ZNOTES.

ORG

UPDATED TO 2023-2025 SYLLABUS

CAIE AS LEVEL
BUSINESS
SUMMARIZED NOTES ON THE DEFINITIONS SYLLABUS
Prepared for Krish Kotadiya for personal use only.
CAIE AS LEVEL BUSINESS

Limited liability – the only liability or potential loss the

shareholder has if the company fails is the amount
1. Definitions invested in the company, not the total wealth of the
shareholder.
Consumer goods – the physical and tangible goods sold to Private limited company – a small to medium-sized
the general public – include durable consumer goods like business owned by shareholders who are often members
cars and washing machines and non-durable goods like of the same family; this company cannot sell shares to the
food, drinks and sweets that can be used only once. general public.
Consumer services – the non-tangible products sold to the Share – a certificate confirming part ownership of a
general public – include hotel accommodation, insurance company and entitling the shareholder owner to dividends
services and train journeys. and certain shareholder rights.
Capital goods – the physical goods the industry uses to aid Shareholder – a person or institution owning shares in a
in producing other goods and services, such as machines limited company.
and commercial vehicles. Public limited company – a limited company, often a large
Creating value – increasing the difference between the business, with the legal right to sell shares to the general
cost of purchasing bought-in materials and the price the public. Prices are quoted on the national stock exchange.
finished goods are sold for. Memorandum of association – this states the name of the
Added value – the difference between the costs of company, the address of the head office through which it
purchasing bought-in materials and the price the finished can be contacted, the maximum share capital for which
goods are sold for. the company seeks authorisation and the declared aims
Opportunity cost – the benefit of the next most desired of the business.
option given up. Articles of association – this document cover the internal
Entrepreneur – someone who takes the financial risk of working and control of the business-for example, the
starting and managing a new venture. names of the directors and the procedures to be followed
Social enterprise – a business with mainly social at meetings will be detailed.
objectives that reinvest most of its profits into benefiting Franchise – a business that uses the name, logo and
society rather than maximising returns to owners. trading systems of an existing successful business.
Triple bottom line – the three objectives of social Joint venture – two or more businesses agree to work
enterprises: economic, social and environmental. closely together on a particular project and create a
Primary sector business activity – firms engaged in separate business division to do so.
farming, fishing, oil extraction and all other industries that Holding company – a business organisation that owns and
extract natural resources so that they can be used and controls a number of separate businesses, but does not
processed by other firms. unite them into one unified company.
Secondary sector business activity – firms that Public corporation – a business enterprise owned and
manufacture and process products from natural controlled by the state-also known as nationalised
resources including computers, brewing, baking, and industry.
clothes-making and construction. Revenue – total value of sales made by a business in a
Tertiary sector business activity – firms that provide given time period. Capital employed – the total value of all
services to consumers and other businesses such as the long term finance invested in the business.
retailing, transport, insurance, banking, hotels, tourism Market capitalisation – the total value of a company’s
and telecommunications. issued shares.
The public sector comprises organisations accountable to Market share – business sales as a proportion of total
and controlled by the central or local government. market sales.
Private sector – comprises of businesses owned and Internal growth – business expansion by opening new
controlled by individuals or groups of individuals. branches, hops or factories (also known as organic
Mixed economy – economic resources are owned and growth).
controlled by private and public sectors. Mission statement – a statement of the business’s core
Free-market economy – economic resources are owned aims, phrased to motivate employees and stimulate
largely by the private sector with little state intervention. interest by outside groups.
Command economy – economic resources are owned, Corporate social responsibility – this concept applies to
planned and controlled by the state. those businesses that consider the interests of society by
Sole trader – a business in which one person provides the taking responsibility for the impact of their decisions of
permanent finance and, in return, has full control of the customers, employees, communities and the
business and can keep all of the profits. environment.
Partnership – a business formed by two or more people to Management by objectives – coordinating and motivating
carry on a business together, with shared capital all organisational staff by dividing its overall aim into
investment and, usually, shared responsibilities.

