stocks held by the business in the form of materials, work in progress and finished goods.
Operational flexibility
the ability of a business to vary both the level of production and the range of products following changes in consumer demand.
Closing cash balance
cash held at the end of the month becomes next month's opening balance.
Added value
the difference between the costs of purchasing bought-in materials and the price the finished goods are sold for.
Quality circles
voluntary groups of workers who meet regularly to discuss work-related problems and issues.
Public relations
the deliberate use of free publicity provided by newspapers, TV and other media to communicate with and achieve understanding by the public.
Flow production
producing items in a continually moving process.
Accounts payable (creditors)
value of debts for goods bought on credit payable to suppliers, also known as 'trade payables'.
Net monthly cash flow
the estimated difference between monthly cash inflows and cash outflows.
Direct competitor
a business that provides the same or very similar goods or services.
Start-up capital
the capital needed by an entrepreneur to set up a business.
Job enlargement
attempting to increase the scope of a job by broadening to deepening the tasks undertaken.
Operations planning
preparing input resources to supply products to meet expected demand.
Marketing OR promotional budget
the financial amount made available by a business for spending on marketing/promotion during a certain time period.
Target pricing
setting a price that will give a required rate of return at a certain level of output/sales.
Overdraft
The bank agrees to a business borrowing up to an agreed limit as and when required.
Unfair dismissal
ending a worker's employment contract for a reason that the law regards as being unfair.
Secondary sector business activity
firms that manufacture and process products from natural resources including computers, brewing, baking, and clothes-making and construction.
Trade barriers
taxes (tariffs) or other limitations on the free international of goods and services.
Sample
the group of people participating in the market research survey selected to represent the overall target market.
Level of production
the number of units produced during a time period.
Market size
the total level of sales of all producers within a market.
Scale of operations
the maximum output that can be achieved using the available inputs (resources)-this scale only be increased in the long term by employing more of all inputs.
Sustainability
production systems prevent waste by using the minimum of non-renewable resources so that levels of production can be sustained in the future.
Process innovation
using a new or much-improved production or service delivery method.
Multinational
a business with operations or production bases in more than on country.
Quantitative factors
these are measurable in financial terms and will directly impact either the costs of a site or the revenues from it and its profitability.
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.
Salary
annual income that is usually paid on a monthly basis.
Capital expenditure
the purchase of assets expected to last more than one year, such as building and machinery.
Enterprise resource planning
the use of a single computer application to plan the purchase and the use of resources in an organisation to improve the efficiency of operations.
The margin of safety
the amount by which the sales level exceeds the break-even level of output.
Opportunity cost
the benefit of the next most desired option which is given up.
Re-order quantity
the number of units ordered each time. Lead time - the normal time taken between ordering new stocks and their delivery.
Operating profit (formerly net profit) is gross profit minus overhead expenses.
Shareholders' equity
total value of assets - total value of liabilities
Induction training
introductory training programme to familiarise new recruits with the systems used in the business and the layout of the business site.
Market skimming
setting a high price for a new product when a firm has a unique or highly differentiated product with a low price elasticity of demand.
Mass customisation
the use of flexible computer-aided production systems to produce items to meet individual customers' requirements at mass-production cost levels.
Joint venture
two or more businesses agree to work closely together on a particular project and create a separate business division to do so.
Offshoring
the relocation of a business process done in one country to the same or another company in another country.
Limited liability
the only liability-or potential loss-a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder.
Shareholder
a person or institution owning shares in a limited company.
Direct costs
these costs can be clearly identified with each unit of production and can be allocated to a cost centre.
Manager
responsible for setting objectives, organising resources and motivating staff to meet the organisation's aims.
Demand
the quantity of a product that consumers are willing and able to buy at a given price in a time period.
Share
a certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.
Acid-test ratio
liquid assets/current liabilities
Gross profit margin
this ratio compares gross profit (profit before deduction of overheads) with revenue. Gross profit margin % = gross profit/revenue × 100
Triple bottom line
the three objectives of social enterprises: economic, social and environmental.
Open questions
those that invite a wide-ranging or imaginative response-the results will be difficult to collate and present numerically.
Intangible assets
items of value that do not have a physical presence, such as patents, trademarks and current assets.
Liquid assets
current assets - inventories (stocks) = liquid assets.
Cash-flow statement
a record of the cash received by a business over a period of time and the cash outflows from the business.
Liability
a financial obligation of a business that it is required to pay in the future.
Price elasticity of demand (PED)
measures of demand responsiveness following a price change.
Job redesign
involves restricting a job-usually with employees' involvement and agreement- to make work more interesting, satisfying and challenging.
