group of data points plotted on a scatter graph.
54
Moving Average
A succession of averages derived from successive segments of a series of values.
55
Time-Series Analysis
A method that allows a business to predict future levels from past figures.
56
Average Rate of Return (ARR)
A method of investment appraisal that measures the net return per annum as a percentage of its initial spending.
57
Capital Cost
The amount of money spent when setting up a new venture.
58
Cash inflow
The cash coming into the business.
58
Cash outflow
The cash going out of the business.
59
Discounted Cash Flow (DCF)
A method of investment appraisal that takes interest rates into account by calculating the present value of future income.
60
Investment
The purchase of capital goods.
61
Net Cash Flow
Cash inflows minus cash outflows.
62
Net Present Value (NPV) Formula
Present value of future income for a project - initial cost
63
Opportunity Cost
The benefit lost from the next best alternative to the one that has been chosen.
64
Payback Period
The amount of time it takes to recover the cost of an investment project.
65
Qualitative
Data expressed through words which conveys attitudes, opinions and feelings
66
Quantitative
Data expressed through numbers.
67
Back Data
Data obtained from a previous time period
68
Probability
The chances of an event happening
69
Rollback Technique
The process of working back through a decision tree (from right to left) calculating the expected values at each node
70
Critical Path
The tasks involved in a project, which if delayed, could delay the project.
71
Critical Path Analysis
A method of calculating the minimum time required to complete a project, identifying delays which could be critical to its completion.
72
Earliest Start Time (EST)
How soon a task in a project can begin. It is influenced by the length of time taken by tasks which must be completed before it can begin.
73
Free Float
The time by which a task can be delayed without affecting the following task.
74
Latest Finish Time (LFT)
The latest time that a task in a project can finish.
74
Nodes
Positions in a network diagram which indicate the start and finish times of tasks.
75
Total Float
The time by which a task can be delayed without affecting the time needed to complete the project.
76
Contribution Pricing
A pricing strategy that involves setting a price that exceeds the value of the variable cost.
77
Overheads
Expenses such as lighting, equipment and any extras paid for out of a centralised budget.
78
Total Contribution
The amount of money left over from the sale of several units, or an order, after variable costs have been covered.
79
Unit Contribution
The amount of money left over from the sale of a single unit after variable costs have been covered.
80
Infrastructure
The basic physical and organisational structures and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise
81
Multinational
A business organisation operating in several countries
82
Organisational Culture
The values, attitudes, beliefs, meanings and norms that are shared by people and groups within an organisation
83
Strong Culture
A culture where the values, beliefs and ways of working are deeply fixed within the business and its employees
84
Labour Turnover
The rate at which employees leave a business
85
Weak Culture
a culture where workers are not fully aligned to the values, beliefs and ways of working of an organisation
86
Dividend
A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves)
87
Remuneration
The reward for work in the form of pay, salary or wages, including allowances and benefits, such as company cars, health insurance, etc.
88
Shareholder Value
A measure of company performance that combines the size of dividends with the share price
89
Audit
An official inspection of an organisation's accounts, typically by an independent body.
90
Business Ethics
The moral principles that guide the way in which a business behaves
91
Corporate Social Responsibility
A business assessing and taking responsibility for its effects on the environment and its impact on social welfare.
92
Ethical Codes of Practice
Statements about how employees in a business should behave in particular circumstances where they experience ethical issues
93
Ethics
Moral rules or principles of behaviour that should guide members of a profession or organisation.
94
National minimum wage
The minimum pay per hour all workers are entitled to by law
95
Living Wage
An hourly rate of pay based on the basic cost of living.
96
Solvency
The ability of a business to meet its debts
97
Absenteeism
Where workers fail to turn up for work without good reason.
98
Capital Gain
The profit made from selling a share for more than it was bought for
99
Consultation
Listening to the views of employees before making key decisions that affect them
100
Labour Productivity
Output per worker in a given time period.
101
Quality Circles
Where workers are given time to meet regularly to discuss work issues.
102
Labour Retention
The number of employees who remain in a business over a period of time
103
Insolvency
The state of being unable to pay the money owed, by a person or company, on time.
104
Transformative Leadership
Where new leadership brings about change with the purpose of improving business performance.
105
Quantitative Sales Forecasting
It uses historical sales data and statistical methods to predict future sales.
106
Investment Appraisal
The process of evaluating the potential return and risk of an investment project, helping businesses decide whether it's worth pursuing.
107
Decision Tree
A visual tool that helps businesses evaluate choices by showing possible decisions, outcomes and associated probabilities.
108
Critical Path Analysis (CPA)
Project management tool that identifies the longest sequence of dependent tasks determining the shortest time to complete a project.
109
Contribution Formula
Sales Revenue - Variable Costs
110
Moving Average Formula
Sum of Data Points In The Period/Number of Data Points
111
Payback Period Formula
Amount invested/Annual Net Cash Flow
112
Average Rate of Return (ARR) Formula
Average Net Return/Investment * 100
113
Net Present Value Formula
Sum of the present value of cash flow - the cost of the initial investment.