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specific targets for each department, manager and Commission – a payment to a salesperson for each sale
employee. made.
Ethical code (code of conduct) – a document detailing a Bonus – a payment made in addition to the contracted
company’s rules and guidelines on staff behaviour that all wage or salary.
employees must follow. Profit sharing – a bonus for staff based on the profits of
Stakeholders – people or groups who can be affected by – the business-usually paid as a proportion of basic salary.
and therefore have an interest in – any action by an Performance-related pay – a bonus scheme to reward
organisation. staff for above-average work performance.
Stakeholder concept – the view that businesses and their Fringe benefits – benefits given, separate from pay, by an
managers have responsibilities to a wide range of groups, employer to the same or all employees.
not just shareholders. Job rotation – increasing the flexibility of employees in the
Corporate social responsibility – the concept that variety of work they do by switching from one job to
accesses that businesses should consider the interests of another.
society in their activities and decisions beyond the legal Job enlargement – attempting to increase the scope of a
obligations that they have. job by broadening and deepening the tasks undertaken.
Manager – responsible for setting objectives, organising Job redesign – involves restricting a job-usually with
resources and motivating staff to meet the organisation’s employees’ involvement and agreement- to make work
aims. more interesting, satisfying and challenging.
Leadership is the art of motivating a group towards Quality circles – voluntary groups of workers who meet
achieving common objectives. regularly to discuss work-related problems and issues.
Autocratic leadership – a style of leadership that keeps all Worker participation – workers are actively encouraged to
decision-making at the centre of the organisation. become involved in decision-making within the
Democratic leadership – a leadership style that promotes organisation.
workers' active participation in decisions. Team working – production is organised so that groups of
Paternalistic leadership – a leadership style based on the workers undertake complete units of work.
approach that the manager is in a better position than the Human resource management (HRM) – the strategic
workers to know what is best for an organisation. approach to effectively managing an organisation’s
Laissez-faire leadership – a leadership style that leaves workers so that they help the business gain a competitive
much of the business decision-making to the workforce – advantage.
is a ‘hands off’ style approach and the reverse of the Recruitment – the process of identifying the need for a
autocratic style. new employee, defining the job to be filled and the type of
Informal leader – a person who has no formal authority person needed to fill it and attracting suitable candidate
but has the respect of colleagues and some power over for the job.
them. Selection – involves the series of steps by which the
Emotional intelligence (EI) – the ability of managers to candidates are interviewed, tested and screened to
understand their own emotions, and those of the people choose the most suitable person for the vacant post.
they work with, to achieve better business performance. Job description – a detailed list of the key points about the
Motivation – the internal and external factors that job to be filled-stating all of its key tasks and
stimulate people to take actions that lead to achieving a responsibilities.
goal. Person specification – a detailed list of the qualities, skills
Self-actualisation – a sense of fulfilment reached by and qualifications that a successful applicant will need to
feeling enriched and developed by what one has learned have.
and achieved. Employment contract – a legal document that sets out the
Motivating factors (motivators) – aspects of a worker’s job terms and conditions governing a worker’s job.
that can lead to positive job satisfaction, such as Labour turnover – measures the rate at which employees
achievement, recognition, meaningful and interesting are leaving an organisation. It is measured by: Number of
work and advancement at work. employees leaving in 1 year/average number of people
Hygiene factor – aspects of a worker’s job that have the employed * 100
potential to cause dissatisfaction, such as pay, working Training – work-related education to increase workforce
conditions, status and over-supervision by managers. skill and efficiency.
Job enrichment – aims to use workers' full capabilities by Induction training – introductory training programme to
allowing them to do more challenging and fulfilling work. familiarise new recruits with the systems used in the
Time based wage rate – payment to a worker made for business and the layout of the business site.
each period of time worked, e.g.; one hour. On-the-job training – instruction at the place of work on
Piece rate – a payment to a worker for each unit how a job should be carried out.
produced. Off-the-job training – all training undertaken away from
Salary – annual income that is usually paid on a monthly the business, e.g. work related college courses.
basis.