Market segment
a sub-group of a whole market in which consumers have similar characteristics.
Gross profit
equal to sales revenue less costs of sales.
Cash-flow forecast
an estimate of a firm's future cash inflows and outflows.
Employment contract
a legal document that sets out the terms and conditions governing a worker's job.
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.
Economies of scale
reductions in a firm's unit (average) costs of production that results from an increase in the scale of operations.
Current ratio
current assets/current liabilities
Market growth
the percentage change in the total size of a market (volume or value) over a period of time.
Right issue
existing shareholders are given the right to buy additional shares at a discounted price.
E-commerce
the buying and selling of goods and services by businesses and consumers through an electronic medium.
Current liabilities
debts of the business that will usually have to be paid within one year.
Advertising
paid-for communication with consumers to inform and persuade, e.g. TV and cinema advertising.
Non-current liabilities
the value of debts of the business that will be payable after more than one year.
Job description
a detailed list of the key points about the job to be filled-stating all of its key tasks and responsibilities.
Above-the-line promotion
a form of promotion that is undertaken by a business by paying for communication with consumers.
Emotional intelligence (EI)
the ability of managers to understand their own emotions, and those of the people they work with, to achieve better business performance.
Batch production
producing a limited number of identical products- Each item in the batch passes through one production stage before passing on to the next stage.
Market capitalisation
the total value of a company's issued shares.
Qualitative research
research into the in-depth motivations behind consumer buying behaviour or opinions.
Job rotation
increasing the flexibility of employees in the variety of work they do by switching from one job to another.
Dynamic pricing
offering goods at a price that changes according to the next level of demand and the customers' ability to pay.
Market share
sales of the business as a proportion of total market sales.
Quantitative research
research that leads to numerical results that can be statistically analysed.
Diversity policy
practices and processes aimed at creating a mixed workforce and placing positive value on diversity in the workplace.
Liquidity
the ability of a firm to pay its short-term debts.
USP-unique selling point (or proposition)
the special feature of a product that differentiates it from competitors' products.
Customer relationship management (CRM)
using marketing activities to establish successful customer relationships to maintain existing customer loyalty.
Ethical code (code of conduct)
a document detailing a company's rules and guidelines on staff behaviour that all employees must follow.
Crowdfunding
the use of small amounts of capital from a large number of individuals to finance a new business venture.
Extension strategy
these are marketing plans to extend the maturity stage of the product before a brand new one is needed.
Statement of financial position (balance sheet)
an accounting statement that records the value of a business's assets, liabilities and shareholders' equity at one point in time.
Worker participation
workers are actively encouraged to become involved in decision-making within the organisation.
Capital goods
the physical goods used by the industry to aid in production of other goods and services, such as, machines and commercial vehicles.
Channel of distribution
this refers to the chain of intermediaries product passes through firm producer to final consumer.
Equilibrium price
the market price that equates supply and demand for a product.
Competition-based pricing
a firm will base its price upon the price set by its competitors.
Opening cash balance
cash held by the business at the start of the month.
Democratic leadership
a leadership style that promotes workers' active participation in decisions.
Person specification
a detailed list of the qualities, skills and qualifications that a successful applicant will need to have.
Equity finance
permanent finance raised by companies through the sale of shares.
Inventory (stock)
materials and goods required to allow for the production and supply of products to the customer.
High-quality profit
profit that can be repeated and sustained.
Qualitative factors
non-measurable factors that may influence business decisions.
Window-dressing
presenting the company accounts in a favourable light - to flatter the business performance.
Trade receivables (debtors)
the value of payments to be received from customers who have bought goods on credit.
Holding company
a business organisation that owns and controls a number of separate businesses, but does not unite them into one unified company.
Commission
a payment to a salesperson for each sale made.
Added value
the difference between the cost of purchasing raw materials and the price the finished goods are sold for-this is the same as creating value.
Cash inflows
payments in cash received by a business, such as those from customers (trade receivables) or from the bank, e.g. receiving a loan.
Time based wage rate
payment to a worker made for each period of time worked, e.g.; one hour.
Integrated marketing strategy
the key marketing decisions complement each other and work together to give customers a consistent message about the products.
Sponsorship
payment by a company to the organisers of an event or team/individuals so that the company name becomes associated with the event/team/individuals.
Cluster sampling
using one or number of specific groups to draw samples from and not selecting from the whole population, e.g. using one town or region.
Non-current assets
assets to be kept and used by the business for more than one year. Used to be referred as 'fixed assets'.
Income statement
records the revenue, costs and profit (or loss) of a business over a given period of time.
