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Business Studies > Theme 2 - Managing Business Activities > Flashcards

Theme 2 - Managing Business Activities Flashcards

1
Q

Capital

A

The money provided by the owners in a business.

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2
Q

Capital expenditure

A

Spending on business resources that can be used repeatedly over a period of time.

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3
Q

Internal finance

A

Money generated by the business or its current owners.

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4
Q

Retained profits

A

Profit after tax that is ‘ploughed back’ into the business.

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5
Q

Revenue expenditure

A

Spending on business resources that have already been consumed or will be very shortly.

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6
Q

Sale and leaseback

A

The practice of selling assets, such as property or machinery, and leasing them back from the buyer.

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7
Q

Authorised share capital

A

The maximum amount that can be legally raised.

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8
Q

Bank overdraft

A

An agreement between a business and a bank that means a business can spend more money that it has in its account (going ‘overdrawn’). The overdraft limit is agreed and interest is only charged when the business goes overdrawn.

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9
Q

Capital gain

A

The profit made from selling a share for more than it was bought.

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10
Q

Crowd funding

A

Where a large number of individuals (the crowd) invest in a business or project on the internet, avoiding the use of a bank.

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11
Q

Debenture

A

A long-term loan to a business.

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12
Q

Equities

A

Another name for an ordinary share.

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13
Q

External finance

A

Money raised from outside the business.

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14
Q

Issues share capital

A

Amount of current share capital arising from the sale of shares.

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15
Q

Lease

A

A contract to acquire the use of resources such as property or equipment.

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16
Q

Peer to peer lending (P2PL)

A

Where individuals lend to other individuals without prior knowledge of them, on the internet.

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17
Q

Permanent capital

A

Share capital that is never repaid by the company.

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18
Q

Secured loans

A

A loan where the lender requires security, such as property, to provide protection in case the borrower defaults.

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19
Q

Share capital

A

Money introduced into the business through the sale of shares.

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20
Q

Unsecured loans

A

Where the lender has no protection if the borrower fails to repay the money owned.

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21
Q

Venture capitalism

A

Providers of funds for small or medium-sized companies that may be considered too risky for other investors.

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22
Q

Collateral

A

An asset that might be sold to pay a lender when a loan cannot be repaid.

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23
Q

Incorporated business

A

A business model in which the business and the owner(s) have separate legal identities.

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24
Q

Limited liability

A

A legal status that means shareholders can only lose the original amount they invested in a business.

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25
Q

Long-term finance

A

Money borrowed for more than one year.

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26
Q

Rights issue

A

Issuing new shares to existing shareholders at a discount.

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27
Q

Short-term borrowing

A

Money borrowed for 12 months or less.

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28
Q

Undercapitalised

A

A business not raising enough capital when setting up.

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29
Q

Unincorporated business

A

A business model in which there is no legal difference between the owner(s) and the business.

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30
Q

Unlimited liability

A

A legal status which means that business owners are liable for all business debts.

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31
Q

Business plan

A

A plan for the development of a business, giving details such as the products to be made, resources needed, and forecasts such as costs, revenues and cash flow.

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32
Q

Cash-flow forecast

A

The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month.

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33
Q

Cash inflows

A

The flow of money into a business.

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34
Q

Cash outflows

A

The flow of money out of a business.

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35
Q

Net cash flow

A

The difference between the cash flowing in and the cash flowing out of a business in a given time period.

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36
Q

Solvency

A

The degree to which a business is able to meet its debts when they fall due.

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37
Q

Consumer income

A

The amount of income remaining after taxes and expenses have been deducted from wages.

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38
Q

Consumer trends

A

The habits or behaviours of consumers that determine the goods and services they buy.

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39
Q

Economic growth

A

The rise in output of an economy as measured by the growth in Gross Domestic Product (GDP), usually as a percentage.

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40
Q

Economic variables

A

Measures within the economy which have effects on business and consumers. Examples include unemployment, inflation and exchange rates.

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41
Q

Extrapolation

A

Forecasting future trends based on past data.

