Theme 2 - Managing Business Activities Flashcards
(171 cards)
1
Q
Capital
A
The money provided by the owners in a business.
2
Q
Capital expenditure
A
Spending on business resources that can be used repeatedly over a period of time.
3
Q
Internal finance
A
Money generated by the business or its current owners.
4
Q
Retained profits
A
Profit after tax that is ‘ploughed back’ into the business.
5
Q
Revenue expenditure
A
Spending on business resources that have already been consumed or will be very shortly.
6
Q
Sale and leaseback
A
The practice of selling assets, such as property or machinery, and leasing them back from the buyer.
7
Q
Authorised share capital
A
The maximum amount that can be legally raised.
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.
9
Q
Capital gain
A
The profit made from selling a share for more than it was bought.
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.
11
Q
Debenture
A
A long-term loan to a business.
12
Q
Equities
A
Another name for an ordinary share.
13
Q
External finance
A
Money raised from outside the business.
14
Q
Issues share capital
A
Amount of current share capital arising from the sale of shares.
15
Q
Lease
A
A contract to acquire the use of resources such as property or equipment.
16
Q
Peer to peer lending (P2PL)
A
Where individuals lend to other individuals without prior knowledge of them, on the internet.
17
Q
Permanent capital
A
Share capital that is never repaid by the company.
18
Q
Secured loans
A
A loan where the lender requires security, such as property, to provide protection in case the borrower defaults.
19
Q
Share capital
A
Money introduced into the business through the sale of shares.
20
Q
Unsecured loans
A
Where the lender has no protection if the borrower fails to repay the money owned.
21
Q
Venture capitalism
A
Providers of funds for small or medium-sized companies that may be considered too risky for other investors.
22
Q
Collateral
A
An asset that might be sold to pay a lender when a loan cannot be repaid.
23
Q
Incorporated business
A
A business model in which the business and the owner(s) have separate legal identities.
24
Q
Limited liability
A
A legal status that means shareholders can only lose the original amount they invested in a business.
25
Long-term finance
Money borrowed for more than one year.
26
Rights issue
Issuing new shares to existing shareholders at a discount.
27
Short-term borrowing
Money borrowed for 12 months or less.
28
Undercapitalised
A business not raising enough capital when setting up.
29
Unincorporated business
A business model in which there is no legal difference between the owner(s) and the business.
30
Unlimited liability
A legal status which means that business owners are liable for all business debts.
31
Business plan
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.
32
Cash-flow forecast
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.
33
Cash inflows
The flow of money into a business.
34
Cash outflows
The flow of money out of a business.
35
Net cash flow
The difference between the cash flowing in and the cash flowing out of a business in a given time period.
36
Solvency
The degree to which a business is able to meet its debts when they fall due.
37
Consumer income
The amount of income remaining after taxes and expenses have been deducted from wages.
38
Consumer trends
The habits or behaviours of consumers that determine the goods and services they buy.
39
Economic growth
The rise in output of an economy as measured by the growth in Gross Domestic Product (GDP), usually as a percentage.
40
Economic variables
Measures within the economy which have effects on business and consumers. Examples include unemployment, inflation and exchange rates.
41
Extrapolation
Forecasting future trends based on past data.
42
Forecasting
A business process, assessing the probable outcome using assumptions about the future.
43
Sales forecast
Projection of future sales revenue, often based on previous sales data.
44
Time series data
A method that allows a business to predict future levels from past figures.
45
Average cost or unit cost
The cost of producing one unit, calculated by dividing the total cost by the output.
46
Fixed cost
A cost that does not change as a result of a change in output in the short run.
47
Long run
The time period where all facets of production are variable.
48
Profit
The difference between total costs and total revenue. It can be negative.
49
Sales revenue
The value of output sold in a particular time period. It is calculated by price X quantity of output.
50
Sales volume
The quantity of output sold in a particular time period.
51
Semi-variable cost
A cost that consists of both fixed and variable elements.
52
Short run
The time period where at least one factor of production is fixed.
53
Total cost
The entire cost of producing a given level of output.
54
Total revenue
The amount of money the business receives from selling output.
55
Variable cost
A cost that rises as output rises.
