Business Terms & Definitions (Self-Compiled) Chapter 1: Enterprise

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Business Terms & Definitions (Self-Compiled)

Chapter 1: Enterprise
Added value: the difference between the cost of purchasing raw materials and the price the finished
goods are sold for.
Capital goods: the physical goods used by industry to aid in the production of other goods and services,
such as machines.
• Examples are such as tractors in agriculture industries and ovens in bakeries.
Capital: factor of production including all man-made resources used by a business.

• Examples are such as finance, factories/offices or machines.
Consumer goods: the physical and tangible goods sold to the general public which include durable
consumer goods, such as cars and washing machines, and non-durable consumer goods, such as food
and drinks.
Consumer markets: markets for goods and services bought by the final use of them.
• Examples are such as business to business, business-to-government, business to consumer
market and consumer to consumer
Consumer profile: a quantified picture of consumers of a firm’s products, showing proportions of age
groups, income levels, location, gender and social class.
• An example of use would be to categorise consumers into groups for marketing and advertising
purposes/ price discrimination
Consumer services: the non-tangible products sold to the general public such as hotel accommodation,
insurance, train journeys etc.
Creating value: increasing the difference between the cost of purchasing bought-in materials and the
price of the finished goods are sold for.
Enterprise: a factor of production including the driving force of a business, the risk-taking and
decision-making unit of a business which organizes the other three factors of production.
Entrepreneur: someone who takes the financial risk of starting and managing a new venture.
• Notable examples are such as Thomas Edison, Walt Disney and Steve Jobs
Labour: factor of production, including the workforce of a business, both skilled and unskilled.
Land: factor of production, including all natural resources used by a business.

• Examples are such as coal, crude oil, timber.
Opportunity cost: the benefit of the next most desired option which is given up
• For instance, when having the options between a smart phone and a pair of trainers, if the
consumer chooses to buy the smartphone, then the trainers become the opportunity cost
Social enterprise: a business with mainly social objectives that reinvests most of its profits into benefiting
society rather than maximizing returns to owners
• Notable examples are such as World Wildlife Fund (WWF) & GreenPeace
Triple bottom line: the three objectives of social enterprise (economic, social and environmental)
Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

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Chapter 2: Business Structure

Articles of Association: this document covers the internal workings and control of the business
• For example, the names of directors and the procedures to be followed at meetings will be
detailed.
Command economy: economic resources owned, planned and controlled by public sector.
• Notably practiced in Cuba, North Korea and the former Soviet Union.
Deindustrialisation: a decline in the importance of secondary-sector activity and an increase in the
tertiary sector.
• For example, in the UK, new jobs have appeared with either low wages, or high skills
requirement that the laid-off workers lack
Franchise: a business that uses the name, logo and trading systems of an existing successful business.
• Examples are such as McDonald’s, 7-Eleven convenient stores and Subway
Free market economy: economic resources owned largely by the private sector with no or little state
intervention.
• Examples of top free economy countries in 2019 are Switzerland and Australia - 81.9% and
80.9% free economies, respectively.
Holding company: a business organisation that owns and controls a number of separate businesses, but
does not unite them into one unified company.
• For instance, Berkshire Hathaway owns assets in more than one hundred public and limited
companies with minor holdings in The Coca-Cola Company, Apple, Delta Airlines.
Industrialisation: the growing importance of the secondary-sector manufacturing industries in
developing countries.
• Examples include where in Europe and the United States, industrialization occurred in the
1700s and 1800s, with the changes beginning in Britain
Joint venture: two or more businesses agree to work closely together on a particular project and create a
separate business division to do so.
• A notable example would be Sony Ericsson, which is the merger between Sony and Ericsson in
2001 - this joint venture ceased in 2012).
Liability: a financial obligation of a business that it is required to pay in the future.
• Examples are such as accounts payable, bank overdraft and tax.
Limited liability: the only potential loss a shareholder has if the company fails is the amount invested in
the company, not the total wealth of the shareholder.
• For example, if an investor enters into an agreement to join a LLC, his investment of $100,000
is his total liability. In other words, he can potentially lose all of this and no more. He won't be
liable for any liability beyond this initial $100,000
Memorandum of Association: this states the name of the company, the address of the head office
through which it can be contacted, the maximum share capital for which the company seeks
authorisation and the declared aims of the business
Mixed economy: economic resources are owned and controlled by both private and public sectors
• Examples of mixed economies are the U.S. and France, where they moniter the power of
monopolies

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Partnership: a business formed by two or more people to carry on a business together, with shared
capital investment and, usually, shared responsibilities.
• Example of common partnerships are such as legal and accounting firms.
Primary sector business activity: firms engaged in farming, fishing, oil extraction and all other industries
that extract natural resources so that they can be used and processed by other firms
• Examples include local fishing farms and plantation farms
Private limited companies: a small to medium-sized business that is owned by shareholders who are
often members of the same family, this company cannot sell shares to the general public
• Notable examples include Facebook Inc, IKEA and candy maker Mars
Private sector: compromises business owned and controlled by individuals or groups of individuals
• Examples are such as innovative Apple Inc., Google LLC and Samsung Group
Public corporation: a business enterprise owned and controlled by the state - also known as nationalised
industry
• Examples include senior centres, libraries and aviation and port authorities
Public limited company: a limited company, often a large business, with the legal right to sell shares to
the general public - share prices are quoted on the national stock exchange
• Notable examples include clothing and accessory retailer, Burberry Group PLC, and
automaker, Rolls-Royce Holdings PLC
Public sector: compromises organisations accountable to and controlled by central or local government
• Examples are such as BBC, British Council (Education) and Cabinet Office (Legislative)
Secondary sector business activity: firms that manufacture and process products from natural resources,
including computers, brewing, baking, clothes-making and construction
• Examples include clothing and accessory retailer, Burberry Group and Cotton On Group
Share: a certificate confirming part ownership of a company and entitling the shareholder owner to
dividends and certain shareholder rights
Shareholder: a person or institution owning shares in a limited company.

• A notable figure would be Tim Cook, Chief Executive Officer of Apple, who has a total over
800k shares in Apple as of 2018
Sole trader: a business in which one person provides the permanent finance and, in return, has full
control of the business and is able to keep all the profits.
• Examples include locally run bakeries, sundry shops and hair salons.
Tertiary sector business activity: firms that provide services to consumers and other businesses, such as
retailing, transport, insurance, banking, hotels, tourism and telecommunications
• Examples include the Big Four such as PwC, KPMG, EY and Deloitte

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Chapter 3: Size of business

Capital employed: the total value of all long-term finance invested in the business
Family-owned business: those that are actively owned and managed by at least two members of the
same family
• Notable examples include Wal-Mart, Mars and Ford Motor Company
Internal growth: expansion of a business by means of opening branches, shops or factories - also
known as organic growth
Market capitalisation: the total value of a company's issued shares
Market share: sales of the business as a proportion of total market sales
Revenue: total value of sales made by a business in a given time period
Chapter 4: Business Objectives

Corporate social responsibility (CSR): this concept applies to those businesses that consider the interests
of society by taking responsibility for the impact of their decisions and activities on customers,
employees, communities and the environment.
• Examples are such as reducing carbon footprints, improving labour policies and charitable
giving
Ethical code of conduct: a document detailing a company’s rules and guidelines on staff behaviour that
must be followed by all employees
• Examples often include being inclusive, considerate, respectful and not harassing
Ethics: the moral guidelines that determine decision-making.

• Examples include honesty, integrity, trustworthiness, loyalty and fairness
Management by objectives (MBO): a method of coordinating and motivating all staff in an organization
by dividing its overall aim into specific targets for each department, manager and employee
• An example would be by delegating and relegating workload for specific departments in hopes
of increasing sales by 10 per cent
Mission statement: a statement of the business’s core aims, phrased in a way to motivate employees and
to stimulate interest by outside groups.
• For instance, an A-Levels college's mission statement would be to provide an academic
curriculum in a caring and supportive environment
SMART - S: Specific, M: Measurable, A: Achievable, R: Realistic & Relevant, T: Time-specific
Corporate aims: long-term goals that a business hopes to achieve.