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Employee appraisal – the process of assessing the Direct competitor – a business that provides the same or
effectiveness of an employee judged against pre-set very similar goods or services.
objectives. USP-unique selling point (or proposition) – the special
Dismissal – being dismissed or sacked from a job due to feature of a product that differentiates it from
incompetence of breach or discipline. competitors’ products.
Unfair dismissal – ending a worker’s employment contract Product differentiation – making a product distinctive to
for a reason that the law regards as being unfair. stand out from competitors’ products in consumers’
Redundancy – when a job is no longer required, the perception.
employee doing this job becomes unnecessary through Niche marketing – identifying and exploiting a small
no fault of their own. segment of a larger market by developing products to suit
Work-life balance – a situation in which employee are able it.
to give the right amount of time and effort to work and to Mass marketing – selling the same products to the whole
their personal life outside work, for example to family or market without attempting to target groups within it.
other interests. Consumer profile – a quantified picture of consumers of a
Equality policy – practices and processes aimed at firm’s products, showing proportions of age groups,
achieving a fair organisation where everyone is treated in income levels, location, gender and social class.
the same way and has the opportunity to fulfil their Market segment – a sub-group of a whole market in which
potential. consumers have similar characteristics.
Diversity policy – practices and processes aimed at Market segmentation – identifying different segments
creating a mixed workforce and placing positive value on within a market and targeting different products or
diversity in the workplace. services to them.
Marketing – the management task that links the business Market research – this is the process of collecting,
to the customer by identifying and meeting the needs of recording and analysing data about customers,
customers’ profitability does this by getting the right competitors and the market.
product to the right place at the right time. Primary research – the collection of first-hand data
Marketing objectives – the goals set for the marketing directly related to a firm’s needs.
department to help the business achieve its overall Secondary research – a collection of data from second-
objectives. hand sources.
Marketing strategy – a long-term plan established for Qualitative research – research into the in-depth
achieving marketing objectives. motivations behind consumer buying behaviour or
Market orientation – an outward-looking approach basing opinions.
product decisions on consumer demand, as established Quantitative research – research that leads to numerical
by market research. results that can be statistically analysed.
Asset-led marketing is an approach to marketing that Focus groups – a group of people who are asked about
bases strategy on the firm’s strengths and assets instead their attitude towards a product, service, advertisement
of purely on what the customer wants. or new style of packaging.
Product orientation – an inward-looking approach that Sample – the group of people participating in the market
focuses on making products that can be made-or have research survey selected to represent the overall target
been made for a long time-and then trying to sell them. market.
Social marketing – this approach considers not only the Random sampling – every member of the target
demands of consumers but also the effects on all population has an equal chance of being selected.
members of the public (society) involved in some way Systematic sampling – every nth item in the target
when firms meet these demands. population is selected.
Demand – the quantity of a product that consumers are Stratified sampling – this draws a sample from a specified
willing and able to buy at a given price in a time period. sub-group or segment of the population and uses random
Supply – the quantity of a product that firms are prepared sampling to select an appropriate number from each
to supply at a given price in a time period. stratum.
Equilibrium price – the market price that equates supply Quota sampling – when the population has been stratified,
and demand for a product. and the interviewer selects an appropriate number from
Market size – the total level of sales of all producers each stratum.
within a market. Cluster sampling – using one or a number of specific
Market growth – the percentage change in the total size groups to draw samples from and not selecting from the
of a market (volume or value) over a period of time. whole population, e.g. using one town or region.
Market share – the percentage of total sales in the total Open questions – those that invite a wide-ranging or
market sod by one business. This is calculated by the imaginative response- the results will be difficult to collate
following formula: Firm’s sales in time period/total market and present numerically.
sales in time period * 100 Closed questions – questions to which a limited number of
pre-set answers are offered.