Mixed economy
economic resources are owned and controlled by both private and public sector.
Penetration pricing
setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales.
Closed questions
questions to which a limited number of pre-set answers are offered.
Current assets
assets that are likely to be turned into cash before the next balance sheet date.
Share capital
the total value of capital rose from shareholders by the issue of shares.
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.
Job production
producing a one-off item specially designed for the consumer.
Profit sharing
a bonus for staff based on the profits of the business-usually paid as a proportion of basic salary.
Asset
an item of monetary value that is owned by a business.
Tangible attributes of a product
measurable features of a product that can be easily compared with other products.
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.
Below-the-line promotion
a promotion that is not a directly paid-for means of communication but is based on short-term incentives to purchase.
Product positioning
the consumer perception of a product or service as compared to its competitors.
Capital intensive
involving a high quantity of capital equipment compared with labour output.
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 of the profits.
Marketing objectives
the goals set for the marketing department to help the business achieve its overall objectives.
Asset-led marketing
an approach to marketing that bases strategy on the firm's existing strengths and assets instead of purely on what the customer wants.
Bad debt
unpaid customers' bills that is now very unlikely ever to be paid.
Private sector
comprises of businesses owned and controlled by individuals or groups of individuals.
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.
Laissez-faire leadership
a leadership style that leaves much of the business decision-making to the workforce - a 'hands off' style approach and the reverse of the autocratic style.
Command economy
economic resources are owned, planned and controlled by the state.
Systematic sampling
every nth item in the target population is selected.
Informal leader
a person who has no formal authority but has the respect of colleagues and some power over them.
Break-even point of production
the level of output at which total costs equal total revenue; neither a profit nor a loss is made.
Branding
the strategy of differentiating products from those of competitors by creating an identifiable image and clear expectations about a product.
CAD-computer-aided design
the use of computer programs to create two-or-three-dimensional (2D or 3D) graphical representations of physical objects.
Product
the end result of the production process sold on the market to satisfy a customer need.
Cost of sales (or cost of goods sold)
this is the direct cost of the goods that were sold during the financial year.
Off-the-job training
all training undertaken away from the business, e.g. work related college courses.
Mass marketing
selling the same products to the whole market with no attempt to target groups within it.
Long-term bonds OR debentures
bonds issued by companies to raise debt finance, often with a fixed rate of interest.
Entrepreneur
someone who takes the financial risk of starting and managing a new venture.
Cash flow
the sum of cash payments to a business (inflows) less the sum of cash payments (outflows).
Creating value
increasing the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for.
Viral marketing
the use of social media sites or text messages to increase brand awareness or sell products.
Revenue (formerly called sales turnover)
the total value of sales made during the trading period = selling price * quantity sold.
Efficiency
producing output at the highest ratio of output to input.
Hygiene factor
aspects of a worker's job that have the potential to cause dissatisfaction, such as pay, working conditions, status and over-supervision by managers.
Intangible attributes of a product
subjective opinions of customers about a product that cannot be measured or compared easily.
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.
Performance-related pay
a bonus scheme to reward staff for above-average work performance.
Supply chain
all of the stages in the production process from obtaining raw materials to selling to the consumer point of origin to point of consumption.
Stakeholder concept
the view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders.
Variable costs
costs that vary with output.
Market segmentation
identifying of different segments within a market and targeting different products or services to them.
Selection
involves the series of steps by which the candidates are interviewed, tested and screened to choose the most suitable person for the vacant post.
Piece rate
a payment to a worker for each unit produced.
Optional location
a business location that combines quantitative and qualitative factors best.
Marketing strategy
long-term plan established for achieving marketing objectives.
Mission statement
a statement of the business's core aims, phrased to motivate employees and stimulate interest by outside groups.
Cash outflows
payments in cash made by a business, such as those to suppliers and workers.
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.
Human resource management (HRM)
the strategic approach to the effective management of an organisation's workers so that they help the business gain a competitive advantage.
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.
Internal growth
business expansion by opening new branches, hops or factories (also known as organic growth).
Motivation
the internal and external factors that stimulate people to take actions that lead to achieving a goal.
Promotion mix
the contribution of a firm's promotional techniques to sell a product.
Secondary research
a collection of data from second-hand sources.
Employee appraisal
the process of assessing the effectiveness of an employee judged against pre-set objectives.
Revenue
total value of sales made by a business in a given time period. Capital employed - the total value of all the long term finance invested in the business.
Quota sampling
when the population has been stratified and the interviewer selects an appropriate number from each stratum.
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 an organisation.
Stakeholders
people or groups of people who can be affected by - and therefore have an interest in - any action by an organisation.
