Key Terms

Question 1

What is the difference between an aim and an objective ?

Answer 1

An aim is a long term plan of the business

An objective is a medium to long term goal established to coordinate the business

Question 2

What is the difference between a fixed cost and a variable cost?

Answer 2

A fixed cost doesn’t change with output. For example rent

A variable cost does change with output. For example fuel costs

Question 3

What is unlimited liability ?

Answer 3

If financial problems occur, the individuals or business could lose their personal assets

Question 4

What is limited liability ?

Answer 4

If financial problems occur, personal belongings are safe

Question 5

What is an Ltd?

Answer 5

Private limited company

Question 6

What is a Plc?

Answer 6

A public limited company

Question 7

What is market capitalisation?

Answer 7

The total value of the issues shares of a public limited company

Question 8

What are real incomes?

Answer 8

Real incomes are incomes that are adjusted for the rate of inflation

Question 9

What are the four factors that shape the external environment ?

Answer 9

Demographic
Economic
Environmental
Market

Question 10

What is the difference between autocratic leadership and democratic ?

Answer 10

Democratic is a decentralised approach and involves employees in decision making
Autocratic is a centralised approach that involves managers making decisions

Question 11

What are non programmed decisions ?

Answer 11

Less structured decisions

Question 12

What are programmed decisions ?

Answer 12

Familiar and routine decisions

Question 13

What is segmentation?

Answer 13

When similar customer needs and wants are grouped within a market

Question 14

What is targeting ?

Answer 14

When a business decided which segments it wants to operate in

Question 15

What is the difference between niche and mass marketing ?

Answer 15

Niche marketing is focusing on specific segments of the market
Mass marketing is focusing on meeting needs of the majority

Question 16

What is positioning?

Answer 16

Positioning identified the benefit and price combination of a product relative to competitors

Question 17

What is product portfolio analysis ?

Answer 17

Examines the market position of all the products of a business

Question 18

What is the difference between penetration pricing and price skimming ?

Answer 18

Price slimming is when demand is inelastic and is successful when a high price is charged

Penetration pricing is when demand is sensitive to price and is successful when a low price is charged

Question 19

What is capacity ?

Answer 19

The capacity of a business measures the maximum it can produce given its existing resources

Question 20

What is lean production?

Answer 20

When managers reduce waste and therefore operations become more efficient

Question 21

What is the difference between quality assurance and quality control?

Answer 21

Quality assurance is attention to detail at every stage of the production

Quality control is maintaining standards by inspection

Question 22

What is mass customisation ?

Answer 22

Producing on a large scale while still enabling individual customer preferences

Question 23

What is gross profit?

Answer 23

Income from sales - the cost of good and services sold

Question 24

What is operating profit ?

Answer 24

Financial surplus arising from the business trading activities before taxation

Question 25

What is the difference between direct and in direct costs ?

Answer 25

Direct costs are specific to a particular area, for example raw materials In direct costs are costs that relate to all aspects of a business, for example maintenance costs

Question 26

What are budgets ?

Answer 26

Budgets are financial plans that forecast revenue from sales - revenue budgets - expenditure budgets - profit budgets

Question 27

What is variance analysis?

Answer 27

A process for analysing budgets | It investigates the differences between forecast data and actual figures

Question 28

What is break even out out ?

Answer 28

The level of output at which total costs = revenue | No profit or loss is made

Question 29

What is the margin of safety?

Answer 29

Measures the amount by which a business's current level of output exceeds break even output

Question 30

What are examples of short term sources of finance ?

Answer 30

Retained profit Debt factoring Overdrafts

Question 31

What are examples of long term sources of finance ?

Answer 31

Venture capital Share capital Loans and mortgages Retained profit

Question 32

What is crowdfunding ?

Answer 32

Funding a project by raising small amounts of money from people using the Internet

Question 33

What is job design?

Answer 33

The process of grouping together or dividing up tasks and responsibilities to create jobs

Question 34

What is job enrichment ?

Answer 34

When employees jobs are redesigned to provide them with more challenging and complex tasks

Question 35

What is span of control?

Answer 35

The number of subordinates directly responsible to a manager

Question 36

Where is cash cow in terms of the Boston matrix model ?

Answer 36

High market share | Low market growth

Question 37

Where is the question mark in terms of the Boston matrix model?

Answer 37

Low market share and high market growth

Question 38

Where is the star in terms of the Boston matrix model?

Answer 38

High market growth and high market share

Question 39

Where is the dog in terms of the Boston matrix model?

Answer 39

Low market share and low market growth

Question 40

What is contribution?

Answer 40

The difference between revenue and variable costs

Question 41

What is extrapolation?

Answer 41

Look at what has happened in past and to continue this trend into the future