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42
Q

Forecasting

A

A business process, assessing the probable outcome using assumptions about the future.

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43
Q

Sales forecast

A

Projection of future sales revenue, often based on previous sales data.

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44
Q

Time series data

A

A method that allows a business to predict future levels from past figures.

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45
Q

Average cost or unit cost

A

The cost of producing one unit, calculated by dividing the total cost by the output.

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46
Q

Fixed cost

A

A cost that does not change as a result of a change in output in the short run.

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47
Q

Long run

A

The time period where all facets of production are variable.

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48
Q

Profit

A

The difference between total costs and total revenue. It can be negative.

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49
Q

Sales revenue

A

The value of output sold in a particular time period. It is calculated by price X quantity of output.

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50
Q

Sales volume

A

The quantity of output sold in a particular time period.

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51
Q

Semi-variable cost

A

A cost that consists of both fixed and variable elements.

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52
Q

Short run

A

The time period where at least one factor of production is fixed.

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53
Q

Total cost

A

The entire cost of producing a given level of output.

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54
Q

Total revenue

A

The amount of money the business receives from selling output.

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55
Q

Variable cost

A

A cost that rises as output rises.

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56
Q

Break-even

A

When a business generates just enough revenue to cover its total costs.

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57
Q

Break-even chart

A

A graph containing the total cost and total revenue lines, illustrating the break-even output.

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58
Q

Break-even output

A

The output a business needs to produce so that its total revenue and total costs are the same.

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59
Q

Break-even point

A

The point at which total revenue and total costs are the same.

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60
Q

Contribution

A

The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit.

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61
Q

Margin of safety

A

The range of output between the break-even level and the current level of output, over which a profit is made.

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62
Q

Budget

A

A quantitative economic plan prepared and agreed in advance.

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63
Q

Budgetary control

A

A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences.

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64
Q

Historical figures

A

Quantitative information based on past trading records.

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65
Q

Production cost budget

A

A firms planned sales for a future period of time - can be measured in terms of volume or revenue.

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66
Q

Sales budget

A

A firms planned sales for a future period of time - can be measured in terms of volume or revenue.

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67
Q

Variance

A

The difference between actual financial outcomes and those budgeted.

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68
Q

Variance analysis

A

The process of calculating variances and attempting to identify their causes.

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69
Q

Zero-based budgeting or zero budgeting

A

A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder (they are given a zero value).

70
Q

Amortisation

A

The writing off of an intangible asset.

71
Q

Cost of sales

A

The direct costs of a business.

72
Q

Exceptional costs

A

A one-off costs, such as large bad debt.

73
Q

Gross profit margins

A

Gross profit expressed as a percentage of revenue/turnover.

74
Q

Operating profit

A

The difference between gross profit and business overheads, such as selling and administrative expenses.

75
Q

Operating profit margin

A

Operating profit expressed as a percentage of revenue/turnover.

76
Q

Profit for the year (net profit) or net profit

A

The difference between operating profit and interest and exceptional items.

77
Q

Profit for the year (net profit) margin or net profit margin

A

Net profit before tax, expressed as a percentage of revenue/turnover.

78
Q

Statement of comprehensive income

A

A financial document showing a company’s income and expenditure over a particular time period, usually one year.

79
Q

Revenue or turnover

A

The total income of a business resulting from sales of goods or services.

80
Q

Acid test ratio

A

Similar to the current ratio but excludes stocks from current assets. A more severe test of liquidity.

81
Q

Assets

A

Resources that belong to a business.

82
Q

Current assets

A

Liquid assets, i.e. those assets that will be converted into cash within one year.

83
Q

Current liabilities

A

Money owned by the business that must be repaid within one year.

84
Q

Current ratio

A

Assesses whether or not a business has enough resources to meet any debts that arise in the next 12 months. It is found by dividing current liabilities into current assets.

85
Q

Intangible assets

A

Non-physical assets, such as brand names, patents and customer lists.

86
Q

Inventories

A

Stocks, such as raw materials and finished goods held by a business.