114
Return
NPV/Investment * 100
115
Gearing Ratio Formula
Non-current liabilities - capital employed * 100
116
Return on Capital Employed Formula
Operating profit/Capital Employed * 100
117
Labour Productivity Formula
Output per period/Number of employees
118
Labour Turnover Formula
Number of staff leaving/Average Number of Staff Employed * 100
119
Labour Retention Formula
Number of staff employed at start of period - number of leavers/ number of staff employed at start of period * 100
120
Absenteeism Formula
Number of days of staff absence in a time period/number of staff employed * time period * 100
121
Gross Profit Margin
Gross Profit/Revenue * 100
122
Net Profit Margin
Net Profit Before Tax / Revenue * 100
123
Current Ratio
Current Assets / Current Liabilities
124
Acid Test Ratio
Current Assets - Inventories/ Current Liabilities
125
Cost leadership (Porter's Generic Strategies)
lowest cost producer in the market, meaning that the business can offer the lowest price.
126
Differentiation (Porter's Generic Strategies)
A business operating in a mass market with a unique position
127
Focus (Porter's Generic Strategies)
Focusing on a very narrow segment of the market.
128
What are Porter's Five Forces?
Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of New Entrants, Threat of Substitutes, Rivalry Among Existing Firms
129
Porter's Five Forces
Model which helps analyse the intensity of competition in an industry and assess profitability.
130
Ansoff's Matrix
A strategic tool used to explore four key growth strategies, each with varying levels of risk. E.g. market penetration, product development, market development and diversification.
131
Porter's Generic Strategies
A framework used to identify three primary strategies for gaining a competitive advantage.
132
Methods of Growing Organically
New Customers, New Products, New Markets, Franchising...
133
Pros of Organic Growth
Lower Risk, Cost-effective, Full Control, Financial Protection, Avoids Diseconomies of Scale.
134
Disadvantages of Organic Growth
Slow Growth, Limited Resources, Competitive Pressure, Delayed Economies of Scale
135
Pros of Inorganic Growth
Speed, Economies of Scale, Reduced Competition
136
Disadvantages of Inorganic Growth
Regulatory Scrutiny (regulations), Integration Costs and Loss of Control
137
Sources of Diseconomies of Scale
Internal Diseconomies); External Diseconomies (demand for raw materials); Internal Communication, Overtrading
138
Advantages of Quantitative Sales Forecasting
Data-driven; trend identification; objective; clear communication
139
Disadvantages of Quantitative Sales Forecasting
Historical Bias; Ignores Qualitative Factors; Requires Accurate Data; Complexity
140
Pros of Investment Appraisal
Informed Decisions; Risk Management; Prioritisation; Resource Allocation
141
Disadvantages of Investment Appraisal
Estimation Risk; Subjective Assumptions; Time-consuming; Ignores Qualitative Factors
142
Pros of Decision Trees
Clear Visuals; Structured Analysis; Risk Qualification; Versatile
143
Disadvantages of Decision Trees
Oversimplification; Subjectivity; Large Trees May be Too Complex; Bias Risk
144
Pros of Critical Path Analysis
Efficiency; Resource Management; Clear Visualisation; Improved Planning
145
Disadvantages of Critical Path Analysis
Complexity with Large Projects; Estimation Risk; Focus on Critical Tasks; Dynamic Nature
146
Pros of Contribution
Profitability Insight; Decision-making; Break-even Analysis; Cost Control
147
Disadvantages of Contribution
Ignored Fixed Costs; Simplication of Costs; Limited Scope; Static Analysis
148
Types of Corporate Cultures
Power Culture, Role Culture, Task Culture, Person Culture
149
Break Even Formula
Fixed Costs/Contribution
150
Working Capital
Current Assets - Current Liabilities
151
Pseudo Consultation
Occurs when employees are consulte, but their input has little to no impact on the final decision-making process.
152
Classical Consultation
Involves meaningful discussions with employees, allowing them to contribute their perspectives on key issues.
153
Empowerment
Giving employees more control over their roles, increasing their sense of ownership and job satisfaction.
154
Contigency Planning
The process of preparing for unexpected events or crises that could disrupt business operations. E.g. natural disasters
155
Succession Planning
Ensures that key leadership roles are filled smoothly in the event of a vacancy.
156
Strategic Decisions
Long-term, high-level decisions that set the direction and goals of a company.
157
Tactical Decisions
Short-term operational decisions that support the implementation of strategic goals
158
Pros of Strategic Decisions
Aligns with long-term vision, creates competitive advantage and optimises resources.
159
Cons of Strategic Decisions
Time-consuming, high risk and expensive.
160
Pros of Tactical Decisions
Quick to implement, cost-effective and responsive
161
Cons of Tactical Decisions
Limited scope, can misalign with long-term goals and can be reactive.
162
Cons of Mission Statements/Corporate Objectives
Unrealistic expectations, vague, static
163
Key Differences in Inorganic and Organic Growth
Speed and Risk
164
Gross Profit
Revenue - Cost of Sales/Goods Sold
165
Simple Payback
Measures how long it takes to recover the initial investment.
| Quicky + easy, assess how fast an investment recover/net return, later y
166
ARR
Calculates average profit each year as a percentage of the original investment
| easy to understand+comparison/does not measure risks, ignores timing
167
NPV
Uses discounted cash flow to show the value of future income today
| considers time of value of money, clear mesure of added value/inaccurate
