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Business theme 2 > Theme 2 key terms > Flashcards

Theme 2 key terms Flashcards

1
Q

Fixed costs

A

Those that do not change as the number of sales change e.g. rent

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2
Q

Variable costs

A

Those that change in line with the amount of business e.g. cost of buying raw materials

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3
Q

Working capital

A

The finance available for the day to day running of the business

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4
Q

Angel investors

A

Investors who back a business before it opens its doors, taking full equity risk

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5
Q

Collateral

A

An asset used as security for a loan. It can be sold by a lender if the borrower fails to pay back a loan

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6
Q

Crowd funding

A

Obtaining external finance from many individuals, small investments usually web based

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7
Q

Public limited company(PLC)

A

A company with limited liability and shares, which are available to the public. Its shares can be quoted on the stock market

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8
Q

Seedcorn capital

A

The early stage(sowing a seed) finance that might come from angel investors

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9
Q

Share capital

A

Business finance that has no guarantee of repayment or annual income, but gains a share of control of the business and its potential profits

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10
Q

Stock market

A

A market for buying and selling company shares. it supervises the issuing of shares by companies. It is also a second hand market for stocks and shares

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11
Q

Venture capital

A

High risk capital invested in a combination of loans and shares, usually in a small, dynamic business

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12
Q

Bankrupt

A

When an individual is unable to meet personal liabilities, some of all of which can be a consequence of business activities

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13
Q

Creditors

A

Those owed money by a business

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14
Q

Limited liability

A

Owners are not liable, they can lose no more than the sum they invested

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15
Q

Sole trader

A

A one person business with unlimited liability

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16
Q

Unlimited liability

A

Owners are liable for any debts incurred by the business, even if it requires them to sell all their assets and possessions and become personally bankrupt

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17
Q

Best case

A

An optimistic estimate of the best possible outcome

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18
Q

Business plan

A

A document setting out a business idea and showing how it can be financed, marketed and put into practice

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19
Q

Cash flow forecast

A

Estimating future monthly inflows and outflows, to find out the net cash flow

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20
Q

Just-In-Time

A

Ordering stock so that it arrives just before it is needed

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21
Q

Overdraft

A

Short term borrowing from a bank. The business only borrows as much as it needs to cover its daily cash shortfall

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22
Q

Worst case

A

A pessimistic estimate assuming the worst possible outcome

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23
Q

Contingency plans

A

Plans held in reserve in case things go wrong

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24
Q

Real incomes

A

Changes in household incomes after allowing for changes in prices

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25
Q

Sales forecast

A

A method of predicting future sales using statistical methods

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26
Q

Trend

A

The general path that a series of values follows over time, disregarding variations or random fluctuations

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27
Q

Piece rate labour

A

Paying workers per item they make, that is without regular pay

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28
Q

Sales revenue

A

The number of units sold in a time period multiplied by the average selling price of those units

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29
Q

Sales volume

A

The number of units sold in a time period

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30
Q

Total costs

A

All the costs of producing a specific output level

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31
Q

Total variable costs

A

All the variable costs of producing a specific level of output- that is variable costs per unit multiplied by the number of units sold

32
Q

Variable costs

A

Those that change in line with the amount of business

33
Q

Break even chart

A

A line graph showing total revenues and total costs at all possible levels of output or demand from zero to maximum capacity

34
Q

Contribution

A

This is the total revenue less variable costs. The calculation of contribution is useful for business that are responsible for a range of products

35
Q

Margin of safety

A

The amount by which current output exceeds the level of output necessary to break even

36
Q

Adverse variance

A

A difference between budgeted and actual figures that is damaging to a firms profit

37
Q

Criteria

A

Yardsticks against which success or the lack of it can be measured

38
Q

Delegation

A

Passing authority down the hierarchy to allow junior employees some decision making power

39
Q

Expenditure budget

A

Setting a maximum figure on what department or manager can spend over a period of time, this controls costs

40
Q

Favourable variance

A

A difference between between budgeted and actual figures that boost a firms profit

41
Q

Income budget

A

Setting a minimum figure for the revenue to be generated by a product, a department or a manager.