87
Q

Liabilities

A

Money owned by the business to banks and suppliers.

88
Q

Liquidity

A

The ease of with which assets can be converted into cash.

89
Q

Net assets

A

Total assets - total liabilities.

90
Q

Non-current assets

A

Long-term resources that will be used by the business repeatedly over a period of time.

91
Q

Shareholders equity

A

The amount of money owed by the business to the shareholders.

92
Q

Statement of financial position (balance sheet)

A

A summary at a particular point in time of the value of a firms assets, liabilities and capital.

93
Q

Trade and other payables

A

Money owed by the business to suppliers and utilities, for example, sometimes called trade creditors.

94
Q

Trade and other receivables

A

Money owed to the business by customers and any prepayments made by the business.

95
Q

Working capital

A

The funds left over to meet day-to-day expenses after current debts have been paid. It is calculated by subtracting current liabilities from current assets.

96
Q

Administration

A

A failing business appoints a specialist to rescue the business or wind it up.

97
Q

External factors

A

Factors beyond the control of businesses cause them to collapse.

98
Q

Internal factors

A

Factors that businesses are able to control cause them to collapse.

99
Q

Overtrading

A

The situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast.

100
Q

Batch production

A

A method that involves completing one operation at a time on all units before performing the next.

101
Q

Capital intensive

A

Production methods that make more use of machinery relative to labour.

102
Q

Capital productivity

A

The amount of output each unit of capital produces.

103
Q

Cell production

A

Involves producing a family of products in a small self-contained unit (a cell) within a factory.

104
Q

Division of labour

A

Specialisation in specific tasks or skills by an individual.

105
Q

Downsizing

A

The process of reducing capacity, usually by laying off staff.

106
Q

Efficiency

A

Producing a level of output where average cost is minimised.

107
Q

Flow production

A

Large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line.

108
Q

Job production

A

A method of production that involves employing all factors to complete one unit of output at a time.

109
Q

Kaizen

A

A Japanese term that means continuous improvements.

110
Q

Labour intensive

A

Production methods that make more use of labour relative to machinery.

111
Q

Labour productivity

A

The amount of output each unit of labour (e.g. one worker) produces.

112
Q

Lean production

A

An approach to operations that focuses on the reduction of resource use.

113
Q

Outsourcing

A

Giving work to sub-contractors to reduce costs.

114
Q

Production

A

The transformation of resources into goods or services.

115
Q

Productivity

A

The output per unit of input per time period.

116
Q

Specialisation

A

In business, the production of a limited range of goods.

117
Q

Standardisation

A

Using uniform resources and activities or producing a uniform product.

118
Q

Capacity utilisation

A

The use that a business makes of its resources.

119
Q

Excess or surplus capacity

A

When a business has too many resources, such as labour and capital, to produce its desired level of output.

120
Q

Full capacity

A

The point where a business cannot produce any more output.

121
Q

Mothballing

A

Leaving machines, equipment or building space unused, but maintained, so they could he brought back to use of necessary.

122
Q

Over-utilisation

A

The position where a business is running at full capacity and ‘straining’ resources.

123
Q

Rationalisation

A

Reducing the number of resources, particularly labour and capital, put into the production process, usually undertaken because a business has excess capacity.

124
Q

Under-utilisation

A

The position where a business is producing at less than full capacity.

125
Q

Buffer stocks

A

Stocks held as a precaution to cope with unforeseen demand.

126
Q

Kanban

A

A card or an object that acts as a signal to move or provide resources in a factory.

127
Q

Lead time

A

The time between placing the order and the delivery of goods.

128
Q

Re-order level

A

The level of current stock when new orders are placed.

129
Q

Re-order quantity

A

The amount of stock ordered when an order is placed.

130
Q

Stock rotation

A

The flow of stock into and out of storage.

131
Q

Work-in-progress

A

Partly finished goods.

132
Q

Quality

A

Features of a product that allow it to satisfy customers’ needs. It may refer to some standard of excellence.

