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Business Management Flashcards
Contemproray Society, Marketing, Decision Making, HR, Operations
198
Business
Not Applicable
11/02/2011
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Term
Entrpreneur
 Definition
Someone that start's up a business and takes all the necessary risks involved. Combines all the factors of production. Someone that uses their initiative to make decisions and solve problems.
Term
Factors Of Production
 Definition
Capital, Enterprise, Land, Labour.
Term
Capital
 Definition
The machinery, tools, equipment and money that is invested into a business.
Term
Enterprise
 Definition
The person(entrepreneur) who combines all the factors of production to produce a good or service.
Term
Land
 Definition
The natural resources such as water, fields and trees.
Term
Labour
 Definition
The workforce (human labour).
Term
Undifferentiated/Mass Marketing
 Definition
When a business does not target a certain part of the market, they might have a target market but they have one marketing mix for the whole market.
Term
Differentiated/Product-Varied Marketing
 Definition
When a business has a seperate marketing mix for each market segment.
Term
Target/Concentrated/Niche Marketing
 Definition
When a business finds a gap in the market where there are little or no competitors, they focus on selling this product.
Term
Product Orientation
 Definition
When a business assumes that their product/service is the best in it's market. The business never feels any need to change because they don't see their competition as a major threat. They focus all their marketing on what is best for the product. This is not used by many businesses
Term
Marketing Mix
 Definition
Product, Promotion, Price, Place.
Term
Market/Customer Orientation
 Definition
When a business is constantly changing their marketing mix to fit their consumer's wants/needs. These business depened on their customers and are completely reliant on the fact that without the consumers, there's no money, which means no business. This is the more popular type of orientation within businesses.
Term
Market Penetration
 Definition
When a bussiness makes a change in their product's marketing mix in order to make more money from existing customers.
Term
Market Development
 Definition
When a bussiness sells their product in a new market to gain new customers, such as marketing in a new area.
Term
Product Development
 Definition
When a business markets a new/updated product to their existing customers.
Term
Unrelated Diversification
 Definition
When a bussines enters a new market that it has no history in and sells a product they are not familiar with. Selling to new customers. (i.e. a soup manufacturer diversifies into the rail business.)
Term
Related Diversification
 Definition
When a business sells a new product in the same market as it was previously in, e.g. a soup manufacturer diversifies into a cake manufacturer. (i.e. the food industry.)
Term
Ansoff's Matrix
 Definition
A marketing tool used by marketers who have objectives for growth. It offers strategic choicesto achieve objectives.
It is provided in the form of a table.
Term
The Three Levels Of A Product
 Definition
Core, Actual, Augmented
Term
Core Product
 Definition
The benefit that comes with the product,the main reasoning for buying the product and what makes it valuable. It's main use.
Term
Actual Product
 Definition
The tangible, physical aspects of the product. E.g. Quality, Fashion, Branding, Style and Colour.
Term
Augmented Product
 Definition
The non-physical part of the product. Things that add value to the product like deals. You may have to pay a premium.E.g. Warranties, Delivery, Services, Installation, Finance and Customer Care.
Term
Perishable
 Definition
Has a short life span. E.g. Fruit and Vegetables.
Term
Durable
 Definition
Has a long life span. E.g. A Car.
Term
The Product Life Cycle
 Definition
The various stages of life a product goes through.
Term
Introduction
 Definition
When the product is first released into the market.Initial sales are low and production costs are much higher than the revenue from sales. The product is heavily promoted to make the public aware of its existence.
Term
Growth
 Definition
Sales begin to increase and early production costs are recovered.
Term
Maturity
 Definition
When the product reaches it's peak and is themostprofitable point for the business. Lots of competitors begin to enter themarket.
Term
Saturation Point
 Definition
Term
Decline
 Definition
The product starts to become obsolete. Sales fall and so does revenue, the product becomes no longer profitable. The productis soon wtihdrawn from the market.
Term
Extending The Product Life Cycle: Product
 Definition
A new version or generation of the product may be introduced.It may have better features, or changes in packaging
Term
Extending The ProductLife Cycle: Promotion
 Definition
BOGOF (Buy one get one free) and other deals may encourage more sales.
Term
Extending The Product Life Cycle: Price
 Definition
The price may be lowered to reach a new market such as a lower class market.
