External Environment

Question 1

Average Rate of Return

Answer 1

Average annual profit as a percentage of the initial investment.

ARR% = (total net cash flow/ number of years ) divided by initial investment x 100

Question 2

BRIC Economies

Answer 2

4 largest emerging economies Brazil, Russia, India, China

Question 3

Carroll’s pyramid

Answer 3

Sets out priorities for business to become good corporate citizens, starting with goal of being profitable, then obeying laws, then being ethical, then being philanthropic.

Question 4

Contractionary policies

Answer 4

Leads to reduction in demand within the economy due to government action such as high interest rates, high taxes or low gov spending

Question 5

Core competencies

Answer 5

Key area of strength for business that gives competitive advantage

Question 6

Cost push inflation

Answer 6

General rise in price cause by increase of cost

Question 7

CSR

Answer 7

commitment to behave ethically and contribute to economic development while improving quality of life for workforce and local community

Question 8

Customs union

Answer 8

Group of countries that don’t impose tariffs on each others goods and common taxes on outside goods ( example is EU)

Question 9

Demand pull inflation

Answer 9

Rise in price due to nationwide rise in demand

Question 10

Disruptive technology

Answer 10

New product or process that changes competitive advantage of existing market (eg Uber )

Question 11

E-commerce

Answer 11

Buying through electronics (eg online purchasing)

Question 12

Economic growth

Answer 12

Rise in real GDP = increase in amount of goods produced per capita per period of time

Question 13

Elkingtons triple bottom line

Answer 13

Business not only assessed financial but also on their social impact and environmental impact (considering PROFIT, PEOPLE , PLANET)

Question 14

Environment audit

Answer 14

Check up on level of pollution, waste, emissions of a firm

Question 15

Exchange rate appreciation

Answer 15

Rise in value of currency compared to other currencies. Give example

Question 16

Expansionary rate appreciation

Answer 16

Government action that’s stimulates increase in gdp (eg cutting taxes)

Question 17

Fiscal policies

Answer 17

Using tax and gov expenditure to influence economy, announced by chancellor in budget

Question 18

Functional decision making

Answer 18

Policies adopted by individual business departments such as market and operations

Question 19

Globalisation

Answer 19

Growth towards worldwide market, increasing integration of the worlds local regions and national economies into a single international market.

Question 20

Greenwashing

Answer 20

Misleading information by firm to conceal its abuse to environment in order to preserve public image

Question 21

GDP

Answer 21

Total value of output produced in a nation per year, equal to total income generated by nation in one year - total expenditures

Question 22

Hedging

Answer 22

Technique used to reduce financial risk (eg insuring against future exchange rate changes)

Question 23

Income elasticity of demand

Answer 23

Show how income changes affect demand for goods

Income elasticity of demand (YED)

= % change in quantity demanded
—————————————
% change in income

Question 24

Inferior good

Answer 24

Product that’s demand falls as income rises so has negative income elasticity

Question 25

Inflation

Answer 25

Sustained increase in average price of goods and services. Inflation also represents therefor a fall in purchasing power of money

Question 26

Investment appraisal

Answer 26

Attractiveness of a plan to generate future income

Question 27

Migration

Answer 27

Movement of people form one place to another , reason behind may be economic, social, political, environmental