Definitions

Question 1

Advertising

Answer 1

A method of communicating information about the product; the business pays for advertising time/space

Question 2

Aim

Answer 2

The intention to reach a goal

Question 3

Air pollution

Answer 3

The presence or introduction of harmful substances into the air causing disease, allergies or damage to humans, animals, plants or the built environment.

Question 4

Asset

Answer 4

Something the business owns; it has a value.

Question 5

Average rate of return

Answer 5

The average profit for the year as a percentage of the original investment. Average rate or return = average return per annum / initial  100

Question 6

Boston matrix

Answer 6

A tool for analysing the contribution made by each product in a business’ product portfolio. It plots each product’s position according to its market share and the rate of growth of the market.

Question 7

Brand image

Answer 7

The consumers’ perception of the brand; its character, qualities and shortcomings. It is developed over time and operates as a consistent theme through advertising campaigns.

Question 8

Break-even chart

Answer 8

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.

Question 9

Break-even output

Answer 9

The point at which the business’ total sales equals the total costs. There is neither profit nor loss.

Question 10

Buffer stock

Answer 10

A stock of raw materials held in reserve to protect the production process from unforeseen shortages.

Question 11

Business plan

Answer 11

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.

Question 12

Cash

Answer 12

Money that the business has in cash or at the bank.

Question 13

Cash flow forecast

Answer 13

A financial planning tool that estimates the money coming into and going out of the business on a month-by-month basis; it allows the business to predict times when additional finance may be needed to maintain liquidity.

Question 14

Cash inflow

Answer 14

Money received by the business from its operations or investments.

Question 15

Cash outflow

Answer 15

Money paid out by the business to fund its operations or investment activities.

Question 16

Centralisation

Answer 16

Maintaining control by keeping authority at the senior levels of the organisation.

Question 17

Chain of command

Answer 17

The line through the hierarchy that shows who is responsible for whom from top to bottom of an organisation.

Question 18

Channels of distribution

Answer 18

The route the ownership of the product transfers from the seller to the buyer; it may be a single transaction or pass through others such as wholesalers, distributors, agents and retailers.

Question 19

Closing balance

Answer 19

The amount that remains in the account at the end of an accounting period.

Question 20

Commission

Answer 20

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.

Question 21

Competition

Answer 21

The rivalry between businesses looking to sell their goods/services in the same market.

Question 22

Competitive pricing

Answer 22

Setting the price of a product so that it is in line with competitors’ prices.

Question 23

Consumer law

Answer 23

Laws designed to ensure that businesses make products that are safe and of good quality, and that they deal with customers honestly and fairly.

Question 24

Consumer spending

Answer 24

The money spent by households on goods and services to satisfy their needs and wants

Question 25

Contracts of employment

Answer 25

A legal document that sets out the terms and conditions of the job for the employer and the employee.

Question 26

Cost

Answer 26

The money spent by a business on goods and services.

Question 27

Cost-plus pricing

Answer 27

Setting the price of a good or service at an amount higher than the cost of producing it so that a profit is made.

Question 28

Customer

Answer 28

Individuals, businesses or organisations that purchase goods/services and make decisions about which supplier to choose.

Question 29

Customer engagment

Answer 29

The relationship between the business and the customer that puts the customer’s requirements at the centre of the operation to build brand loyalty.

Question 30

Customer loyalty

Answer 30

The likelihood that past customers will continue to buy from the business, enhanced by high quality customer service and/or reward programmes.

Question 31

Decentralisation

Answer 31

Where authority is spread widely through the organisation.

Question 32

Delayering

Answer 32

The reorganisation of the organisation’s employees so that there are fewer levels of management.

Question 33

Delegation

Answer 33

Allocating a task to someone who would not normally be responsible for it.

Question 34

Demand

Answer 34

The quantity of a particular product that will be bought at particular price over a specific time.

Question 35

Directors

Answer 35

The people who are elected by the shareholders to run the business on their behalf.

Question 36

Diseconomies of scale

Answer 36

When a business grows too large, leading to a possible increase in unit cost.

Question 37

Disposal of waste

Answer 37

The removal, storage or destruction of unwanted material. Methods include recycling, burning and landfill sites.

Question 38

Dividend

Answer 38

A portion of the after-tax profit that is paid to shareholders according to the number of shares they own.

Question 39

E-commerce

Answer 39

Business transactions carried out electronically on the internet.

Question 40

Economies of scale

Answer 40

The cost advantage of producing on a large scale. As output increases the unit cost decreases.

Question 41

Employees

Answer 41

Individuals who work full time or part time for the business; they have a contract of employment detailing their duties and rights.

Question 42

Employment law

Answer 42

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.

Question 43

Enterprise

Answer 43

The ability to identify business ideas and opportunities to bring them to fruition and to take risks where appropriate.

Question 44

Entrepreneur

Answer 44

A person who has the vision to use initiative to make business ideas happen, managing the resources and risks.

Question 45

Equality act

Answer 45

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.

Question 46

Ethical objectives

Answer 46

A business’ goals that relate to fair business practice or moral guidelines and make a positive contribution to the business’ reputation.

Question 47

Ethics

Answer 47

The moral principles that guide how a business operates.

Question 48

Exchange rates

Answer 48

The price of one currency based on another or the cost of buying one currency from another, for example £1 = $1.21.

Question 49

Expansion

Answer 49

The process of increasing a business’ size.

Question 50

Export

Answer 50

Good/service sold to a customer in another country.

Question 51

Extension strategies

Answer 51

Methods that can be used to prolong the life of a product; could include price reductions, modifications to the product or relaunch.

Question 52

External growth

Answer 52

The growth of a business by joining with another by merger or takeover.

Question 53

External sources of finance

Answer 53

Obtaining funds from sources that are not part of the business; possibilities include bank loan, mortgage, overdraft, additional partner or share issue.

Question 54

Factors of production

Answer 54

The elements that combine in the production process: land, labour, capital and enterprise.

Question 55

Fixed costs

Answer 55

The costs that stay largely the same, regardless of the business’ output.

Question 56

Flat organisational structure

Answer 56

An organisational structure with a wide span of control and few levels of hierarchy (a short chain of command).

Question 57

Flow production

Answer 57

Using a production line to make goods continuously and in large numbers.

Question 58

Focus groups

Answer 58

A small number of people from the target market brought together to discuss a particular product; produces qualitative data about their preferences and opinions.