• A notable example would be Mercedes-Benz that has aims to be achieve profitable growth by
continuing to play a leading role in the automobile industry

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Chapter 5: Stakeholder in a Business

Corporate social responsibility: the concept that accepts that businesses shoulder consider the interests
of society in their activities and decisions, beyond the legal obligations they have.
• A notable example would be The Body Shop and its stand on being against animal cruelty and
testing
Stakeholder concept: the view that businesses and their managers have responsibilities to a wide range of
groups, just shareholders
Stakeholders: people or groups of people who can be affected by - and therefor have an interest in - any
action by an organisation.
• Examples are such as customers, employees, the local community and government
Chapter 6: Business Structure (A-Levels)

Free trade: no restrictions or trade barriers exist that might prevent or limit trade between countries.
• Examples are such as EFTA, NAFTA, SAFTA and Pacific Alliance
Globalisation: the increasing freedom of movement of goods, capital and people around the world
• Examples include travel where there is the ability to travel and experience other places and
cultures, and transportation with international shipping systems such as shipping and air travel
Multinational business: business organisation that has its headquarters in one country, but with
operating branches, factories and assembly plants in other countries
• Examples include Adidas, Facebook Inc, FedEx Express and PepsiCo
Privatisation: A policy on selling state-owned and controlled business organisations to investors in the
private sector, which namely expanded in the 1980s
• Examples include British Airways, British Gas and British Energy
Tariffs: Taxes imposed on imported good to make them more expensive than they would otherwise be
Quotas: Limits on physical quantity or value of certain goods that may be imported
Voluntary export limits: An exporting country agrees to limit the quantity of certain goods sold to one
country; an attempt to possibly discourage the setting of tariffs, or quotas
Protectionism: Using barriers to free trade to protect a country’s own domestic industries

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Chapter 7: Size of Business (A-Levels)

Acquisition (takeover): when a company buys more than 50% of the shares of another company and
becomes the controlling owner of it.
• Notable examples are such as: The Walt Disney Company acquired the 21st Century Fox in 2019
and Microsoft acquired LinkedIn in 2016
External growth: business expansion achieved by means of merging with or taking over another
business, from either the same or a different industry
• This includes examples such as the acquisition of 21st Century Fox by The Walt Disney
Company in 2019 or Instagram by Facebook in 2012
Merger: an agreement by shareholders and managers of two businesses to bring both firms together
under a common board of directors with shareholders in both businesses owning shares in the newly
merged business
• Notables examples include merger of AT&T and BellSouth in 2006
Synergy: literally means that 'the whole is greater than the sum of parts', so in integration it is often
assumed that the new, larger business will be more successful than the two, formerly separate, business
were.
• Examples are such as Horizontal, Vertical (backward), Vertical (forward) and Conglomerate
Integration, with a notable examples such as Disney and Pixar
Chapter 8: External Influences on Business Activity (A-Levels)

Computer-aided design: using computers and IT when designing products
• Notable examples of 3D Modelling CAD software are such as AutoCAD, FreeCAD and
Solidworks.
Computer-aided manufacturing: the use of computers and computer-controlled machinery to speed up

the production process and make it more flexible
• Notable examples include UNISURF which was used for car design and tooling, and Autodesk
Fusion 360, which is a design software for students and educators.
Environmental audits: assess the impact of a business's activities on the environment.

• Examples include assessing pollution levels, wastage levels and recycling rates of the business
Information technology (IT): the use of electronic technology to gather, store, process and communicate
information
• An example would be such as storing information about products such as stock control using
databases and business calculations using computer spreadsheets
Innovation: creating more effective processes, products or ways of doing things in a business
• Notable examples are such as Apple changing music and consumer electronics, Uber changing
the taxi business and Amazon changing retailing
Monopoly: theoretically a situation in which there is only one supplier, but this is very rare: for
government policy purposes this is usually redefined as a business controlling at least 25% of the market
• Examples include Microsoft, a computer and software manufacturing company, that holds
more than 75% market share and is the market leader and virtual monopolist in the tech space.

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Pressure Groups: organisations created by people with a common interest or aim who put pressure on
business and governments to change policies so that an objective is reached
• Examples include environmental groups such as GreenPeace and human rights groups
Amnesty
Social audit: a report on the impact a business has on society (it could cover pollution levels, health and
safety record, source of supplies, customer satisfaction and contribution to the community)
• For instance, a local family store makes a clothing donation to local church
Chapter 9: External Economic Influences on Business Behaviour (A-Levels)

Balance of payments (current account): this account records the value of trade in goods and services
between one country and the rest of the world. A deficit means that the value of goods and services
imported exceeds the value of goods and services exported.
Business cycle: the regular swing in economic activity, measured by real GDP, that occur in most
economies, varying from boom conditions (high demand and rapid growth) to recession when total
national output declines.
Business investment: expenditure by businesses on capital equipment, new technology and research and
development.
• Examples are such as purchasing new machinery, real estate and investing in workforce training.
Cyclical unemployment: unemployment resulting from low demand for goods and services in the
economy during a period of slow economic growth or a recession.
• For instance, an automobile worker is laid off during a recession to cut labour costs. During this
downturn, people are buying fewer cars or vehicles, so the owner doesn't need as many workers to
meet the demand.
Deflation: a fall in the average price level of goods and services.
• A notable example would be ‘The Great Recession’ of 2007-2008.
Economic growth: an increase in a country's productive potential measured by an increase in its real
GDP.
• For example, Libya with the highest growth rate in GDP (55%) as of 2018.
Exchange rate appreciation: a rise in the external value of a currency as measured by its exchange rate
against other currencies.
• If $1 rises from €1.5 to €1.8, the value of the dollar has appreciated.
Exchange rate depreciation: a fall in the external value of a currency as measured by its exchange rate
against other currencies.
• If $1 falls in value from €2 to €1.5, the value of the dollar has depreciated.
Exchange rate: the price of one currency in terms of another.

• For example, if you travelled to the United Kingdom on January 29, 2019, you would only
receive 0.77 pounds for your one U.S. dollar.
Exports: goods and services sold to consumers and business in other countries.
• An example of export is rice being shipped from China to be sold in many countries.

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External costs: costs of an economic activity that are not paid for by the producer or consumer, but by
the rest of society.
• For instance, when people buy fuel for a car, they pay for the production of that fuel (an internal
cost), but not for the costs of burning that fuel, such as air pollution.
Fiscal policy: concerned with decisions about government expenditure, tax rates and government
borrowing - these operate largely through the government's annual budget decisions.
• The two major examples of expansionary fiscal policy are tax cuts and increased government
spending. Both of these policies are intended to increase aggregate demand while contributing to
deficits or drawing down of budget surpluses.
Frictional unemployment: unemployment resulting from workers losing or leaving jobs and taking a
substantial period of time to find alternative employment.
• Examples include quitting, a voluntary frictional unemployment and termination, an
involuntary unemployment
Government budget deficit: the value of government spending exceeds revenue from taxation.
Government budget surplus: taxation revenue exceeds the value of government spending.
Gross domestic product (GDP): the total value of goods and services produced in a country in one year
- real GDP has been adjusted for inflation.
Imports: goods and services purchased from other countries.

• Examples include wholesalers who import goods from multiple producers to sell to retailer and
merchants, and consumer importers who directly import goods themselves.
Income elasticity of demand: measures the responsiveness of demand for a product after a change in
consumer incomes
Inflation: an increase in the average price level of goods and services - it results in a fall in the value of
money.
• Example include Japan in 1998 to 2005 and Zimbabwe in 2006 to 2008.
Market failure: when market fails to achieve the most efficient allocation of resources and there is
under-or over production of certain goods or services
• Examples include Monopoly power, where markets may fail to control the abuses of monopoly
power, and Missing markets, where markets may fail to form, resulting in a failure to meet a need
or want, such as the need for public goods, such as defence, street lighting, and highways.
Monetary policy: is concerned with decisions about the rate of interest and the supply of money in the
economy
• Examples of expansionary monetary policy are decreases in the discount rate, purchases of
government securities, and reductions in the reserve ratio.
Recession: a period of six months or more of declining real GDP

• A good example is the Great Recession. There were four consecutive quarters of negative GDP
growth in the last two quarters of 2008 and the first two quarters of 2009.