Term
Extending The Product Life Cycle: Place
 Definition
Changes in where the product is sold can expand the life cycle. As certain products could be more fashionable or popular in certain places.
Term
Branding
 Definition
A mark/image/name/concept that identifies a business or product/service.
Term
Trademark
 Definition
A brand name that has legal protection.
Term
Aspects Of A Prominent Brand Name
 Definition
Legally protectable, Easy to pronounce, Attracts attention, Sugeests product's benefits (E.g. Easy Off) or suggests it's usage, Suggests the company or product image, Distinguish's the product's positioning relative to the competition.
Term
Unique Selling Proposition
 Definition
Usually a slogan. It is a term that a business uses in advertisement to persuade customers to use their product/service.
Term
Stages In Product Development
 Definition
Idea Generation, Idea Screening, Concept development & testing, Marketing Strategy, Business Analysis, Product development, Test marketing, Commercialization.
Term
Boston Matrix
 Definition
A marketing tool used by businesses to analyse it's product portfolio in terms of market share and market growth.
Term
Star
 Definition
A product wih a high market share in a high growth market, they generate a large income.
Term
Cash Cow
 Definition
A product that has a a high market share in a slow growth market. They generate a large profit, but over a long time.
Term
Dog
 Definition
Products with a low market share of a low growth market. They absorb money rather than generate it. Useless products in decline.
Term
Problem Child
 Definition
A product with a low market share of a high growth market. They make a small profit and usually use up a lot of resources.
Term
Product Portfolio
 Definition
A Businesses range of products.
Term
Long Term Pricing Strategies
 Definition
Low price, Market price, High price
Term
Short Term Pricing Strategies
 Definition
Skimming, Penetration pricing, Destroyer pricing, Promotional pricing, Demand-orientated pricing.
Term
Mark-up
 Definition
When a business adds a profit percentage onto direct cost of goods.
Term
Cost-plus Pricing
 Definition
When a business adds overheads onto direct costs before the profit percentage is added.
Term
Low Price
 Definition
When a business charges a lower price than their competitors so that consumers will but their product because it is cheaper, resulting in higher sales. This is a long term pricing strategy.
Term
Market Price
 Definition
When a business sets it's prices in line with it's competitors. This avoids a price war, which is unbeneficial to all companies. It is a long term pricing strategy.
Term
High Price
 Definition
Selling high quality, premium goods and services at a high price, image is all important. It is long term pricing strategy.
Term
Skimming
 Definition
When a new product is introduced into the market with a high price. At first when the competition is low consumers have no-one else to buy the product from, but as more competition enters the price is lowered gradually over time. This is a short term pricing strategy.
Term
Penetration pricing
 Definition
Used by businesses when entering an established market. Prices are set low, sometimes at a loss. Once the product becomes wel known in it's market, the business is able to increase it's price. This is a short term pricing strategy.
Term
Destroyer pricing
 Definition
When a firm sets it's prices low enough to drive competitors out of the market. Once the competitor is forced out the prices return to normal. It is a short term pricing strategy.
Term
Promotional pricing/ Loss Leader
 Definition
When a business sets it's prices so low that the price becomes a promotional device. It is a short term pricing strategy.
Term
Demand-orientated pricing/ Price Discrimination
 Definition
When a business varies its prices for different groups of consumers. This is a short term pricing strategy.
Term
Channel of Distribution
 Definition
The route taken by a product as it passes from producer/manufacturer to consumer/customer.
Term
Wholesaler
 Definition
They buy large quantities of product from suppliers and sell them on in smaller volumes to retailers or other business users. Provides a link between the manufacturer and retailer, saving the producer time and money in direct delivery to the retailer.
Term
Retailer
 Definition
The stage of distribution which sells goods to the general public. They offer a variety of goods/services from a variety of manufacturers. Goods are stored on their premises and prepared for sale.
Term
Input
 Definition
Raw materials and labour.
Term
Process
 Definition
Using different amounts of different resources in order to produce a different end product.
Term
Output
 Definition
The actual goods or serices for sale.
Term
Operations Management
 Definition
Concerned with the efficient conversion of an organisation's resources into goods or services that it has been set-up to provide.
Term
The three key areas of Operations Management
 Definition
The purchase and storage of raw materials. The production and storage of finished goods. The distribution of the finished goods.