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Marketing mix – the four key decisions that must be taken Above-the-line promotion – a form of promotion that is
to market a product effectively. undertaken by a business by paying for communication
Customer relationship management (CRM) – using with consumers.
marketing activities to establish successful customer Advertising – paid-for communication with consumers to
relationships and maintain customer loyalty. inform and persuade, e.g. TV and cinema advertising.
Brand – an identifying symbol, image or trademark that Below-the-line promotion – a promotion that is not a
distinguishes a product from its competitors. directly paid-for means of communication but is based on
Intangible attributes of a product – subjective opinions of short-term incentives to purchase.
customers about a product that cannot be measured or Sales promotion – incentives such as special offers or
compared easily. special deals directed at consumers or retailers to
Tangible attributes of a product – measurable product achieve short-term sales increases and repeat consumer
features that can be easily compared with other products. purchases.
Product – the end result of the production process sold on Personal selling – a member of the sales staff
the market to satisfy a customer's need. communicates with one consumer intending to sell the
Product positioning is the consumer perception of a product and establish a long-term relationship between
product or service compared to its competitors. the consumer and the company.
Product portfolio analysis – analysing a business's range Sponsorship – payment by a company to the organisers of
of existing products to help allocate resources effectively an event or team/individuals so that the company name
between them. becomes associated with the event/team/individuals.
Product life cycle – the pattern of sales recorded by a Public relations – the deliberate use of free publicity
product from launch to withdrawal from the market. It is provided by newspapers, TV and other media to
one of the main forms of product portfolio analysis. communicate with and achieve understanding by the
Extension strategy – these are marketing plans to extend public.
the maturity stage of the product before a brand new one Branding – the strategy of differentiating products from
is needed. those of competitors by creating an identifiable image
Consumer durable –manufactured process that can be and clear expectations about a product.
reused and is expected to have a reasonably long life, Marketing OR promotional budget – the financial amount
such as a car or washing machine. made available by a business to spend on
Price elasticity of demand (PED) – measures of demand marketing/promotion during a certain period.
responsiveness following a price change. Channel of distribution – this refers to the chain of
Markup pricing – adding a fixed markup for profit to the intermediaries that the product passes through the firm
unit price of a product. producer to the final consumer.
Target pricing – setting a price that will give a required Internet (online) marketing – refers to advertising and
rate of return at a certain level of output/sales. marketing activities that use the internet, email and
Full-cost pricing – setting a price by calculating a unit cost mobile communications to encourage direct sales via
for the product (allocated fixed and variable costs) and electronic commerce.
then adding a fixed profit margin. E-commerce – the buying and selling goods and services
Contribution-cost pricing - setting prices based on the by businesses and consumers through an electronic
variable costs of making a product in order to make a medium.
contribution towards fixed costs and profits. Viral marketing – using social media sites or text
Competition-based pricing – a firm will base its price upon messages to increase brand awareness or sell products.
the price set by its competitors. Integrated marketing strategy – the key marketing
Penetration pricing – setting a relatively low price often decisions complement each other and work together to
supported by strong promotion in order to achieve a high give customers a consistent message about the products.
volume of sales. Added value – the difference between the cost of
Dynamic pricing – offering goods at a price that changes purchasing raw materials and the price the finished goods
according to the next level of demand and the customers’ are sold is the same as creating value.
ability to pay. Intellectual capital – intangible capital of the business that
Market skimming – setting a high price for a new product includes human capital (well-trained and knowledgeable
when a firm has a unique or highly differentiated product employees), structural capital (database and information
with a low price elasticity of demand. system) and relational capital (goods links with suppliers
Promotion – the use of advertising, sales promotion, and customers).
personal selling, direct mail, trade fairs, sponsorship and Production – converting inputs into outputs.
public relations to inform consumers and persuade them Level of production – the number of units produced during
to buy. a time period.
Promotion mix – the contribution of a firm's promotional Productivity – the ratio of outputs to inputs during
techniques to sell a product. production, e.g. output per worker per time period.