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Structural unemployment: unemployment caused by the decline in important industries, leading to

significant job losses in one sector of industry
• For example, hundreds of thousands of well-paying manufacturing jobs have been lost in the
United States over the past three decades as production jobs have migrated to lower-cost areas in
China and elsewhere.
Unemployment: this exists when members of the working population are willing and able to work, but
are unable to find a job
Working population: all those in the population of working age who are willing and able to work
Chapter 10: Management and Leadership

Autocratic Leadership: a style of leadership that keeps all decision-making at the centre of the
organisation
• Notable practitioners are such as Adolf Hitler and Queen Elizabeth I
Democratic leadership: a leadership style that promotes the active participation of workers in decision
making
• Notable practitioners are such as Muhtar Kent (CEO and chairman of the board at Coca-Cola)
and Steve Jobs (Co-founder of Apple)
Emotional intelligence: the ability of managers to understand their own emotions, and those of the
people they work with, to achieve better business performance
Informal leader: a person who has no formal authority but has the respect of colleagues and some
power over them
• A great example would be Rosa Parks. Originally, she didn't hold any position of authority, but
was most certainly an informal leader in her community (and quickly the entire country).
Laissez-faire leadership: a leadership style that leaves much of the business decision making to the
workforce-a “hands-off’ approach and the reverse of the autocratic leadership.
• A notable practitioner would be former U.S. president Herbert Hoover
Leadership: the art of motivating a group of people towards achieving a common objective
• Notable practitioners are such as Nelson Mandela and Henry Ford
Manager: responsible for setting objectives, organizing resources and motivating staff so that the
organization’s aims are met
Paternalistic leadership: a leadership style based on the approach that the manager is in a better position
than the workers to know what is best for the organization

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Chapter 11: Motivation

Bonus: a payment made in addition to the contracted wage or salary.
• Examples are such as annual bonus, spot bonus award and milestone bonus.
Commission: a payment to a sales person for each sale made.
• For instance, commission on gross profit, sales revenue commission, and placement fees
Fringe benefits: benefits given, separate from pay, by an employer to some or all employees.
• Examples are such as medical and dental insurance, company car and employee discounts.
Hourly wage rate: payment to a worker made for each hour worked.
Hygiene factors: aspects of a worker’s job that have the potential to cause dissatisfaction, such as pay,
working conditions, status and over-supervision by managers.
Job enlargement: attempting to increase the scope of a job by broadening or deepen tasks undertaken.
• A practical example would be replacing assembly lines with modular work.
Job enrichment: aims to use the full capabilities of workers by giving them the chance do more
challenging and fulfilling work.
• A practical example would be to take advantage of the experienced employees by giving them
more duties or at least changing them.
Job redesign: involves the restructuring of a job – usually with employees’ agreement – to make work
more interesting, satisfying and challenging.
• For instance, hairdressers may be given opportunities to add beauty therapies as part of their
total job skills.
Job rotation: increasing the flexibility of the workforce and the variety of work they do by switching
from one job to another.
• For instance, a dress designer at a bridal shop may work for a time as a sales consultant to learn
a different segment of the business.
Motivating factors: aspects of a worker’s job that can lead to positive job satisfaction, such as
achievement, recognition, meaningful and interesting work and advancement at work
Motivation: the internal and external factors that stimulate people to take actions that lead to achieving a
goal
Performance-related pay: a bonus scheme to reward staff for above-average work performance
• A practical example includes a worker being paid $10 per kg of potatoes peeled
Piece rate: a payment to worker for each unit produced
Profit sharing: a bonus for staff based on the profits of the business – usually paid as a proportion of
basic salary
Quality circles: voluntary groups of workers who meet regularly to discuss work-related problems and
issues.
• A notable example would be Toyota, which helped pioneered this concept decades ago where
employers and employees are constantly encouraged to be on the lookout for improvement
opportunities

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Salary: annual income that is usually paid on a monthly basis
Self-actualization: a sense of self-fulfilment reached by feeling enriched and developed by what one has
learned and achieved
Team working: production is organized so that groups of workers undertake complete units of work
Time based wage rate: payment to a worker made for each period of time worked, e.g. one hour
Worker participation: workers are actively encouraged to become involved in decision making within the
organization.
• Examples are such as quality circles such as Toyota's and project teams in specific departments of a
company
Chapter 12: Human Resource Management

Dismissal: being dismissed or sacked from a job due to incompetence or breach of discipline.
Diversity policy: practices and processes aimed at creating a mixed workforce and placing positive value
on diversity in the workplace.
• For instance, a workplace that encourages diversity employs individuals from various races,
ethnicities, religions and genders.
Employee appraisal: the process of assessing the effectiveness of an employee judged against pre-set
objectives.
• Examples would include giving appraisal for employees' communication, teamwork or
leadership and management skills
Employment contract: a legal document that sets out the terms and conditions governing a worker's job
Equality policy: practices and processes aimed at achieving a fair organisation where everyone is treated
in the same way and has the opportunity to fulfil their potential.
• For instance, businesses that promote equality in the workplace do not base recruitment and
dismissal decisions, pay, promotions and other benefits on employees’ race, sexuality, gender, age,
religion or national origin.
Human resource management (HRM): the strategic approach to the effective management of an
organization’s workers so that they help the business gain a competitive advantage.
• Examples including top companies in HR such as Delta Airlines, Facebook Inc and Google.
Induction training: introductory training programme to familiarize new recruits with the systems used in
the business and the layout of the business site.
Job description: a detailed list of the key points about the job to be filled – stating all its key tasks and
responsibilities.
• For instance, it could include an office clerk handles important tasks within an office, such as
typing, filing and answering phones.
Labour turnover: measures the rate at which employees are leaving an organisation. It is measured by:
(number of employees leaving in 1 year / average number of people employed) x 100
Off-the-job training: all training undertaken away from the business, e.g. work-related college courses
• Examples are such as role playing, management games and case studies.

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On-the-job training: instruction at the place of work on how a job should be carried out
• Examples include video training, coaching and mentoring, and hands-on training.
Person specification: a detailed list of the qualities, skills and qualifications that a successful applicant will
need to have
• Examples are such as level of personal representation as well as their personality characteristics
such as level of self-motivation
Recruitment: the process of identifying the need for a new employee, defining the job to be filled and the
type of person
• Examples include using social media and exploring niche job boards
Redundancy: when a job is no longer required, so the employee doing this job becomes redundant
through no fault of his or her own
• For instance, when too many people are doing the same job
Selection: involves a series of steps by which the candidates are interviewed, tested and screened for
choosing the most suitable person for vacant post
Training: work-related education to increase workforce skills and efficiency

• Examples are such as hands-on training, video training, and coaching and mentoring
Unfair dismissal: ending a worker’s employment contract for a reason that the law n being unfair
• A notable example would be a termination of a fixed term contract before it is due to expire
Work-life balance: a situation in which employees are able to give the right amount of time and effort to
work and to their personal life outside work, for example to family or other interests.
• A notable example would be Google's 20% policy, where engineers are allowed to spend 20%
of their time working on their ideas
Chapter 13: Further Human Resource Management (A-Levels)

Absenteeism: measures the rate of workforce absence as a proportion of the employee total. It is
measured by: absenteeism (%) = (no. of employees absent / total no. of employees) x 100
Collective bargaining: the process of negotiating the terms of employment between an employer and a
group of workers who are usually represented by a trade union official.
Flexi-time contract: employment contract that allows staff to be called in at times most convenient to
employers and employees, e.g. at busy times of the day.
Hard HRM: an approach of managing staff that focuses on cutting costs, e.g. temporary and part-time
employment contracts, offering maximum flexibility but with minimum training costs.
Industrial action: measures taken by workforce or trade union to put pressure on management to settle
an industrial dispute in favour of employees.
• A notable example would be Heathrow Airport staff industrial action regarding a pay dispute in
2019.
Labour productivity: the output per worker in a given time period. It is calculated by: total output in time
period, e.g. one year / total workers employed.

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No-strike agreement: unions agree to sign a no-strike agreement with employers in exchange for greater
involvement in decisions that affect the workplace
Outsourcing: not employing staff directly, but using an outside agency or organization to carry out some
business functions
Part-time employment contract: employment contract that is for less than the normal full working week
of, say, 40 hours, e.g. eight hours per week
Single-union agreement: an employer recognises just one union for purposes of collective bargaining
Soft HRM: an approach to managing staff that focuses on developing staff so that they reach
self-fulfilment and are motivated to work hard and stay with the business
• For instance, mangers allow workers to consult and ask questions about orders
Teleworking: staff working from home but keeping contact with the office by means of modern IT
communications
Temporary employment contract: employment contract that lasts for a fixed time period
Terms of employment: include working conditions, pay, work hours, shift length, holidays, sick leave,
retirement benefits and health care benefits
Trade union recognition: when an employee formally agrees to conduct negotiations on pay and
working conditions with a trade union rather than bargain individually with each worker
Trade union: an organisation of working people with the objective of improving the pay and working
conditions of their members and providing them with support and legal services
• Examples are such as nurses', engineers' union or the Law Society representing solicitors'
interests
Workforce audit: a check on the skills and qualifications of all existing managers/employees.
• An example would be the evaluation on compliance w anti-discrimination and privacy policies
Workforce planning: analysing and forecasting the numbers of workers and the skills of those workers
that will be required by the organization to achieve its objectives.
• Examples are such as forecasting and assessment, leadership development and retention
planning
Zero-hours contract: no minimum hours are offered and workers are only called in and paid when work
is available
Chapter 14: Organisation Structure (A-Levels)

Centralisation: keeping all of the important decision-making powers within head office or the centre of
the organisation.
• A notable example would be that the military has a centralised organisation structure. This is
because the higher ups order those below them and everybody must follow those orders.
Chain of command: this is the route through which authority is passed down an organisation - from the
chief executive and the board of directors.
• For instance, an employee reports to a manager who reports to a senior manager who reports to
the vice president who reports to the CEO.