Term
The quantity of stock ordered depends on:(Input)
 Definition
The stock of materials currently available. The duration of time which will elapse between this order and any future orders. The amount of raw materials likely to be required during the period. The storage space available and cost of storage.
Term
When choosing supplier consider:(Input)
 Definition
Price: Lowest price? Discounts for regular customers or bulk orders? Credit terms?
Quality: Acceptable for needs? Consistently available?
Availability: Dependable source of supply? Reliability of deliveries? Confident in supplier?
Location of Supplier: Additional charges for delivery/insurance?
Term
The Purchasing Mix
 Definition
Supplier, Price, Delivery, Quantity, Quality, Storage
Term
Stock Control
 Definition
An essential part of a business. Can account for 30% of the total assets held. Every business tries to balance the needs of the production department with the costs of holding stock.
Term
Stock Levels:
 Definition
Raw materials and components for the product or process;
Work in progress;
Finsihed stock.
Term
Requisition Card
 Definition
Similar to a memo, when one business/department in a business reuests something, i.e. stock from another department/business.
Term
Bin Card System
 Definition
A label for slots of stock with information about the stock on it, e.g. who it was made by, who it is issued for, its running balance.
Term
Possible Ways To Monitor Stock Levels:
 Definition
By recording how much stock a business has.(Using a bin card system.)
By using a databsae or spreadsheet, meaning changes in stock are recorded as they take place. Many such systems now allow automatic re-ordering when re-order level is reached, wiht no need for operator input.
Term
A Physical Stock Count
 Definition
A count of all the organisations stock by an operator/employee. It must be carried out once a year.
Term
Costs of Overstocking:
 Definition
Storage, insurance, lighting and handling costs will be high because there will be more stock to store.
Large stock levels will occupy space in the premises, there may be more productive ways of using this space, such as improving the layout of the factory.
The opportunity cost will be high, e.g.money tied up in stocks could be used to buy fixed assets.
Large stock levels could result in unsold stock, if there is an unexpected change in demand a business may have sock that nobody wants and will have to dispose of it.
Very large stocks might result in an increase in theft by employees if the stock control isn't very efficient.
Term
Lead Time
 Definition
The time taken between ordering stock and its arrival.
Term
Quality Control
 Definition
When finished products are examined by inspectors to see whether they meet the consumer's set standard or not. It is costly because it can result in a large amount of wasted materials.
Term
Quality Assurance
 Definition
Where the stages of production involve checking the standard, e.g. the employees check the standard of the product as they are manufacturing it, this way everyone takes responsibility for anything going wrong with the finished product.
Term
Job Production
 Definition
This is where the product is made individually and each item is finished before the next is started. Designer dresses are an example. It's main advantages are that it is a highly specialised or customised goods which means a premium price can be charged. Therefore it is expensive for the customers as highly skilled employees do not come cheap! The time for an order to be completed can take a long time. A famous example in Scotland is Linn Products in Waterfoot, East Renfrewshire. Many of their luxury sound systems are built by just one highly trained and skilled employee.
Term
Batch Production
 Definition
This is when groups of items are made together. Each group is finished before the next block is started. For example, a baker first produces a group of 50 white loaves. Only after they are completed will he or she start baking 50 loaves of brown bread. It's main advantages are that there is less demand for highly skilled workers and equipment can be standardised to a certain extent, which lowers costs. However repetition on the job can de-motivate employees and a high volume of stock may be held, tying up valuable cash.
Term
Flow Production
 Definition
This is where identical, standardised items are produced on an assembly line. Most cars are mass-produced in large factories using conveyor belts and expensive machinery such as robot arms. Workers have specialised jobs, for instance, fitting wheels. It's main advantages are that in assembly lines vast orders can be met and large quantities produced. Standardisation of machinery can keep costs low and automated machinery can operate without breaks 24/7.
Its major disadvantages are that a large initial capital outlay is required and employees are unskilled and highly de-motivated. Customisation is difficult to meet and would increase costs.
Term
Supplier(Purchasing Mix)
 Definition
A business needs to decide which is the most reliable, loyal, and cheap.
Term
Delivery(Purchasing Mix)
 Definition
A business has to consider which is the best way to order stock that fits with its deadlines, they can either rely on lead time or just in time stock.