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Efficiency – producing output at the highest ratio of output Enterprise resource planning – the use of a single
to input. computer application to plan the purchase and the use of
Effectiveness – meeting the enterprise's objectives by resources in an organisation to improve the efficiency of
using inputs productively to meet customers’ needs. operations.
Labour intensive – involving a high level of labour input Supply chain – all of the stages in the production process
compared with capital equipment. from obtaining raw materials to selling to the consumer
Capital intensive – involving a high quantity of capital point of origin to point of consumption.
equipment compared with labour output. Sustainability – production systems prevent waste by
Operations planning – preparing input resources to supply using the minimum of non-renewable resources so that
products to meet expected demand. production levels can be sustained in the future.
CAD-computer-aided design – using computer programs Inventory (stock) – materials and goods required to allow
to create two-or-three-dimensional (2D or 3D) graphical for the production and supply of products to the customer.
representations of physical objects. Economic order quantity – the optimum or least-cost of
CAM-computer-aided manufacturing – the use of stock to re-order, taking into account delivery costs and
computer software to control machine tools and related stock-holding costs.
machinery in manufacturing components or complete Re-order quantity – the number of units ordered each
products. time. Lead time – the normal time taken between ordering
Operational flexibility – the ability of a business to vary new stocks and their delivery.
both the production level and the range of products Buffer inventories – the minimum level of inventory level
following changes in consumer demand. that should be held to ensure that production can still take
Process innovation – using a new or much-improved place should a delay in delivery occur or should
production or service delivery method. production rates increase.
Job production – producing a one-off item specially Just-in-time – this inventory-control method aims to avoid
designed for the consumer. holding inventories by requiring supplies to arrive just as
Batch production – producing a limited number of needed in production and completed products are
identical products- Each item in the batch passes through produced to order.
one production stage before passing on to the next stage. Start-up capital – the capital an entrepreneur needs to set
Flow production – producing items in a continually moving up a business.
process. Working capital – the capital needed to pay for raw
Mass customisation – using flexible computer-aided materials, day-to-day running costs and credit offered to
production systems to produce items to meet individual customers. In accounting terms, working capital = current
customers’ requirements at mass-production cost levels. assets – current liabilities.
Optional location – a business location that combines Liquidity – the ability of a firm to pay its short-term debts.
quantitative and qualitative factors best. Liquidation – when a firm cases trading and assets are
Quantitative factors are measurable in financial terms sold for cash to pay suppliers and other creditors.
and will directly impact either the costs of a site or its Capital expenditure – the purchase of assets expected to
revenues and profitability. last more than one year, such as building and machinery.
Qualitative factors – non-measurable factors that may Revenue expenditure – spending on all costs and assets
influence business decisions. other than fixed assets and including wages and salaries,
Multi-site location – a business that operates from more and materials bought for stock.
than one location. Overdraft – The bank agrees to a business borrowing up
Offshoring – the relocation of a business process done in to an agreed limit as and when required.
one country to the same or another company in another Factoring = selling of claims over trade receivables to a
country. debt factor in exchange for immediate liquidity-only a
Multinational – a business with operations or production proportion of the value of the debts will be received as
bases in multiple countries. cash.
Trade barriers – taxes (tariffs) or other limitations on the Hire purchase – an asset is sold to a company that agrees
free international of goods and services. to pay fixed repayments over an agreed time period. The
Scale of operations – the maximum output that can be asset belongs to the company.
achieved using the available inputs (resources)-this scale Leasing – obtaining the use of equipment or vehicles and
only be increased in the long term by employing more of paying a rental or leasing charge over a fixed period; this
all inputs. avoids the need for the business to raise long-term capital
Economies of scale – reductions in a firm’s unit (average) to buy the asset; ownership remains with the leasing
costs of production that results from an increase in the company.
scale of operations. Equity finance – permanent finance raised by companies
Diseconomies of scale – factors that cause average costs through the sale of shares.
of production to rise when the scale of operation is Long-term loans – loans that do not have to be prepaid for
increased. at least one year.