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Decentralisation: decision-making powers are passed down the organisation to empower subordinates
and regional/product managers.
• Examples are such as WM Morrison and Tesco.
Delayering: removal of one or more of the levels of hierarchy from an organisational structure.
• For instance, many high-street banks no longer have a manager in each of their branches,
preferring to appoint a manager to oversee a number of branches.
Delegation: passing authority down the organisational hierarchy.
• For instance, when a group of steel workers are assigned to represent all steel workers in union
talks.
Informal organisation: the network of personal and social relations that develop between people within
an organisation.
Level of hierarchy: a stage of the organisational structure at which the personnel on it have equal status
and authority.
• An example would be the various department heads.
Line managers: managers who have direct authority over people, decisions and resources within the
hierarchy of an organisation.
• For instance, a Sales Director will have line authority over the sales managers.
Matrix structure: an organisation structure that creates a project teams that cut across traditional
functional departments
Organisational structure: the internal, formal framework of a business that shows the way in which
management is organised and linked together and how authority is passed through the organisation
Span of control: the number of subordinates reporting directly to a manager
Staff managers: managers who, as specialists, provide support, information and assistance to line
managers
Chapter 15: Business Communication (A-Levels)

Communication barriers: reasons why communication fails.
• Examples are such as the use of jargon, differences in perception and viewpoint and cultural
differences.
Communication media: the methods used to communicate a message.
• Examples are such as oral communication, written communication, IT and web-based media
(electronic media) and visual communication.
Effective communication: the exchange of information between people or groups, with feedback.
Formal communication networks: the official communication channels and routes used within an
organisation
Informal communication: unofficial channels of communication that exist between informal groups
within an organisation.
Information overload: so much information and so many messages are received that the most important
ones cannot be easily identified and quickly acted on - most likely to occur with electronic media.

15
Chapter 16: What is Marketing?

Asset-led marketing: an approach to marketing that bases strategy on the firm’s existing strengths and
assets instead of purely on what the customers want.
• For instance, the firm may use its brand reputation to support market or product extension.
Consumer profile: a quantified picture of consumers of a firm's products, showing proportions of age
groups, income levels, location, gender and social class
Demand: the quantity of products consumers are willing and able to buy at a certain price particular
period of time, ceteris paribus.
Direct competitor: businesses that provide the same or very similar goods or services.
• A notable example would be Pizza Hut and Domino’s Pizza.
Equilibrium price: the market price that equates supply and demand for a product.
Industrial markets: markets for goods and services bought by businesses to be used in the production
process of other products. Business to business marketing.
Market growth: the percentage change in the total size of a market (volume or value) over a period of
time
Market orientation: an outward-looking approach basing product decisions on consumer demand, as

established by market research
Market research: this is the process of collecting, recording and analysing data about the customers,
competition and the market
• Examples include Quantitative and Qualitative market research types and methods such as
surveys, online reviews and phone survey
Market segment: a sub-group of a whole market in which consumers have similar characteristics
• For example, common characteristics of a market segment include interests, lifestyle, age,
gender, etc.
Market segmentation: identifying different segments within a market and targeting different products or
services to them
• Common examples of market segmentation include geographic, demographic, psychographic
and behavioural.
Market size: the total level of sales of all producers within a market
Marketing objectives: the goals set for the marketing department to help the business achieve its overall
objectives
• Examples include achieving a market share of 30% for Product C within 3 years of launch
Marketing strategy: long-term plan established for achieving marketing objectives

• Some overall business aim and business strategies that could be used are such as increase sales,
bring in new customers and increase market share
Marketing: the management task that links the business to the customer by identifying and meeting the
needs of customers profitably – it does this by getting the right product at the right price to the right
place at the right time

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Mass marketing: selling the same products to the whole market with no attempt to target groups within
it
• Coca-Cola is another good example of mass marketing. Its television advertisements can be
seen in winter holidays as well which has been designed to appeal simply to everyone.
Niche marketing: identifying and exploiting a small segment of a larger mark* products to suit it
Product differentiation: making a product distinctive so that it stands out from competitor products in
consumers’ perception
• An example could be where a customer chooses an iPhone over an Android as the customer
considers iPhone to be a status symbol and believes that it has an easier interface as compared to
Android.
Product orientation: an inward-looking approach that focuses on making products that can be made – or
have been made for a long time – and then trying to sell them
• Example: Gillette Company focuses on producing the best possible disposable razors at an
economic rate.
Societal marketing: this approach considers not only the demands of consumers but also the effects on
all members of the public (society) involved in some way when firms meet these demands
• Examples include The Body Shop and its stand on being animal cruelty free and against animal
testing
Supply: the quantity of a product that firms are prepared to supply at a given price in a time period
Unique selling point (USP): the special feature of a product that differentiates it from competitors’
product
• A practical example would be with Domino's Pizza slogan, 'You get fresh, hot pizza delivered to
your door in 30 minutes or less or its free'
Chapter 17: Market Research

Arithmetic Mean: calculated by totalling all the results and dividing by the number of results asset - an
item of monetary value that is owned by a business.
Bar chart: use bands of equal width but of varying length or height to represent relative values.
Closed questions: questions to which a limited number of pre-set answers is offered.

• An example of closed questions would be yes or no questions.
Cluster sampling: using one or a number of specific groups to draw samples from and not selecting from
the whole population, e.g. using one town or region.
Focus groups: a group of people who are asked about their attitude towards a product, service,
advertisement or new style of packaging.
Histograms: it is not the height of each bar that represents relative values, but the area of each bar.
Inter-quartile range: the range of the middle 50% of the data.
Line graphs: most commonly used for showing changes in variables over a period of time, such as sales
over time in time-series graphs.

17
Median: the value of the middle item when data have been ordered or ranked. It divides the data into two
equal parts
Mode: the value that occurs most frequently in a set of data
Open questions: those that invite a wide-ranging or imaginative response – the results will be difficult to
collate and present numerically
Pie chart: used to display data that need to be presented in such a way that the proportions of the total
are clearly shown
Primary research: the collection of first-hand data that is directly related to a firm’s needs
Qualitative factors: non-measurable factors that may influence business decisions.

• Examples are such as the impact on employee's morale by the addition of a break room in the
production area
Qualitative research: research into the in-depth motivations behind consumer buying behaviour or
opinions.
• Examples are such as intangible factors which include social norms, gender roles and religion
Quantitative factors: these are measurable in financial terms and will have a direct impact on either the
costs of a site or the revenues from it and its profitability
Quantitative research: research that leads to numerical results that can be statistically analysed
Quota sampling: when the population has been stratified and the interviewer selects an appropriate
number of respondents in each stratum.
• For instance, a researcher might ask for a sample of 100 females or 100 individuals between the
ages of 20-30
Random sampling: every member of the target population has an equal chance of being selected.
• An example would be where the names of 25 employees are randomly chosen from a company
of 250 employees
Range: the difference between the highest and the lowest value.
• For instance, in (3,4,5,6,& 7), the highest value would be 7 while the lowest value would be 3
Sample: the group of people taking part in a market research survey selected to be representative of the
overall target market.
• An example would be asking 100 randomly chosen people at a football match
Secondary research: collection of data from second-hand sources.