Term
Price(Purchasing Mix)
 Definition
Discounts could be available, such as a discount for buying in bulk or a discount for guarenteed orders with the same supplier, it must be balanced against quality.
Term
Quantity(Purchasing Mix)
 Definition
This can depend on what diiscounts are available, the rate at which the materials are used, how much storage space is available, the finance available for stock, the cost of storing the stock, the nature of the stock i.e. is it perishable or not.
Term
Quality(Purchasing Mix)
 Definition
Must meet the requirements of the consumer/customer.
Term
Storage(Purchasing Mix)
 Definition
A warehouse or stock room has to have the capacity to hold the amount of stock ordered and the business needs to be able to afford the upkeep of the space, whether it needs a specific temperature etc. The stock should also be locked away to prevent theft.
Term
Centralised Warehousing/Storage Of Stock
 Definition
When all stock is held in one area before dispatched.
Term
De-Centralised Warehousing/Storage Of Stock
 Definition
Small warehouses in locations throughout the country.
Term
Scheduling
 Definition
A plan of how production is going to be organised.
Term
Understocking
 Definition
The business might not be able to cope with surprise increases in demand if it doesn't have enough stock to supply it's customers which can result in a loss of customers if they are let down too often.
If deliveries are delayed the firm may run out of stock and have to halt production. This might lead to idle labour and machinery while the firm waits for delivery.
The firm is less able to cope with unexpected shortages of materials. Again, this could result in lost production.
A firm which holds very low stocks may have to place more orders. This will raise total ordering costs.
Term
Advantages of Centralised Warehousing:
 Definition
Improved security from loss or theft as it tends to be carefully controlled by specialist staff.
Specialist staff maintain stocks by following agreed procedures for its control-only issued when 'authorised'.
Central stock of components or materials may cost less tohold than many small 'on site' supplies.
Improved efficiency in stock handling and management.
Term
Disadvantages of Centralised Warehousing:
 Definition
Time wasting going to and from branches.
Cost of specialist stock staff.
Cost of having specific or dedicated warehouse.
Term
Advantages of De-Centralised Warehousing:
 Definition
1 stock is always 'at hand' when required.
2 orders of new stock reflect actual production usage rather than a standard amount irrespective of needs.
3 speedier turnover of a small quantity of stock reduces the likelihood of its deterioration or decay.
Term
Disadvantages of De-Centralised Warehousing:
 Definition
Less rigid control and supervision, i.e. more chance of pilfering.
Takes up more physical space in actual production areas.
Term
Re-order Level
 Definition
The point where stock is re-ordered usually when stock levels are approaching minimum stock level, at the point where buffer stock is hit.
Term
Buffer Stock
 Definition
Stock that is held in case new stock is delivered late or there is an unexpected large stock order.
Term
Just In Case Stock Control
 Definition
When stock levels have a re-order level and the business is always ordering stock when it hits buffer stock, it is costly but managable and reliable.
Term
Just In Time Stock Control
 Definition
When a business holds no stock and relies on raw materials and components being delivered when the business needs them. This reduces storage costs and is more beneficial if the materials a business require are perishable or the market they work in is always changing it's requirements.
Term
Advantages of Just in Time Stock Control:
 Definition
It improves the cash flow for a business if money is not being used for storage.
It reduces the amount of obsolete, damaged stock.
There is more factory space that can be used for a more productive purpose if it is not being used to hold stock.
It decreases storage costs significantly.
Links, relationships and control with suppliers can be improved.
Term
Disadvantages of Just in Time Stock Control:
 Definition
There is a lot of pressure on suppliers if the business depends on them, therefore they may decide to increase their prices to make some businesses priority.
There is an increase in ordering and delivery costs.
There is no possibility of getting a discount for buying in bulk and the business will have to hope their supplier will do them regular discounts for loyalty.
The business is liable to machinery breakdowns and a break in supply, resulting in the disposal of stock that has nowhere to be stored.
The business can lose some of it's equity and loyal customers if they have late deliveries and consumers are unable to get the product when they want it.
Term
Kanban Production
 Definition
A Japanese method of production where stock is only reordered when needed using signal cards, i.e. when stock has been used it is given a stock retrieval card so that it can be replaced with new stock.
Term
Lean Production
 Definition
Similar to just in time production, when everything is cost efficient, the business only orders stock when it needs it, and the business has core/permanent staff and temporary staff for temporary jobs like researching a new idea for a product.