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Long-term bonds OR debentures – bonds issued by Non-current assets – assets to be kept and used by the
companies to raise debt finance, often with a fixed business for more than one year. Used to be referred as
interest rate. ‘fixed assets’.
Right issue – existing shareholders are given the right to Intangible assets – items of value that do not have a
buy additional shares at a discounted price. physical presence, such as patents, trademarks and
Venture capital – risk capital invested in business start- current assets.
ups or expanding small businesses that have good profit Current assets – assets that are likely to be turned into
potential but do not find it easy to gain finance from other cash before the next balance sheet date.
sources. Inventories – stocks held by the business in the form of
Crowdfunding – the use of small amounts of capital from materials, work in progress and finished goods.
a large number of individuals to finance a new business Trade receivables (debtors) – the value of payments to be
venture. received from customers who have bought goods on
Microfinance – providing financial services for poor and credit.
low-income customer who do not have access to banking Current liabilities – debts of the business that will usually
services, such as loans and overdrafts offered by have to be paid within one year.
traditional banks. Accounts payable (creditors) – value of debts for goods
A business plan is a detailed document giving evidence bought on credit payable to suppliers, also known as
about a new or existing business that aims to convince ‘trade payables’.
external leaders and investors to finance the business. Non-current liabilities – the value of debts of the business
Direct costs – these costs can be clearly identified with that will be payable after more than one year.
each unit of production and can be allocated to a cost Statement of financial position (balance sheet) – an
centre. accounting statement that records the value of a
Variable costs – costs that vary with output. business’s assets, liabilities and shareholders’ equity at
Fixed costs – costs that do not vary with output in the short one point in time.
run. Shareholders’ equity – total value of assets – total value of
Marginal costs – the extra cost of producing one more liabilities
unit of output. Asset – an item of monetary value that is owned by a
Indirect costs – costs that cannot be identified with a business.
production unit or allocated accurately to a cost centre. Liability is a business's financial obligation that it must pay
Break-even point of production – the output level at which in the future.
total costs equal total revenue; neither a profit nor a loss Share capital – the total value of capital rose from
is made. shareholders by the issue of shares.
The margin of safety – the amount by which the sales Intellectual capital OR property – the amount by which the
level exceeds the break-even level of output. market value of a firm exceeds its tangible assets minus
Contribution per unit – selling price less variable cost per liabilities – an intangible asset.
unit. Goodwill – arises when a business is valued at or sold for
Income statement – records the revenue, costs and profit more than the balance sheet value of its assets.
(or loss) of a business over a given period of time. Cash-flow statement – a record of the cash received by a
Gross profit – equal to sales revenue less costs of sales. business over a period of time and the cash outflows from
Revenue (formerly called sales turnover) – the total value the business.
of sales made during the trading period = selling price * Gross profit margin – this ratio compares gross profit
quantity sold. (profit before deduction of overheads) with revenue.
Cost of sales (or cost of goods sold) – this is the direct cost Gross profit margin % = gross profit/revenue × 100
of the goods that were sold during the financial year. Operating profit margin – this ratio compares operating
Operating profit (formerly net profit) is gross profit minus profit (formerly, this ratio was referred to as the net profit
overhead expenses. margin) revenue. Operating profit margin % = operating
Profit for the year (profit after tax) – operating profit profit/revenue × 100
minus interest costs and corporation tax. Liquidity – the ability of a firm to pay its short-term debts.
Dividends – the share of the profits paid to shareholders Current ratio – current assets/current liabilities
as a return for investing in the company. Acid-test ratio – liquid assets/current liabilities
Retained earnings (profit) – the profit left after all Liquid assets – current assets – inventories (stocks) =
deductions, including dividends, have been made, this is liquid assets.
‘ploughed back’ into the company as a source of finance. Window-dressing – presenting the company accounts in a
Low-quality profit – one-off profit that cannot easily be favourable light – to flatter the business performance.
repeated or sustained. Cash flow – the sum of cash payments to a business
High-quality profit – profit that can be repeated and (inflows) less the sum of cash payments (outflows).
sustained. Liquidation – when a firm ceases trading, and its assets
are sold for cash to pay suppliers and other creditors.

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

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CAIE AS LEVEL
Business

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