133
Q

Quality assurance

A

A method of working for businesses that takes into account customers’ wants when standardising quality. It often involves guaranteeing that quality standards are met.

134
Q

Quality chains

A

When employees form a series of links between customers and suppliers in business, both internally and externally.

135
Q

Quality circles

A

Groups of workers meeting regularly to solve problems and discuss work issues.

136
Q

Quality control

A

Making sure that the quality of a product meets specified quality performance criteria.

137
Q

Statistical process control

A

The collection of data about the performance of a particular process in a business.

138
Q

Total quality management (TQM)

A

A managerial approach that focuses on quality and aims to improve the effectiveness, flexibility and competitiveness of the business.

139
Q

Appreciation of a currency

A

A rise in the value of a currency.

140
Q

Base rate

A

The rate of interest around which a bank structures other interest rates. If the Bank of England raises the base rate, all other borrowing and savings rates are likely to move in the same direction and vice versa.

141
Q

Boom

A

The peak of the economic cycle where GDP is growing at its fastest.

142
Q

Consumer price index (CPI)

A

A common measure of price changes used in the EU.

143
Q

Deflation

A

A fall in the general price level. Also used to describe a situation where economic growth is falling or negative when inflation is falling.

144
Q

Depreciation (of a currency)

A

A fall in the value of a currency.

145
Q

Downturn

A

A period in the economic cycle where GDP grows, but more slowly.

146
Q

Economic, trade or business cycle

A

Regular fluctuations in the level of output in the economy.

147
Q

Exchange rate

A

The price of one currency in terms of another.

148
Q

Fiscal policy

A

Using changes in taxation and government expenditure to manage the economy.

149
Q

Government expenditure

A

The amount spent by the government in its provision of public services.

150
Q

Gross domestic product (GDP)

A

A common measure national income, output or employment.

151
Q

Index linked

A

The linking of certain payments, such as benefits, to the rate of inflation.

152
Q

Inflation

A

A general rise in prices.

153
Q

Monetary policy

A

Using changes in the interest rate and money supply to manage the economy.

154
Q

Recession

A

A less severe form of depression.

155
Q

Recover or upswing

A

A period where economic growth begins to increase again after a recession.

156
Q

Slump or depression

A

The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment.

157
Q

Taxation

A

The charges made by government on the activities, earnings and income of businesses and individuals.

158
Q

Anti-competitive or restrictive practices

A

Attempts by firms to prevent or restrict competition.

159
Q

Barriers to entry

A

Obstacles that make it difficult for new firms to enter a market.

160
Q

Collusion

A

Two (or more) businesses agreeing to a restrictive practice, such as price fixing.

161
Q

Contract of employment

A

A written agreement between an employer and an employee in which each has certain obligations.

162
Q

Discrimination

A

Favouring one person over another. For example, in the EU it is unlawful to discriminate on grounds of race, gender, age and disability.

163
Q

Employment tribunal

A

A court that deals with cases involving disputes between employers and employees.

164
Q

National minimum wage

A

A wage rate set by the government below which it is illegal to pay people at work.

165
Q

Unfair dismissal

A

The illegal dismissal of a worker by a business.

166
Q

Cartel

A

A group of businesses (or countries) which join together to agree on pricing and output in a market in an attempt to gain higher profits at the expense of customers.

167
Q

Colluding

A

In business, where several businesses (or countries) make agreements among themselves which benefit them at the expense of either rival businesses or customers.

168
Q

Market structures

A

The characteristics of a market, such as the size of the barriers to entry to the market, the number of businesses in the market or whether they produce identical products, which determine the behaviour of businesses within the market.

169
Q

Sale of good Act 1994

A

The law requires that products must be of satisfactory quality, fit for purpose and as described.

170
Q

The trade description Act 1968

A

The law requires that products are correctly descripted and not portrayed that it does things it can’t.

171
Q

The companies Act 1998

A

The law requires that businesses must not fix prices, bid for contracts, limit production to reduce competition, charge different prices for different customers.

Business Studies (4 decks)

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