• Examples are such as news reports, newsletters and academic journals
Stratified sampling: this draws a sample from a specified sub-group or segment of the population and
uses random sampling to select an appropriate number from each stratum
Systematic sampling: every nth item in the target population is selected

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Chapter 18: The Marketing Mix - Product and Price

Brand: an identifying symbol, name, image or trademark that distinguishes a product from its
competitors.
• Some of the most recognisable brands in the world are Nike, Coca-Cola, Google, Apple and
Microsoft.
Competition-based pricing: a firm will base its price upon the price set by its competitors.
• The pricing strategy used by Coca-Cola and Pepsi is an example of competition-based pricing.
Consumer durable: manufactures product that can be reused and is expected to have a reasonably long
life, such as a car or washing machine.
Contribution-cost pricing: setting prices based on the variable costs of making a product in order to
make a contribution towards fixed costs and profit.
Customer relationship marketing (CRM): using marketing activities to establish successful customer
relationships so that existing customer loyalty can be maintained.
• Examples of CRM are good marketing, sales tracking, customer service and support.
Dynamic pricing: offering goods at a price that changes according to the level of demand and the
customer's ability to pay.
Extension strategies: these are marketing plans to extend the maturity stage of the product before a
brand new one is needed.
• For instance, businesses may develop new packaging, style or features for their old products.
Full-cost pricing: setting a price by calculating a unit cost for the product (allocated fixed and variable
costs) and then adding a fixed profit margin.
Intangible attributes of a product: subjective opinions of customers about a product that cannot be
measured or compared easily
• Intangible attributes may include such characteristics as price, quality, reliability, beauty or
aesthetics
Market skimming: setting a high price for a new product when a firm has a unique or highly
differentiated product with low elasticity of demand
Marketing mix: the four key decisions that must be taken in the effective marketing of a product
Mark-up pricing: adding a fixed mark-up for profit to the unit price of a product
Penetration pricing: setting a relatively low price often supported by strong promotion in order to
achieve a high volume of sales
• Examples include regularly offers of low introductory prices such as free or steeply discounted
premium channels
Price elasticity of demand: a numerical measure showing the responsiveness of quantity demanded to a
change in price
Product life cycle: the pattern of sales recorded by a product from launch to withdrawal from the market
and is one of the main forms of product portfolio analysis

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Product portfolio analysis: analysing the range of existing products of a business to help allocate
resources effectively between them
Product positioning: the pattern of sales recorded by a product from launch to withdrawal from the
market
Product: the end result of the production process sold on the market to satisfy a customer
Tangible attributes of a product: measurable features of a product that can be easily compared with other
products
• Tangible attributes can include such product characteristics as size, colour, weight, volume,
smell, taste, touch, quantity, or material composition.
Target pricing: setting a price that will give a required rate of return at a certain level of output/sales
Chapter 19: The Marketing Mix - Promotion and Place

Above-the-line Promotion: a form of promotion that is undertaken by a business by paying for
communication with consumers.
• Examples are such as advertising on television or radio, direct mail marketing and sponsorship.
Advertising: paid-for communication with consumers to inform and persuade.

• Examples includes above the line advertising such as TV, radio, & newspaper advertisements
and below the line advertising such as billboards and sponsorships.
Below-the-line promotion: promotion that is not a directly paid-for means of communication, but based
on short-term incentives to purchase.
• Examples are such as trade shows, catalogues and targeted search engine marketing.
Branding: the strategy of differentiating products from those of competitors by creating an identifiable
image and clear expectations about a product.
Channel of distribution: the chain of intermediaries a product passes through from producer to final
consumer.
• Examples of channels are wholesalers, distributors and retailers.
E-commerce: the buying and selling of goods and services by businesses and consumers through an
electronic medium.
• Some notable E-commerce businesses are Taobao, Amazon, Walmart, eBay and Target.
Integrated marketing mix: the key marketing decisions complement each other and work together to
give customers a consistent message about the product.
• Some of the most successful examples are the Old Spice: Smell like a Man, Man Campaign, the
Levi Strauss and Co, ‘Ready to Work’ campaign and the Coca-Cola, ‘Share a Coke’ campaign.
Internet marketing: the marketing of products over the Internet.

• Popular internet marketing choices are through blogs, email marketing, Facebook groups, fan
page or Google.

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Personal selling: a member of the sales staff communicates with one customer with the aim of selling the
product and establishing a long-term relationship between company and consumer
Promotion budget: the financial amount made available by a business for spending on
marketing/promotion during a certain time period
Promotion mix: the combination of promotional techniques that a firm uses to sell a product
• This includes Price - skimming, Place - e-commerce, Promotion - word of mouth and Product
- innovative mobile phone
Promotion: the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship
and public relations to inform consumers and persuade them to buy
Public relations: the deliberate use of free publicity provided by newspapers, TV and other media to
communicate with and achieve understanding by the public
Sales promotion: incentives such as special offers or special deals directed at consumers or retailers to
achieve short-term sales increases and repeat purchases by consumers
• Examples include contests, rebates and coupon offers
Sponsorship: payment by a company to the organizers of an event so that the company name becomes
associated with the event
• Examples include Coca Cola and the Olympic Games
Viral marketing: the use of social networking is awareness or sell products

• Example of effective use of viral marketing, is tv series '13 reasons why', with its promotional
campaign on Twitter, Facebook and Instagram
Chapter 20: Marketing Planning (A-Levels)

Cross elasticity of demand: measures the responsiveness of demand for a product following a change in
the price of another product.
Cyclical fluctuations: these variations in sales occur over period of time of much more than a year and
are due to the business cycle.
Delphi method: a long-range qualitative forecasting technique that obtains forecasts from a panel of
experts.
Income elasticity of demand: measures the responsiveness of demand for a product following a change
in consumer incomes.
• Income elasticity of demand = % change in demand for the product / % change in consumer
incomes
Jury of experts: uses the specialists within a business to make forecasts for the future.
Marketing objectives: the goals set for the marketing department to help the business achieve its overall
objectives
Marketing plan: a detailed, fully researched written report on marketing objectives and the marketing
strategy to be used to achieve them

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Marketing strategy: long-term plan established for achieving marketing objectives
New product development (NPD): the design, creation and marketing of new goods and services
Promotional elasticity of demand: measures the responsiveness of demand for a product following a
change in the amount spent on promoting it.
• Promotional elasticity of demand = %change in demand for the product over %change in
promotional spending
Random fluctuations: these can occur at any time and will cause unusual and unpredictable sales figures
- examples include exceptionally poor weather or negative public image following a high-profile product
failure
Research and Development (R&D): the scientific research and technical development of new products
and processes
• Sales forecasting: predicting future sales levels and sales trends
Sales-force composite: a method of sales forecasting that adds together all of the individual predictions
of future sales of all the sales representative working for a business
Seasonal fluctuations: the regular and repeated variations that occur in sales data within a period of 12
months
Test marketing: the launch of the product on a small-scale market to test consumers' reaction to it
The trend: the underlying movement in a time series
Chapter 21: Globalisation and International Marketing (A-Levels)

BRICS: the acronym for five rapidly developing economies with great market opportunities - Brazil,
Russia, India, China and South Africa.
Global localisation: adapting the marketing mix, including differentiated products, to meet national and
regional tastes and cultures.
• For instance, global fast-food chains offer geographically-specific menu items that cater to local
tastes.
International marketing: selling products in markets other than the original domestic market.
• Examples of businesses with successful global marketing strategies are Red Bull, Dunkin
Donuts, Domino’s Pizza and Nike.

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Chapter 22: The Nature of Operations

Capital intensive production: involving a high quantity of capital equipment compared with labour
input.
• This is mostly used in automobile manufacturing or in the transportation sector.
Difference between Effectiveness and Efficiency: the ability to produce maximum output with limited
resources is known as efficiency. The level of the nearness of the actual result with planned result is
effectiveness. Efficiency is 'to do the things perfect' while effectiveness is 'to do perfect things'.
Effectiveness: meeting the objectives of the enterprise by using inputs productively to meet customers’
needs.
Efficiency: producing output at the highest ratio of output to input.
Intellectual capital: intangible capital of a business that includes human capital (well trained and
knowledgeable employees), structural capital (databases and information systems) and relational capital
(good links with supplier and customers).
Labour intensive production: involving a high level of labour input compared with capital equipment.
• This is mostly used in the agriculture, mining, hospitality and food service industries.
Level of production: the number of units produced during a time period.
Production: converting inputs into outputs
Productivity: the ratio of outputs to inputs during production, e.g. output per worker per time period
£M^
Chapter 23: Operations Planning

Batch production: producing a limited number of identical products – each item in the batch passes
through one stage of production before passing on to the next stage.
• This is frequently used in industries that produce baked goods, clothing, computer chips or
electrical goods.
Computer aided design (CAD): the use of computer programs to create two- or three-dimensional (2D
or 3D) graphical representations of physical objects.
• This is often used in the area of engineering for manufacturing, planning and computer aided
analysis.
Computer aided manufacturing (CAM): the use of computer software to control machine tools and
related machinery in the manufacturing of components or complete products.
• This is often used in machining equipment, management of overall production process,
engineering design and equipment safety.
Diseconomies of scale: factors that cause average costs of production to rise when the scale of operation
is increased.
• This occurs when the firms outgrow in the size which results in the increase in employee cost,
compliance cost, administration cost etc.