Term
Flexible Production
 Definition
When several different models can be produced on the same assembly line.
Term
Advantages of Job Production:
 Definition
It is easy to organise production.
Orders can be customised.
'One-off' orders can be accommodated.
Workers are involved in the entire production process, making them feel more important and raising employee morale.
Term
Disadvantages of Job Production:
 Definition
Production costs are likely to be high.
Production time is likely to be quite lengthy.
Investment in machinery will be high as specialist equipment may be required.
Term
Low Technology Jobs
 Definition
When the production process is extremely simple. The skills and equipment required are easily obtainable. This makes it easier to include customers specific requirements. e.g. hairdressing, tailoring.
Term
High Technology Jobs
 Definition
Jobs that involve much greater complexity, they present a much greater management challenge. The main part of it is project management/control.
Term
Advantages of Batch Production
 Definition
It allows flexible production.
Stocks of part-finished goods can be held and completed later.
Workers can specialise.
Term
Disadvantages of Batch Production
 Definition
Production runs of small batches can be expensive to produce.
If production runs are different there may be extra costs and time delays in setting up different equipment.
Repetitive work for employees.
Term
Requirements of Flow Production
 Definition
There must be substantially constant demand.
The product and production tasks must be standardised.
Materials used must be identical and must meet specification and delivered on time.
Each operation in the production flow must be carefully defined.
The output must meet quality standards.
Term
Advantages of Flow Production
 Definition
A business can use economies of scale to their advantage.
Automated production lines save time and money.
Quality assurance systems can be built into the production process.
Term
Disadvantages of Flow Production
 Definition
Identical, standard products produced.
High set-up costs of automated lines.
Repetitive work will result in a drop of morale for employees.
Long production lines may produce more than required.
Term
Total Quality Management (TQM)
 Definition
The aim of this quality strategy is to provide a perfect product/service to every customer in order to meet their needs. Similar to quality assurance except has a different view of quality. A bussiness using this strategy operates to achieve quality. Used by market orientated businesses. Also to not have any processes with any wastes or inefficiencies and have a team approach on problem solving.
Term
TQM Requirements:
 Definition
Every employee is quality concious and working to meet customer's set standards.
A quality plan.
Employee training to be treated as essential.
A constant requirement check, i.e. quality assurance.
Constantly looking to improve.
Term
Quality Chains (TQM)
 Definition
Failure to meet the requirements in any aspect of production. This causes delays in the next stage of production
Term
Company Policy and Accountability (TQM)
 Definition
Improvements in quality is only possible if a bussiness has a wide-spread company, quality policy and everybody must be responsible for what they do and they need to take pride in their job.
Term
Control (TQM)
 Definition
Customer's requirements will only be met if the owners of a business take charge of the factors that affect a product's quality. Whether it's human, administrative or technical.
Term
Monitoring the Process (TQM)
 Definition
The business needs to keep a constant watch over their production process in order to identify opportunities of improvement.
Term
Teamwork (TQM)
 Definition
Is the most important feature because it is the most effective way of solving problems.
Term
Advantages of Teamwork (TQM)
 Definition
A wider range of skills, knowledge and experience are available.
Employee morale is often improved due to more social activities.
Problems acrross departments are better dealt with.
A greater variety of problems can be tackled.
Team ideas are more likely to be used compared to individual ones.
Term
Disadvantages of TQM
 Definition
There will be training and development costs everytime the business changes a process in their business.
It will only work if the every employee and everyone involved in the business business is commited.
It can be very stressful for employees and managemnet.
Term
Benchmarking
 Definition
A technique used to help discover the "best" methods of production available to a business.
Term
Benchmarking Features
 Definition
Seeing what the customers see's as an ordinary supplier compared to an excellent supplier.
Setting standards for a product to meet with the customer.
Finding out how the market leaders are top of their market.
Applying the competitors' standards to meet in the middle and find a better one.
Term
Drawbacks of Benchmarking
 Definition
Competitors will be reluctant to provide their competitors with figures and internal information.
Organisations can't stop benchmarking, even the market leaders should always be looking to improve.
Term
Time-rate payment systems
 Definition
A basic wage or salary. Employees are rewarded for the amount of time they spend at work. Holidays with pay are usually included.
