AICE Business AS (All Chapters)
Terms in this set (267)
The difference between the cost of purchasing raw materials and the price the finished goods are sold for.
The physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles.
The physical and tangible goods sold to the general public. They include durable consumer goods, such as cars and washing machines, and non-durable consumer goods such as food, drinks and sweets that can be used only once.
The non-tangible products sold to the general public. They include hotel accommodation, insurance services, and train journeys.
Increasing the difference between the cost of purchasing bought in materials and the price the finished goods are sold for.
Someone who takes the financial risk of starting and managing a new venture.
The benefit of the next most desired option which is given up.
A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners.
Triple Bottom Line
The three objectives of social enterprises: economic, social, and environmental.
Articles of Association
This document covers the internal working and control of the business. For example, the names of directors and the procedures to be followed at meetings will be detailed.
Economic resources owned, planned, and controlled by the state.
A business that uses the name, logo, and trading systems of an existing successful business.
Economic resources owned largely, by the private sector with very little state intervention.
A business organization that owns and controls a number of separate businesses, but does not unite them into one unified company.
Two or more business agree to work closely together on a particular project and create a separate business division to do so.
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.
Memorandum of Association
This states the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorization and declared aims of the business.
Economic resources are owned and controlled by both private and public sectors.
A business formed by two or more people to carry on a business together with shared capital investment and, usually, shared responsibilities.
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.
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.
Comprises of businesses owned and controlled by individuals or groups of individuals.
A business enterprise owned and controlled by the state. Also known as a nationalized industry.
Public Limited Company
A limited company, often a large business, with the legal right to sell shared to the general public-share prices are quoted on the natural stock exchange.
Comprises of organizations accountable to and controlled by central or local government.
Secondary Sector Business Activity
Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes making, and construction.
A certificate confirming part ownership of a company and entitling the shareholder owned to dividends and certain shareholder rights.
A person or institution owning shares in a limited company.
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.
The total value of all long term finance invested in the business.
Expansion of a business by means of opening new branches, shops, or factories (also known as organic growth).
The total value of a company's issued shares.
Sales of a business as a proportion of total market sales.
The total value of sales made during a given time period.
Tertiary Sector Business Activity
Firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism, and telecommunications.
Corporate Social Responsibility
The concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities, and the environment.
Ethical Code (Code of Conduct)
A document detailing a company's rules and guidelines on staff behavior that must be followed by all employees.
Management by Objectives
A method of coordinating and motivating all staff in an organization by dividing its overall aim into specific targets for each department, manager, and employee.
A statement of the businesses core aims, phrased in a way to motivate employees and to stimulate interest by outside groups.
A criteria for effective business objectives: Specific, Measurable, Achievable, Realistic, Time-Specific.
The view that businesses and their managers have responsibilities to a wide range of groups, not just stakeholders.
People or groups of people who can be affected by and therefore have an interest in any action by organization (e.g. shareholders, customers, suppliers, employees, local communities, lenders, etc.)
A style of leadership that keeps all decision making at the center of the organization.
A leadership style that promotes the active participation of workers in taking decisions.
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.
A person who has no formal authority, but has the respect of colleagues and some power over them.
A leadership style that leaves much of the business decision making to the workforce. A hands-off approach and the reverse of the autocratic style.
The art of motivating a group of people towards achieving a common objective.
Responsible for setting objectives, organizing resources and motivating staff so that the organization's aims are met.
A leadership style based on the approach that the manager is in a better position than the workers to know what is best for the organization.
A payment made in addition to the contracted wage or salary.
A payment to a sales person for each sale made.
Benefits given separate from pay by and employer to some or all employees.
Aspects of a worker's job that have the potential to cause dissatisfaction, such as pay, working conditions, statues and over-supervision by managers.
Attempting to increase the scopes of a job by broadening or deepening the tasks undertaken.
Aims to use the full capabilities of workers by giving them the opportunity to do more challenging and fulfilling work.
Involves the reconstruction of a job-usually with employees involvement and agreement- to make work more interesting, satisfying, and challenging.
Increasing the flexibility of the workforce and the variety of work they do by switching from one job to another.
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.
The internal and external factors that stimulate people to take actions that lead to achieving a goal.
Performance Related Pay
A bonus scheme to reward staff for above-average work performance.
A payment to a worker for each unit produced.
A bonus for staff based on the profits of the business- usually paid as a promotion of basic study.
They are voluntary groups of workers who meet regularly to discuss work-related problems and issues.
Annual income that is usually paid on a monthly basis.
A sense of self-fulfillment reached by feeling enriched and developed by what one has learned and achieved.
Production is organized so that groups of workers undertake complete units of work.
Time Based Wage Rate
Payment to a worker made for each period of time worked (example one hour).
Workers are actively encouraged to become involved in decision making within the organization.
Being dismissed or sacked from a job due to incompetence or breach.
Practices and processes aimed at creating a mix the workforce and placing a positive value on diversity in the workplace.
The process of assessing the effectiveness of an employee judged against pre-set objectives.
A legal document that sets out the terms and conditions governing a workers job.
Practices and processes aimed at achieving of their organization, where everyone is treated the same way and has the opportunity to fulfill their potential.
Human Resource Management (HRM)
The strategic approach to the effective management of an organization's workers so that they help the business gain a competitive advantage.
Introductory training programs to familiarize new recruits with the systems used in the business and the layout of the business site.
A detailed list of the key points about the job to be filled, stating all its key tasks and its responsibilities.
Measures the rate at which employees are leaving an organization: (Number of employees leaving in one year / average number of people employed) x 100.
All training undertaken away from the business, e.g. work-related college courses.