23
Economies of scale: reduction in a firm’s average costs of production that results from an increase in the
scale of operations.
Enterprise resource planning: the use of a single computer application to plan the purchase and use of
resources in an organisation to improve the efficiency of operations.
Flow production: producing items in a continually moving process.

• This is frequently used in the production of cars, chocolate bars or electronic goods.
Job production: producing a one-off item specially designed for the customer.
• This is often used for building ships, bridges and buildings and making handmade crafts like
furniture or made-to-measure clothes.
Mark-up pricing: adding a fixed mark-up for profit to the unit price of a product
Mass customization: the use of flexible computer-aided production systems to produce items to meet
individual customers’ requirements at mass production cost levels
Multinational: a business with operations and production based in more than one country Net monthly
cash flow: estimated difference between monthly cash inflows
Multi-site location: a business that operates from more than one location
Offshoring: the relocation of a business process done in one country to the same or another company in
another country
Operational flexibility: the ability of a business to vary both the level of production and the range of
products following changes in customer demand
Operations planning: preparing input resources to supply products to meet expected demand
Optimal location: a business location that gives the best combination of quantitative and qualitative
factors
Process innovation: the use of a new or much improved production method or service delivery method
Scale of operation: the maximum output that can be achieved using the available inputs (resources) – this
scale can only be increased in the long term by employing more of all inputs
Trade barriers: taxes (tariffs) or other limitations on the free international movement of goods and
services
• Practical examples include Chinese Import Tariffs and Custom Duties post-Brexit

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Chapter 24: Inventory Management

Buffer stocks/inventories: the minimum stocks/inventories that should be held to ensure that
production could still take place should a delay in delivery occur or should production rates increase.
Economic order quantity: the optimum or least-cost quantity of stock to re-order taking into account the
delivery costs and stock-holding costs.
Inventory: stock held by the business in the form of materials, work in progress and finished goods.
• Raw material inventory is such as wood, to make a shelf/Work-in-process inventory is such as
an unfinished cake in a food manufacturing business/Finished goods inventory is such as a bed
that you have finished making.
Just-in-time (JIT): this stock-control method aims to avoid holding stocks by requiring supplies to arrive
just as they are needed in production and completed products are produced to order.
• Businesses with successful use of JIT are Toyota, Dell and Harley Davidson.
Lead time: the normal time taken between ordering new stocks and their delivery.
Reorder quantity: the number of units ordered each time
Stock: materials and goods required to allow for and supply of products to the customer stratified
sampling: this draws a sample from a specified sub-group or segment of the population and uses random
sampling to select an appropriate number from each stratum
Chapter 25: Capacity Utilisation (A-Levels)

Business-process outsourcing (BPO): a form of outsourcing that uses a third party to take
responsibility for certain business functions, such as HR and finance.
Capacity shortage: when the demand for a business's products exceeds production capacity.
Capacity utilisation: the proportion of maximum output capacity currently being achieved.
Excess capacity: exists when the current levels of demand are less than the full capacity output of a
business - also known as spare capacity.
Full capacity: when a business produces at maximum output.
Rationalisation: reducing capacity by cutting overheads to increase efficiency of operations, such as

closing a factory or office department, often involving redundancies.
Chapter 26: Lean Production and Quality Management (A-Levels)

Benchmarking: involves management identifying the best firms in the industry and then comparing the
performance standards - including quality - of these businesses with those of their own business.
Cell production: splitting flow production into self-contained groups (known as cells) that are
responsible for whole work units. Cells are responsible for the quality of their own complete unit of
work.

25
Internal customers: people within the organisation who depend upon the quality of work being done by
others.
• For example, the flight attendants are internal customers of the pilots. The pilots must provide
both information and direction to the flight attendants so they can do their job. Likewise, the
pilots are also internal customers of the flight attendants. The pilots rely on the flight attendants to
keep them aware of any issues in the cabin, to provide refreshments, and even to help secure the
area when the cockpit needs to be opened in flight.
ISO 9000: this is an internationally recognised certificate that acknowledges the existence of a quality
procedure that meets certain conditions.
Kaizen: Japanese term meaning continuous improvement.
Lean production: producing goods and services with the minimum of wasted resources while
maintaining high quality.
• Some of the top lean manufacturing companies are Toyota, Ford and John Deere.
Quality assurance: a system of agreeing and meeting quality standards at each stage of production to
ensure customer satisfaction.
• For example, Nissan car factories have predetermined quality standards set and checked at each
stage of the assembly of vehicles – by the workers accountable for them.
Quality control: this is based on inspection of the product or a sample of products.

• For example, a customer service line worker having a call to a customer listened to and
recorded.
Quality product: a good or service that meets customers’ expectations and is therefore ‘fit for purpose’.
Quality standards: the expectations of customers expressed in terms of the minimum acceptable
production or service standards.
• Examples of aspects of quality standards are reliability, availability, usability, customer
experience and customer service.
Simultaneous engineering: product development is organised so that different stages are done at the
same time instead of in sequence.
Total quality management: an approach to quality that aims to involve all employees in
quality-improvement.
Zero defects: achieving perfect products every time.
Chapter 27: Project Management (A-Levels)

Critical path analysis: a planning technique that identifies all tasks in a project, puts them in the correct
sequence and allows for the identification of the critical path.
Critical path: the sequence of activities that must be completed on time for the whole project to be
completed by the agreed date.
Network diagram: the diagram used in critical path analysis that shows the logical sequence of activities
and the logical dependencies between them – so the critical path can be identified.

26
Chapter 28: Business Finance

Bank overdraft: bank agrees to a business borrowing up to an agreed limit as and when required.
• An example would be when a company writes a check for more than the amount available in the
checking account.
Business plan: a detailed document giving evidence about a new or existing business, and that aims to
convince external lenders and investors to extend finance to the business.
Capital expenditure: involves the purchase of assets that are expected to last for more than one year,
such as building and machinery.
Crowd funding: the use of small amounts of capital from a large number of individuals to finance a new
business venture.
• Some of the most popular crowd funding websites are Kickstarter and Indiegogo.
• Examples of successful crowd funding ventures are such as Oculus VR (American company
specializing in virtual reality hardware and software products) and M3D (a company that
manufacture small 3D printers).
Equity finance: permanent finance raised by companies through the sale of shares.
Factoring: selling of claims over debtors to a debt factor in exchange for immediate liquidity – only a
proportion of the value of the debts will be received as cash.
Hire purchase: an asset is sold to a company that agrees to pay fixed repayments over an agreed time
period – the asset belongs to the company.
• Examples of hire purchase goods are such as car, computer and machinery.
Leasing: obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed
period. This avoids the need for the business to raise long-term capital to buy the asset. Ownership
remains with the leasing company.
Liquidation: when a firm ceases trading and its assets are sold for cash to pay supply other creditors.
Liquidity: the ability of a firm to be able to pay its short-term debts.
Long-term bonds (debentures): bonds issued by companies to raise debt finance, often with a fixed rate
of interest.
Long-term loans: loans that do not have to be repaid for at least one year.
• Examples are such as government debt, mortgages and debentures (bonds).
Microfinance: providing financial services for poor and low-income customers who do not have access
to banking services, such as loans and overdrafts offered by traditional commercial banks.
Overdraft: bank agrees to a business borrowing up to an agreed limit as and when required
Revenue expenditure: spending on all costs and assets other than fixed assets and includes wages and
salaries and materials bought for stock
Rights issue: existing shareholders are given the right to buy additional shares at a discounted price
Start-up capital: capital needed by an entrepreneur to set up a business

• Example sources of start-up capital include checks coming from friends or family, or personal

27
savings pumped into the business
Venture capital: risk capital invested in business start-ups or expanding small businesses that have good
profit potential but do not find it easy to gain finance from sources
• Notable examples include well known alternative investment assets managers, Kehlberg, Kravis
and Roberts (KKR)
Working capital: the capital needed to pay for day-to-day running costs and credit offered to. Working
capital is equal to current assets minus current liabilities.
• Examples are such as inventory, accounts payable, accounts receivable and cash.
Chapter 29: Costs

Break-even point of production: the level of output at which total costs equal total revenue – neither a
profit nor loss is made.
Contribution per unit: selling price less variable cost per unit.
Direct costs: these costs can be clearly identified with each unit of production and can be allocated to a
cost centre.
• Examples are such as costs for direct labour or direct materials, commissions, piece rate wages,
and costs of manufacturing supplies.
Fixed costs: costs that do not vary with output in the short run.
• Examples are such as insurance, rent paid, interest expense, property taxes and salaries.
Indirect costs: costs that cannot be identified with a unit of production or allocated accurately to a cost
centre.
• Examples are such as production supervision salaries, quality control costs, insurance and
depreciation.
Marginal costs: the extra cost of producing one more unit of output.
Margin of safety: the amount by which the sales level exceeds the break-even level of output.
Variable costs: Costs that vary with a change in output

• Examples include direct materials and piece rate labor
Chapter 30: Accounting Fundamentals

Accounts payable: value of debts for goods bought on credit payable to suppliers; also known as ‘trade
payables’.
• Examples are such as costs for raw materials, equipment or leasing.
Accounts/Trade receivables (debtors): the value of payments to be received by customers who have
bought goods on credit.
Acid-test ratio: (current assets – inventory)/current liabilities
Asset: an item of monetary value that is owned by a business.