42
Q

Zero budgeting

A

Setting all future budgets at £0, to force managers to have to justify the spending levels they say they need in the future

43
Q

Corporation tax

A

A levy of the incomes of companies i.e. the percentage you pay a percentage of your tax pre profit

44
Q

Dividends

A

Annual payments made to shareholders

45
Q

Fixed overheads

A

The indirects costs that have to be paid however the business is performing e.g. rent

46
Q

Contingency finance

A

Planning for the unexpected by either keeping a cash cushion in the firms current account or keeping an overdraft facility little used

47
Q

Credit period

A

The length of time a supplier allows a buyer to wait before paying

48
Q

Liquidation

A

Closing the business down by selling off all the assets , paying debts and returning what is left to the shareholders

49
Q

Liquidity

A

The ability of a business to pay its bills on time, which all depends upon having enough cash in the bank

50
Q

Working capital cycle

A

How long it takes for a complete cycle from cash out(buying stocks) to cash back in from a customer payment. it could vary from one day to one year

51
Q

Administration

A

When the directors of a business feel forced by the threat of insolvency to hand over management control to an administrator(usually an accountant), who may try to sell the business or perhaps close it down and sell off the assets

52
Q

Business model

A

The underlying plan of how the business is going to make profit in the long term

53
Q

Enterprise resource planning

A

Planning that log all of a firms costs, working methods and resources within a piece of software; this provides a model of the business that can be used to answer questions

54
Q

Supply chain

A

The whole path from suppliers of raw materials through production and storage onto customer delivery

55
Q

Barrier to entry

A

Factors that make it hard for new firms to break into an existing market

56
Q

GDP

A

Gross domestic product is the value of all the goods and services produced in a country in a year

57
Q

Job enrichment

A

Giving people the opportunity to use their ability

58
Q

Lean production

A

Focusing on minimising wastage of resources throughout the supply process

59
Q

Downtime

A

Any period when machinery is not being used in production; some downtime is necessary for maintenance but too much may suggest incompetence

60
Q

Excess capacity

A

When there is more capacity than justified by current demand

61
Q

Rationalisation

A

Reorganising in order to increase efficiency. This often implies cutting capacity to increase the percentage utilisation

62
Q

Sub contracting

A

Where another business is used to perform or supply certain aspects of a firms operations

63
Q

Buffer stock

A

The desired minimum stock level held by a firm just in case something goes wrong

64
Q

Competitive advantage

A

A feature that gives one business an edge over its rivals

65
Q

Competitiveness

A

The extent to which a firm can stand up to or beat its rivals

66
Q

Opportunity cost

A

The cost of missing out on the next best alternative when making a decision

67
Q

Stockholding cost

A

The overheads resulting from the stock levels held by a firm

68
Q

Right first time

A

Avoiding mistakes and therefore achieving high quality with no wastage of time or materials

69
Q

Trade off

A

Accepting less of one thing achieve more of another

70
Q

Zero defects

A

Eliminating quality defects by getting things right the first time

71
Q

Consumer demand

A

The level of spending by consumers in general

72
Q

Discretionary income

A

A persons income after deducting tax and fixed payments such as rent and utility bills

73
Q

Economic climate

A

The atmosphere surrounding the economy

74
Q

Real

A

Changes in money excluding the distorting effects of change in prices. so a fall in real wages may mean that wages are unchanged but prices have risen

75
Q

Recession

A

Two or more quarters of negative growth

76
Q

Collusion

A

When managers from different firms get together to discuss ways to work together to restrict supply/raise prices

77
Q

Non-price competition

A

All competitive strategies other than price such as branding product design and technological innovation

Business theme 2 (12 decks)

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