Term
Overtime
 Definition
When employees are payed for working over their normal amount of hours.
Term
Piece-rate payment systems
 Definition
When employees are payed for how well they perform or how much they produce.
Term
Piece rate plus a basic/fixed pay element
 Definition
When employees are payed a fixed rate and payed for how well they work or how much they produce.
Term
Commission payments
 Definition
When employees are paid according to the volume they produce or the amount they sell.
Term
The facors of choice of distribution
 Definition
The product, The Market, Legal Restrictions, The Company, Holding Stocks, Transporting Products.
Term
The roles of financial management
 Definition
To ensure that there is enough money available to the business in order for itto achieve it's objectives.
Ensure costs are controlled.
Ensure there is a steady cash flow.
Establish and control profitability levels.
Term
Cash Flow Management
 Definition
The balance between the money coming into a business and going out. Cash inflows must be higher than cash outflows.
Term
Liquidity
 Definition
Not having any debts and having enough money to keep the business flowing from day to day.
Term
Cash Budget/Cash Flow Statement
 Definition
Records the movements of cash in and out of the organisation as well as where exactly it has gone to or come from and how much.
Term
The Balance Sheet
 Definition
A Record of a businesses fixed and current assets as well as their current liabilites and the equity(share value, reserves etc.) of the company. Overall it shows the value of the business as a whole. Usually drawn up at the end of an accounting period.
Term
Fixed Assets
 Definition
Items owned by the organisation that will generate income, such as property, equipment, vehicles, etc. Without these assets the business would not be able to operate.
Term
Current Liabilites
 Definition
These are debts owed to external organisations that must be repaid in the short term, usually less than 12 months. Such as creditors, suppliers bank overdraft or loan, dividends, due to shareholders and taxation.
Term
Current Assets
 Definition
Items owned by the organisation that will be used up/sold/converted into csah within 12 months. They include stocks, debtors, bank balances and cash itself.
Term
Fixed Liabilities
 Definition
Debts owed to external organisations that are long-term and can usually be paid back over a year, such as a five year plus bank loan or a mortgage.
Term
Net Current Assets (Working Capital)
 Definition
The amount by which the total value of current assets exceeds the total value of current liabilities. It should always be that the value of current assets is greater than the value of current liabilities. If not, there can be serious cash flow problems, usually resulting in selling fixed assets.
Term
Net Assets (Capital employed)
 Definition
This is Net fixed assets + Net Current Assets. This shows the net value of the firm once short-term debts have been repaid.
Term
Issued Share Capital
 Definition
Money invested into the business by the owners or shareholders. In return for their investment they recieve dividend payments.
Term
Dividend Payments
 Definition
A Share of the profits made by a business. Usually the payment shareholders recieve, the more they invest the larger payments they get.
Term
Reserves from Profit and Loss Account
 Definition
These are the profits retained by the organisation after the payment of dividends to the shareholder and after all current liabilites have been dealt with. Organisations will use these profit reserves to finance some form of growth for the business at a later date.
Term
Shareholders' Interest(Shareholders' Funds)
 Definition
All of the issued share value(ordinary and preference shares) all reserves, retained profits and any other reserves.
Term
Preference Shares
 Definition
When a shareholder invests a small amount of money for a small percentage in the business and the organisation ios legally required to pay them dividends.
Term
Ordinary Shares
 Definition
When a shareholder invests as much as they want into a business, but the business is not legally required to pay them dividends if they do not have the money required.
Term
Drawings
 Definition
The value of resources that are withdrawn from the organisation by the owner/s for their private use. These can be taken in the form of cash, goods or services.
Term
An Accounting Period
 Definition
Six months or a year.
Term
A Trading Profit and Loss Account
 Definition
A historical review of the revenue(income) and expenditure of a business for the previous financial year.
Term
The Trading Account
 Definition
Compares the value of sales to the customer with the value of the sales at cost price. The main concern is to make sure the purchased goods are sold at a higher price in order to make a profit.
Term
Gross Profit
 Definition
The difference between the turnover and cost of sales.
Term
What appears in the Trading Account:
 Definition
Turnover.
Purchases.
Sales Returns.
Purchase Returns.
Cost of bringing stock into the shop/warehouse.
Warehouse Rent.
Stock at the start of the trading period.
Stock at the end of the trading period.