Contribution per unit
selling price less variable cost per unit.
Market research
this is the process of collecting, recording and analysing data about customers, competitors and the market.
Marginal costs
the extra cost of producing one more unit of output.
Product differentiation
making a product distinctive so that it stands out from competitors' products in consumers' perception.
Franchise
a business that uses the name, logo and trading systems of an existing successful business.
Autocratic leadership
a style of leadership that keeps all decision-making at the centre of the organisation.
Productivity
the ratio of outputs to inputs during production, e.g. output per worker per time period.
Redundancy
when a job is no longer required, the employee doing this job becomes unnecessary through no fault of their own.
Niche marketing
identifying and exploiting a small segment of a larger market by developing products to suit it.
Public sector
comprises organisations accountable to and controlled by the central or local government.
Consumer services
the non tangible products sold to the general public - they include hotel accommodation, insurance services and train journeys.
Overtrading
expanding a business rapidly without obtaining all of the necessary finance so that a cash-flow shortage develops.
Liquidity
the ability of a firm to be able to pay its short-term debts.
Tertiary sector business activity
firms that provide services to consumers and other businesses such as retailing, transport, insurance, banking, hotels, tourism and telecommunications.
Self-actualisation
a sense of fulfilment reached by feeling enriched and developed by what one has learned and achieved.
On-the-job training
instruction at the place of work on how a job should be carried out.
Primary research
the collection of first-hand data that is directly related to a firm's needs.
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.
Motivating factors (motivators)
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.
Social enterprise
a business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners.
Public corporation
a business enterprise owned and controlled by the state-also known as nationalised industry.
Free-market economy
economic resources are owned largely by the private sector with little state intervention.
Consumer profile
a quantified picture of consumers of a firm's products, showing proportions of age groups, income levels, location, gender and social class.
Focus groups
a group of people who are asked about their attitude towards a product, service, advertisement or new style of packaging.
Product portfolio analysis
analysing the range of existing products of a business to help allocate resources effectively between them.
Creditors
suppliers who have agreed to supply products on credit and who have not yet been paid
Dividends
the share of the profits paid to shareholders as a return for investing in the company.
Profit for the year (profit after tax)
operating profit minus interest costs and corporation tax.
Dismissal
being dismissed or sacked from a job due to incompetence of breach or discipline.
Fringe benefits
benefits given, separate from pay, by an employer to the same or all employees.
Liquidation
when a firm ceases trading and its assets are sold for cash to pay suppliers and other creditors.
Revenue expenditure
spending on all costs and assets other than fixed assets and include wages and salaries, and materials bought for stock.
Economic order quantity
the optimum or least-cost of stock to re-order taking into account delivery costs and stock-holding costs.
Labour intensive
involving a high level of labour input compared with capital equipment.
Job enrichment
aims to use workers' full capabilities by allowing them to do more challenging and fulfilling work.
Internet (online) marketing
refers to advertising and marketing activities that use the internet, email and mobile communications to encourage direct sales via electronic commerce.
Low-quality profit
one-off profit that cannot easily be repeated or sustained.
Multi-site location
a business that operates from more than one location.
Production
converting inputs into outputs.
Liquidation
when a firm cases trading and assets are sold for cash to pay suppliers and other creditors.
Private limited company
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.
Market orientation
an outward-looking approach basing product decisions on consumer demand, as established by market research.
Markup pricing
adding a fixed markup for profit to the unit price of a product.
Intellectual capital OR property
the amount by which the market value of a firm exceeds its tangible assets less liabilities - an intangible asset.
Partnership
a business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
Brand
an identifying symbol, image or trademark that distinguishes a product from its competitors.
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.
Fixed costs
costs that do not vary with output in the short run.
CAM-computer-aided manufacturing
the use of computer software to control machine tools and related machinery in the manufacturing of components or complete products.
Diseconomies of scale
factors that cause average costs of production to rise when the scale of operation is increased.
Random sampling
every member of the target population has an equal chance of being selected.
Effectiveness
meeting the objectives of the enterprise by using inputs productively to meet customers' needs.
Training
work-related education to increase workforce skill and efficiency.
Bonus
a payment made in addition to the contracted wage or salary.
Marketing mix
the four key decisions that must be taken to effectively market a product.
Supply
the quantity of a product that firms are prepared to supply at a given price in a time period.
Long-term loans
loans that do not have to be prepaid for at least one year.
Team working
production is organised so that groups of workers undertake complete units of work.
Indirect costs
costs that cannot be identified with a unit of production or allocated accurately to a cost centre.
Credit control
monitoring of debts to ensure that credit periods are not exceeded.
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