56
Break-even
When a business generates just enough revenue to cover its total costs.
57
Break-even chart
A graph containing the total cost and total revenue lines, illustrating the break-even output.
58
Break-even output
The output a business needs to produce so that its total revenue and total costs are the same.
59
Break-even point
The point at which total revenue and total costs are the same.
60
Contribution
The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit.
61
Margin of safety
The range of output between the break-even level and the current level of output, over which a profit is made.
62
Budget
A quantitative economic plan prepared and agreed in advance.
63
Budgetary control
A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences.
64
Historical figures
Quantitative information based on past trading records.
65
Production cost budget
A firms planned sales for a future period of time - can be measured in terms of volume or revenue.
66
Sales budget
A firms planned sales for a future period of time - can be measured in terms of volume or revenue.
67
Variance
The difference between actual financial outcomes and those budgeted.
68
Variance analysis
The process of calculating variances and attempting to identify their causes.
69
Zero-based budgeting or zero budgeting
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
Amortisation
The writing off of an intangible asset.
71
Cost of sales
The direct costs of a business.
72
Exceptional costs
A one-off costs, such as large bad debt.
73
Gross profit margins
Gross profit expressed as a percentage of revenue/turnover.
74
Operating profit
The difference between gross profit and business overheads, such as selling and administrative expenses.
75
Operating profit margin
Operating profit expressed as a percentage of revenue/turnover.
76
Profit for the year (net profit) or net profit
The difference between operating profit and interest and exceptional items.
77
Profit for the year (net profit) margin or net profit margin
Net profit before tax, expressed as a percentage of revenue/turnover.
78
Statement of comprehensive income
A financial document showing a company's income and expenditure over a particular time period, usually one year.
79
Revenue or turnover
The total income of a business resulting from sales of goods or services.
80
Acid test ratio
Similar to the current ratio but excludes stocks from current assets. A more severe test of liquidity.
81
Assets
Resources that belong to a business.
82
Current assets
Liquid assets, i.e. those assets that will be converted into cash within one year.
83
Current liabilities
Money owned by the business that must be repaid within one year.
84
Current ratio
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
Intangible assets
Non-physical assets, such as brand names, patents and customer lists.
86
Inventories
Stocks, such as raw materials and finished goods held by a business.
87
Liabilities
Money owned by the business to banks and suppliers.
88
Liquidity
The ease of with which assets can be converted into cash.
89
Net assets
Total assets - total liabilities.
90
Non-current assets
Long-term resources that will be used by the business repeatedly over a period of time.
91
Shareholders equity
The amount of money owed by the business to the shareholders.
92
Statement of financial position (balance sheet)
A summary at a particular point in time of the value of a firms assets, liabilities and capital.
93
Trade and other payables
Money owed by the business to suppliers and utilities, for example, sometimes called trade creditors.
94
Trade and other receivables
Money owed to the business by customers and any prepayments made by the business.
95
Working capital
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
Administration
A failing business appoints a specialist to rescue the business or wind it up.
97
External factors
Factors beyond the control of businesses cause them to collapse.
98
Internal factors
Factors that businesses are able to control cause them to collapse.
99
Overtrading
The situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast.
100
Batch production
A method that involves completing one operation at a time on all units before performing the next.
101
Capital intensive
Production methods that make more use of machinery relative to labour.
102
Capital productivity
The amount of output each unit of capital produces.
103
Cell production
Involves producing a family of products in a small self-contained unit (a cell) within a factory.
104
Division of labour
Specialisation in specific tasks or skills by an individual.
105
Downsizing
The process of reducing capacity, usually by laying off staff.
106
Efficiency
Producing a level of output where average cost is minimised.
107
Flow production
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
Job production
A method of production that involves employing all factors to complete one unit of output at a time.
109
Kaizen
A Japanese term that means continuous improvements.
110
Labour intensive
Production methods that make more use of labour relative to machinery.
111
Labour productivity
The amount of output each unit of labour (e.g. one worker) produces.
112
Lean production
An approach to operations that focuses on the reduction of resource use.
113
Outsourcing
Giving work to sub-contractors to reduce costs.
114
Production
The transformation of resources into goods or services.
115
Productivity
The output per unit of input per time period.