Term
The Profit and Loss Account
 Definition
Calculates the final proft or loss that a business has made over an accounting period.
Term
What appears in the Profit and Loss Account
 Definition
Discounts received.
Commission received.
Profit from the disposal of assets.
Expenses such as: wages, carriage outwards, rent, rates, insurance, advertising, bad debts allowance, Depreciation, Stationery etc.
Term
Turnover
 Definition
The revenue from selling goods/services.
Term
Cost of Sales
 Definition
Costs associated directly with the production/purchase of goods or services.
Term
Gross Profit/Loss
 Definition
The difference between Sales revenue and costs of goods sold.
Term
Expenses
 Definition
All additional expenses incurred by the organisation, for example administration, distribution and selling expenses.
Term
Net Profit
 Definition
The amount of money an organisation has made once all it's expenses have been deducted from the sales revenue.
Term
Primary Sector
 Definition
Businesses that are involved in exploiting or extracting the natural resources e.e farming, mining and fishing.
Term
Secondary Sector
 Definition
Buisinesses that are involved in manufacturing and construction. Also the conversion of natural resources from another sector into a product. e.g. car manufacturers and building firms.
Term
Tertiary Sector
 Definition
Businesses involved in providing a service rather than a good or product, e.g. hairdressing and banking.
Term
De-industrialisation
 Definition
The process an economy goes through as it starts off in the primary sector and as it grows it moves through the other sectors of industry.
Term
A Sole Trader
 Definition
A business owned and controlled by one person. The owner can still hire employees. This could be a plumber, hairdresser or a local newsagents.
It is usually a small business with less than 50 employees. They do not usually sell on a large, international scale.
Term
Advantages of a Sole Trader
 Definition
The firm is easy to set-up.
Usually only requires a small amount of capital invested, reducing the start-up cost.
The wage billis usually low because there are few or no employees.
The owner has more control compared to any other business owner because there is no-one to consult decision making with, giving them a more hands on approach.
The owner can decide opening and closing times to suit them if they want.
Term
Disadvantages of a Sole Trader
 Definition
There is no-one to share the workload or responsibility with.
The work can be stressful for one person, especially if they are ill or on vacation with no-one to cover for them.
The business can only be developed so far when a small amount of capital is invested.
Unlimited liability can force the owner to sell their personal assets if the business goes bankrupt with debt still to be paid.
It is hard to obtain any large sources of finance without taking out a loan.
Term
Aims and Objectives of a Sole Trader
 Definition
To survive in the business world.
Maximise profits.
Satisfy consumers and meet their requirements.
Term
Sources of Finance for a Sole Trader
 Definition
Bank Loan. Government Grant. Personal Savings. Friend/Family Loan.
Term
A Partnership
 Definition
Businesses owned by 2-20 people. Examples could be a doctors, dentists or solicitors.
Each owner signs a deed of partnership.
Term
A Deed Of Partnership
 Definition
This states what type of partnership it is, how much capital each has invested and how the profits and losses will be shared.
Term
Advantages of a Partnership
 Definition
There is sharedresponsibility between the owners, meaning they can share the workload and cover for one another when ill or on vacation. Also each partner may bring certain skills and qualities to the business which allows for specialisation.
More capital is being invested because there is more entrepreneurs/owners, this allows for more flexibility in running the business.
There is less pressure on each individual partner.
Business decisions can be consulted, researched and discussed between partners.
Easier to obtain finance compared to a sole trader.
Term
Disadvantages of a Partnership
 Definition
Each partner has less responsibility and control over the business.
Partners have to consult one another on decisions which can cause problems if there are disagreements.
There can be disputes concerning the distribution of profits, if the deed of partnership does not satisfy one of the partners, e.g. one partner is doing more work and wants more of the profits.
The owners have unlimited liability, meaning they are personally responsible for the success or failure of the business and if the business goes bust with remaining debts the owners must sell their personal assets.
Alegal agreement between partners is mandatory.
Term
Aims and Objectives of a Partnership
 Definition
These can be to maximise profits, survive, and provide a quality product/service.
Term
Sources of Finance for a Partnership
 Definition
These can be a bank loan, government grant, friend/family loan or gathering equal investments from each partner, depending on how much each partner recieves according to the deed of partnership.
Term
Specialisation
 Definition
When one partner's strength complements anothers.