28
Cash-flow statement: record of the cash received by a business over a period of time and the cash
outflows from the business.
Cost of sales: a.k.a. cost of goods sold; the direct cost of purchasing the goods that were sold during the
financial year.
Current assets: assets that are likely to be turned into cash before the next balance sheet date.
• Examples are such as cash, accounts receivable, inventory and short-term investments.
Current liabilities: debts of the business that will usually have to be paid within one year.
• Examples are such as accounts payable, sales taxes payable, interest payable and bank account
overdrafts.
Current ratio: current assets/current liabilities
Debtors: customers who have bought products on credit and will pay cash at an agreed date in the
future.
Dividends: the share of the profits paid to shareholders as a return for investing in the company.
Goodwill: arises when a business is valued at or sold for more than the balance sheet value of its assets.
Gross profit: equal to sales revenue less cost of sales.
Gross profit margin: This ratio compares gross profit (profit before deduction of overheads) with
revenue.
I. Gross profit margin (%) = (gross profit / revenue) x 100
High-quality profit: profit that can be repeated and sustained.
Income statement: records the revenue, costs and profit (or loss) of a business over a given period of
time.
Intangible assets: items of value that do not have a physical presence, such as patents and trademarks.
Intellectual capital or property: the amount by which the market value of a firm exceeds its tangible
assets less liabilities - an intangible asset.
Liability: a financial obligation of a business that is required to pay in the future.
Liquid assets: current assets – inventories (stocks) = liquid assets.
Low-quality profit: one-off profit that cannot easily be repeated or sustained.
Opening cash balance: cash held by the business at the start of the month
Operating profit (formerly referred to as net profit): gross profit minus overhead expenses.
Operating profit margin: this ratio compares operating profit (formerly this ratio was referred to as the
net profit margin) revenue.
II. Operating profit margin % = (operating profit / revenue) x 100
Profit for the year (profit after tax): operating profit minus interest costs and corporation tax.

29
Retained earnings (profit): the profit left after all deductions, including dividends, have been made. This
is “ploughed back” into the company as a source of finance.
Revenue (formerly called sales turnover): the total value of sales made during the trading period = selling
price x quantity sold.
Share capital: the total value of capital raised from shareholders by the issue of shares.
• For instance, if a company sold 100,000 shares which have a face value of $1 per share, then the
issued share capital of such a company is $100,000
Shareholder: a person or institution owning shares in a limited company.

• A notable example would be Tim Cook, Chief Executive Officer of Apple Inc, who has a total
over 800k shares in Apple
Shareholders’ equity: total value of assets minus total value of liabilities.

• Examples are such as common stock and preferred stock
Statement of financial position (balance sheet): an accounting statement that records the values of a
business’s assets, liabilities and shareholders’ equity at one point of time.
Window dressing: presenting the company accounts in a favourable light – to flatter the business
performance.
• An example would be by postponing the payment to suppliers, so that the period-end cash
balance appears higher than it should be.
Chapter 31: Forecasting and Managing Cash Flows

Bad debt: unpaid customers’ bills that are now very unlikely to ever be paid.
Cash-flow forecast: estimate of a firm’s future cash inflows and outflows.
Cash flow: the sum of cash payments to a business (inflows) less the sum of cash payments (outflows).
Cash inflows: payments in cash received by the business.
Cash outflows: payments in cash made by the business.
Closing cash balance: cash held at the end of the month; it becomes next month’s opening balance.
Credit control: monitoring of debts to ensure that credit periods are not exceeded.
Creditors: suppliers who have agreed to supply products on credit and who have not yet been paid.
Insolvent: when a business cannot meet its short-term debts.
Net monthly cash flow: estimated difference between monthly cash inflows and outflows.
Opening cash balance: cash held by the business at the start of the month.
Overtrading: expanding a business rapidly without obtaining all of the necessary finance so that a
cash-flow shortage develops.

30
Chapter 32: Costs (A-Levels)

Contribution or marginal costing: costing method that allocates only direct costs to cost/profit centres,
not overhead costs.
Cost centre: a section of a business, such as a department, to which costs can be allocated or charged.
• For example, consider a company’s legal department, accounting department, research and
development, advertising, marketing, and customer service a cost centre. The managers in charge
of these departments can control and contain costs – and they are evaluated on their ability to
control and contain costs. But there is not much they can do to directly impact the company’s
revenues.
Full costing: a method of costing in which all fixed and variable costs are allocated to products, services
or divisions of a business.
Profit centre: a section of a business to which both costs and revenues can be allocated – so profit can
be calculated.
• An example would be the selling or sales department.
Chapter 33: Budgets (A-Levels)

Adverse variance: exists when the difference between the budgeted and actual figure leads to a
lower-than-expected profit.
Budget: a detailed financial plan for the future.
Budget holder: Individual responsible for the initial setting and achievement of a budget.
Delegated budgets: giving some delegated authority over the setting and achievement of budgets to
junior managers.
Favourable variance: exists when the difference between the budgeted and actual figure leads to a
higher-than-expected profit.
Flexible budgeting: cost budgets for each expense are allowed to vary if sales or production vary from
budgeted levels.
Incremental budgeting: uses last year's budget as a basis and an adjustment is made for the coming year.
Variance analysis: calculating differences between budgets and actual performance, and analysing
reasons for such differences.
Zero budgeting: setting budgets to zero each year and budget holders have to argue to receive any
finance.
Chapter 34: Contents of Published Accounts (A-Levels)

Capital expenditure: any item bought by a business and retained for more than one year, that is the
purchase of fixed or non-current assets.
• Examples are such as buildings, computer equipment or office equipment.

31
Depreciation: the decline in the estimated value of a non-current asset over time.
• Assets decline in value for two main reasons: 1. normal wear and tear through usage. 2.
technological change, making either the asset, or the product it is used to make, obsolete
Market value: the estimated total value of a company if it were taken over.
Net book value: the current Statement of financial position value of a non-current asset = original cost –
accumulated depreciation.
Net realisable value: the amount for which an asset (usually an inventory) can be sold minus the cost of
selling it – it is only used on Statements of financial position when NRV is estimated to be below
historical cost.
Revenue expenditure: any expenditure on costs other than non0current asset expenditure.
• Examples are such as manufacturing expenses, commission, legal expenses, insurance and
advertisement.
Straight-line depreciation: a constant amount of depreciation is subtracted from the value of the asset
each year. Straight-line depreciation = original cost of asset-expected residual value / expected useful life
of asset (years)
Chapter 35: Analysis of Published Accounts (A-Levels)

Capital employed: the total value of all long-term finance invested in the business: it is equal to
(non-current assets + current assets) – current liabilities OR non-current liabilities + shareholders’
equity.
Day's sales in receivables ratio: (trade accounts receivable x 365) / revenue
Dividend cover ratio = profit for the year / annual dividends
Dividend per share (%) = total annual dividends / total number of issued shares
Dividend yield ratio (%) = (dividend per share x 100) / current share price
Earnings per share = profit for the year / number of issued shares. This is the amount of profit (after
tax and interest) earned per share.
Inventory turnover ratio = cost of goods sold / value of inventories
Price/earnings ratio = current share price / earnings per share
Return on capital employed (%): (operating profit / capital employed) x 100
Share price: the quoted price of one share on the stock exchange.
Chapter 36: Investment Appraisal (A-Levels)