116
Specialisation
In business, the production of a limited range of goods.
117
Standardisation
Using uniform resources and activities or producing a uniform product.
118
Capacity utilisation
The use that a business makes of its resources.
119
Excess or surplus capacity
When a business has too many resources, such as labour and capital, to produce its desired level of output.
120
Full capacity
The point where a business cannot produce any more output.
121
Mothballing
Leaving machines, equipment or building space unused, but maintained, so they could he brought back to use of necessary.
122
Over-utilisation
The position where a business is running at full capacity and 'straining' resources.
123
Rationalisation
Reducing the number of resources, particularly labour and capital, put into the production process, usually undertaken because a business has excess capacity.
124
Under-utilisation
The position where a business is producing at less than full capacity.
125
Buffer stocks
Stocks held as a precaution to cope with unforeseen demand.
126
Kanban
A card or an object that acts as a signal to move or provide resources in a factory.
127
Lead time
The time between placing the order and the delivery of goods.
128
Re-order level
The level of current stock when new orders are placed.
129
Re-order quantity
The amount of stock ordered when an order is placed.
130
Stock rotation
The flow of stock into and out of storage.
131
Work-in-progress
Partly finished goods.
132
Quality
Features of a product that allow it to satisfy customers' needs. It may refer to some standard of excellence.
133
Quality assurance
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
Quality chains
When employees form a series of links between customers and suppliers in business, both internally and externally.
135
Quality circles
Groups of workers meeting regularly to solve problems and discuss work issues.
136
Quality control
Making sure that the quality of a product meets specified quality performance criteria.
137
Statistical process control
The collection of data about the performance of a particular process in a business.
138
Total quality management (TQM)
A managerial approach that focuses on quality and aims to improve the effectiveness, flexibility and competitiveness of the business.
139
Appreciation of a currency
A rise in the value of a currency.
140
Base rate
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
Boom
The peak of the economic cycle where GDP is growing at its fastest.
142
Consumer price index (CPI)
A common measure of price changes used in the EU.
143
Deflation
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
Depreciation (of a currency)
A fall in the value of a currency.
145
Downturn
A period in the economic cycle where GDP grows, but more slowly.
146
Economic, trade or business cycle
Regular fluctuations in the level of output in the economy.
147
Exchange rate
The price of one currency in terms of another.
148
Fiscal policy
Using changes in taxation and government expenditure to manage the economy.
149
Government expenditure
The amount spent by the government in its provision of public services.
150
Gross domestic product (GDP)
A common measure national income, output or employment.
151
Index linked
The linking of certain payments, such as benefits, to the rate of inflation.
152
Inflation
A general rise in prices.
153
Monetary policy
Using changes in the interest rate and money supply to manage the economy.
154
Recession
A less severe form of depression.
155
Recover or upswing
A period where economic growth begins to increase again after a recession.
156
Slump or depression
The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment.
157
Taxation
The charges made by government on the activities, earnings and income of businesses and individuals.
158
Anti-competitive or restrictive practices
Attempts by firms to prevent or restrict competition.
159
Barriers to entry
Obstacles that make it difficult for new firms to enter a market.
160
Collusion
Two (or more) businesses agreeing to a restrictive practice, such as price fixing.
161
Contract of employment
A written agreement between an employer and an employee in which each has certain obligations.
162
Discrimination
Favouring one person over another. For example, in the EU it is unlawful to discriminate on grounds of race, gender, age and disability.
163
Employment tribunal
A court that deals with cases involving disputes between employers and employees.
164
National minimum wage
A wage rate set by the government below which it is illegal to pay people at work.
165
Unfair dismissal
The illegal dismissal of a worker by a business.
166
Cartel
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
Colluding
In business, where several businesses (or countries) make agreements among themselves which benefit them at the expense of either rival businesses or customers.
168
Market structures
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
Sale of good Act 1994
The law requires that products must be of satisfactory quality, fit for purpose and as described.
170
The trade description Act 1968
The law requires that products are correctly descripted and not portrayed that it does things it can't.
171
The companies Act 1998
The law requires that businesses must not fix prices, bid for contracts, limit production to reduce competition, charge different prices for different customers.