Term
Control and Ownership of a Sole Trader
 Definition
It is owned and controlled by the one owner, although the owner can hire employees to work for him/her.
Term
Control and Ownership of a Partnership
 Definition
Owned by between 2-20 people, but not always equally. Although it is controlled equally by each partner, i.e. each partner has an equal amount of responsibility but does not neccesarily own an equal amount.
Term
A Private Limited Company
 Definition
Usually a small business, has to have at least two shareholders. This type of business is required, by law, to have at least one director and a Company Secretary. The business has the right to choose who it sells shares to and shareholders have to invited to invest.
In order to qualify as a plc it must produce a Memorandum of Association and Articles of Association in accordance with the Companies Act.
Term
Memorandum of Association
 Definition
A detailed description of an organisation's aims and objectives, used in a private/public limited company.
Term
Articles of Association
 Definition
A detailed description of how the business will be run and financed, used in a private/public limited company.
Term
The Companies Act.
 Definition
The legal obligations a private/public limited company has,such as publishing it's acounts and objectives.
Term
The Sex Discrimination Act of 1975.
 Definition
Protects employees againstdiscriminationon the groundsof gender. For example in job advertisements, selection of employeesfor jobs, promoting empoloyees or offering training and carrer development opportunities.
Although, in some situations it is accepted,e.g. advertising for a "male lavatory attendant" or a female actor to play a female character's role in a film.
Term
The Equal Pay Act of 1970.
 Definition
This document sets out that women and men should recieve the same pay for doing the same type of work or ranked as being ranked as of the same value to the organisation.
Term
The Race Relations Act of 1976.
 Definition
This declares dicriminationon the grounds of race illegal in the same way genderis in the sexdiscrimination act. Although,there are exceptions, such as advertising for an "Italian waiter" to work in an Italian restaurant.
Term
The Disability Act of 1995.
 Definition
This applies to organisations that employ 20 or more people. They are required to accommodate the needs of the disabled and establish a right of access for the disabled in transport, higher education etc. This act defines discrimination when someone who is disabled is treated unfailry for an unjust reason.
Term
Advantages of a Private Limited Company.
 Definition
There is limited liability for the shareholders/owners. The responsibility is ahre among directors and the risk is shared among shareholders if there is more than one.
Shareholders and directors can enter the business with skills and qualities to help bring the business to success in meetings it's objectives, this would be an advantage of being able to choose who becomes a shareholder.
Easy sources of finance with shareholder's investments.
Term
Disadvantages of a Private Limited Company.
 Definition
There could be disagreements between directors, causing problems with the way the business operates and is run.
It is more complex to set-up compared to a sole trader or partnership. It must abide by the rules of the Companies Act.
Term
Aims and Objectives for a Private Limited Company.
 Definition
These can be to maximise profits, grow and have a strong brand name.
Term
Sources of Finance for a Private Limited Cpmpany.
 Definition
This would most likely be the money invested by shareholders.
Although it could be a bank loan, mortgage or government grant.
Term
A Public Limited Company
 Definition
Usually a large business with at least 250 employees. It sells it's stocks publicly, on the stock market, to shareholders,i.e. anyone can buy shares. It requires a Board of Directors and at least two shareholders.
Term
Control and Ownership of a Private Limited Company
 Definition
It is owned by the shareholders but controlled by the board of directors that are elected by the shareholders.
Term
The Use of a Trading Profit and Loss Account
 Definition
To determine whether or not this year's trading result was good or bad compared with last year or with a competitor.
To see if the gross profit has improved this year, compared with last year.
To see if the organisation is making efficient use of it's stock.
To analyse the net profit figure compared with compeitors.
Term
The Use of a Balance Sheet
 Definition
To determine whether or not the assets make a large enough profit to cover the liabilities.
To analyse if the organisation has enough working capital to avoid cash flow problems.
To see if the business is making enough use of available trade credit.
To determine whether or not the firm has a moderate level of debtors compared to competitors.
To analyse whether or not the assets are making the largest profit possible and decide if it is better to sell them or not.
Term
Profitability
 Definition
Is the organisation earning more than it is paying out?
Term
Liquidity
 Definition
Does the organisation have enough money to pay it's bills?
Term
Efficiency
 Definition
Is the organisation making the best use of it's resources
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