Accounting rate of return (ARR): measures the annual profitability of an investment as a percentage of
the initial investment. ARR (%) = [annual profit (net cash flow) / initial capital cost] x 100; an alternative
formula is: ARR (%) = [annual profit (net cash flow) / average capital cost] x 100, where the average
capital cost = (initial capital cost - residual capital value) / 2

32
Annual forecasted net cash flow: forecast cash inflows minus forecast cash outflows.
Criterion rates or levels: the minimum levels (maximum for payback period) set by management for
investment-appraisal results for a project to be accepted.
Internal rate of return (IRR): the rate of discount that yields a net present value of zero - the higher the
IRR, the more profitable the investment project is.
Investment appraisal: evaluating the profitability or desirability of an investment project.
Net present value (NPV): today’s value of the estimated cash inflows resulting from an investment.
Payback period: length of time it takes for the net cash inflows to pay back the original capital cost of the
investment.
Chapter 37: What Is Strategic Management? (A-Levels)

Competitive advantage: a superiority gained by a business when it can provide the same value
product/service as competitors but a lower price, or can charge higher prices by providing greater value
through differentiation.
• An example can be seen from the differentiation of Coca-Cola compared to Pepsi where
Coca-Cola created competitive advantages for its products with storytelling. This is why Pepsi
struggles to get a bigger market share.
Corporate strategy: a long-term plan of action for the whole organisation, designed to achieve a
particular goal.
Strategic management: the role of management when setting long-term goals and implementing
cross-functional decisions that should enable a business to reach these goals.
Tactic: short-term policy or decision aimed at resolving a particular problem or meeting a specific part of
the overall strategy.
• This could be in areas such as sales, quality assurance, marketing or merger and acquisitions.
Chapter 38: Strategic Analysis (A-Levels)

Boston Matrix: a method of analysing the product portfolio of a business in terms of market share and
market growth.
Core competence: an important business capability that gives a firm competitive advantage.
Core product: product based on a business's core competences, but not necessarily for final consumer or
end user.
• Examples are such as Windows of Microsoft, Google Search/Android of Google Inc. and OS
X/iOS of Apple Inc.
Mission statement: a statement of the business’s core purposes and focus, phrased in a way to motivate
employees and to stimulate interest by outside groups.
Non-current assets: assets to be kept and used by the business for more than one year; a.k.a. fixed assets
Non-current liabilities: value of debts of the business that will be payable after more than one year

33
PEST analysis: the strategic analysis of a firm’s macro-environment, including political, economic, social
and technological factors.
Strategic analysis: the process of conducting research into the business environment within which an
organisation operates, and into the organisation itself, to help form future strategies.
SWOT analysis: a form of strategic analysis that identifies and analyses the main internal strengths and
weaknesses and external opportunities and threats that will influence the future direction and success of
a business.
Vision statement: a statement of what the organisation would like to achieve or accomplish in the long
term.
Chapter 39: Strategic Choice (A-Levels)

Ansoff's matrix: a model used to show the degree of risk associated with the four growth strategies of
market penetration, market development, product development and diversification.
Decision tree: a diagram that sets out the options connected with a decision and the outcomes and
economic returns that may result.
Diversification: the process of selling different, unrelated goods or services in new markets.
• An examples of a diversified business is such as Samsung, which produces smartphones,
tablets and televisions, and also makes military hardware, apartments and ships while also
operates a Korean amusement park.
Expected value: the likely financial result of an outcome obtained by multiplying the probability of an
event occurring by the forecast economic return if it does occur.
Force-field analysis: technique for identifying and analysing the positive factors that support a decision
('driving forces') and negative factors that constrain it ('restraining forces').
Market development: the strategy of selling existing products in new markets.

• This could include exporting goods to overseas markets or selling to a new market segment.
Market penetration: achieving higher market shares in existing markets with existing products.
Product development: the development and sale of new products or new developments of existing
products in existing markets.
• For example, the launch of Diet Pepsi took an existing product, developed it into a slightly
different version and sold it in the soft drinks market where Pepsi was already available.
Chapter 40: Strategic Implementation (A-Levels)

Business process re-engineering: fundamentally rethinking and redesigning the processes of a business
to achieve a dramatic improvement in performance.
• For example, in the 1980s, Ford completely eliminated the need for accounts payable clerks to
match orders by recreating the process digitally, hence, solving their problem of overstaffing.
Change management: planning, implementing, controlling and reviewing the movement of an

organisation from its current state to a new one.

34
Contingency plan: preparing an organisation's resources for unlikely events.

• Examples of unlikely events are such as disaster or severe weather event, facility closure,
network failure, a machine breaks down, power outage.
Corporate culture: the values, attitudes and beliefs of the people working in an organisation that control
the way they interact with each other and with external stakeholder groups.
• For example, Disney strives to make every place the happiest place to work and is compassionate towards each other.
Nike’s organisational culture is centred on creativity and innovation to provide products that are cutting-edge and stays
that way.
• Unlike most organizations, Netflix doesn’t measure employees’ efforts by the number of hours they work, but rather
on the end product they deliver. In turn, employees love this sense of trust and flexibility.
Corporate plan: this is a methodical plan containing details of the organisation’s central objectives and
the strategies to be followed to achieve them.
Entrepreneurial culture: this encourages management and workers to take risks, to come up with new
ideas and test out new business ventures.
Person culture: when individuals are given the freedom to express themselves fully and make decisions
for themselves.
• An example of this type of culture is architects or social groups. It is a cluster, there to help the
individuals to profit from themselves.
Power culture: concentrating power among just a few people.

• A power culture is usually a strong culture, though it can swiftly turn toxic. The collapse of
Enron, Lehman Brothers and RBS is often attributed to a strong power culture.
Project groups: these are created by an organisation to address a problem that requires input from
different specialists.
• Examples are such as Department teams, Virtual teams and Problem-solving teams.
Role culture: each member of staff has a clearly defined job title and role.
• Large, well-established companies like insurance companies and banks tend to have role
cultures because they have to.
Strategic implementation: the process of planning, allocating and controlling resources to support the
chosen strategies.
Task culture: based on cooperation and teamwork.

• One example of a task culture is NASA, the US space agency, which in the 1960s had the
specific task of putting a man on the moon before the end of the decade and bringing him back
safely.

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1

Business Terms & Definitions (Self-Compiled)

Capital: factor of production including all man-made resources used by a business.

Land: factor of production, including all natural resources used by a business.

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 2: Business Structure

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Shareholder: a person or institution owning shares in a limited company.

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 3: Size of business

Market capitalisation: the total value of a company's issued shares

Market share: sales of the business as a proportion of total market sales

Revenue: total value of sales made by a business in a given time period

Chapter 4: Business Objectives

Ethics: the moral guidelines that determine decision-making.

SMART - S: Specific, M: Measurable, A: Achievable, R: Realistic & Relevant, T: Time-specific

Corporate aims: long-term goals that a business hopes to achieve.

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 5: Stakeholder in a Business

Chapter 6: Business Structure (A-Levels)

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 7: Size of Business (A-Levels)

Chapter 8: External Influences on Business Activity (A-Levels)

Computer-aided manufacturing: the use of computers and computer-controlled machinery to speed up

Environmental audits: assess the impact of a business's activities on the environment.

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 9: External Economic Influences on Business Behaviour (A-Levels)

Exchange rate: the price of one currency in terms of another.

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Imports: goods and services purchased from other countries.

Recession: a period of six months or more of declining real GDP

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Structural unemployment: unemployment caused by the decline in important industries, leading to

Chapter 10: Management and Leadership

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 11: Motivation

Piece rate: a payment to worker for each unit produced

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Salary: annual income that is usually paid on a monthly basis

Chapter 12: Human Resource Management

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Training: work-related education to increase workforce skills and efficiency

Chapter 13: Further Human Resource Management (A-Levels)

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 14: Organisation Structure (A-Levels)

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Span of control: the number of subordinates reporting directly to a manager

Chapter 15: Business Communication (A-Levels)

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 16: What is Marketing?

Market orientation: an outward-looking approach basing product decisions on consumer demand, as

Marketing strategy: long-term plan established for achieving marketing objectives

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Chapter 17: Market Research

Closed questions: questions to which a limited number of pre-set answers is offered.

Inter-quartile range: the range of the middle 50% of the data.

Business 9609 | Terms & Definitions | @shuhuankoh & @kerming_

Mode: the value that occurs most frequently in a set of data

Qualitative factors: non-measurable factors that may influence business decisions.