Instruction at the place of work on how a job should be carried out.
A detailed list of the qualities, skills, and qualifications that a successful applicant will need to how.
The process of identifying the need for a new employee, defining the job to be filled and the type of person needed to fill it, attracting suitable candidates for the job and selecting the best one.
When a job is no longer required, so the employee doing this job becomes redundant, though no fault of his or her own.
Involves the series of steps by which the candidates are interviewed, tested, and screened for choosing the most suitable person for vacant post.
Work related education to increase workforce skills and efficiency.
Ending a worker's employment contract for a reason that the law regards as being unfair.
Work Life Balance
A situation in which employees are able to get the right amount of time and effort to work and to their personal life outside of work, for example to family and other interests.
An approach to marketing that bases strategy on the firm's existing strengths and assets instead of purely on what the customer wants.
The quantity of a product that consumers are willing and able to buy at a given price in a time period.
Businesses that provide the same or very similar goods or services.
The market price that equates supply and demand for a product.
The percentage change in the total size of a market over a period of time.
An outward looking approach basing product decisions on consumer demand, as established by market research.
A sub-group of a whole market in which consumers have similar characteristics.
Identifying different segments within a market and targeting different products and services to them.
The percentage of sales in the total market sold by one business. Calculated as: Firms Sales in Time Period/Total Sales in the Market in Time Period x 100
The total level of sales of all producers within a market.
The management task that links the business to the customers by identifying and meeting the needs of consumers profitably. It does this by getting the right product to the right place at the right time.
The goals set for the marketing department to help the business achieve its overall objectives.
Long-term plan established for achieving marketing objectives.
Selling the same products to the whole market with no attempt to target groups within it.
Identifying and exploiting a small segment of a larger market by developing products to suit it.
Making a product distinctive so that it stands out from competitors' products in consumers' perception.
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.
This approach considers not only the demands of consumers, but also the effects on all members of the public involved in some way when firms meet these demands.
The quantity of a product that firms are prepared to supply at a given price in a time period.
USP- Unique Selling Point
The special feature of a product that differentiates it from competitors' products.
Calculated by totaling all the results and dividing by the number of results.
Questions to a which a limited number of pre-set answers is offered.
Using one or a number of specific groups to draw samples from and not selecting from the whole population.
A group of people who are asked about their attitude towards a product, service, advertisement, or new style of packaging.
The range of the middle 50% of the data.
This is the process of collecting, recording, and analyzing data about the customers, competitors, and the markets.
The value of the middle item when data have been ordered or ranked. It divides the data into two equal parts.
The value that occurs most frequently in a set of data.
Those that invite a wide-ranging or imaginative response. The results will be difficult to collate and present numerically.
The collection of first-hand data that is directly related to a firm's needs.
Research into the in-depth motivations behind consumer buying behavior or opinions.
Research that leads to numerical results that can be statistically analyzed.
When the population has been stratified and the interviewer selects and appropriate number of respondents from each stratum.
Every member of the target population has an equal chance of being selected.
The difference between the highest and lowest value.
The group of people taking part in a market research survey selected to be representative of the overall target market.
Collection of data from second-hand sources.
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.
Every nth item in the target population is selected.
An identifying symbol, name, image, or trademark that distinguishes a product from its competitors.
A firm will base price upon the price set by its competitors.
Manufactured product that can be reused and is expected to have a reasonable long life, such as a car or a washing machine.
Setting prices based in the variable costs of marketing a product in order to make a contribution towards fixed costs and profit.
Customer Relationship Marketing
Using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained.
Offering goods at a price that changes according to the level of demand and the customers ability to pay.
These are marketing plans to extend the maturity stage of the product before a brand new one is needed.
Setting a price by calculating a unit cost for the product and the adding a fixed profit margin.
Intangible Attributes of a Product
Subjective opinions of customers about a product that can't be measured or compared easily.
Setting a high price for a new product when a firm has unique or highly differentiated product with low price elasticity of demand.
The 4 key decisions that must be taken in the effective marketing of a product.
Adding a fixed mark-up profit to the unit price of a product.
Setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales.
Price Elasticity of Demand
Measures the responsiveness of demand following a change in price (% change in quantity demanded/% change in price).
The end result of the production process sold on the market to satisfy a customer need.
Product Life Cycle
The pattern of sales recorded by a product from launch to withdrawal from the market.
Product Portfolio Analysis
Analyzing the range of existing products of a business to help allocate resources effectively between them.
The consumer perception of a product or service as compared to its competitors.
Tangible Attributes of a Product
Measurable features of a product that can be easily compared with other products.
Setting a price that will give a required tax of return at a certain level of output/sales.
A form of promotion that is undertaken by a business by paying for communication with consumers.
Paid for communication with consumers to inform and persuade.
Promotion that is not a directly paid for means of communication, but based on short-term incentives to purchase.
The strategy of differentiating products from those of competitors by creating an identifiable image and clear expectations about a product.
Channel of Distribution
This refers to the chain of intermediaries a product passes through from producer to final consumer.
The buying and selling of goods and services by businesses and consumers through and electric medium.
Integrated Marketing Mix
The key marketing decisions complement each other and work together to give customers a consistent message about the product.
Internet (Online) Marketing
The marketing of products over the internet.
Marketing or Promotion Budget
The financial amount made available by a business for spending on marketing/promotion during a certain time period.
A member of the sales staff communicated with one consumer with the aim of selling the product and establishing a long-term relationship between company and consumer.
The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship, and public relations to inform consumers and persuade them to buy.
The combination of promotional techniques that a firm uses to sell a product.
The deliberate use of free publicity provided by newspapers, TV and other media to communicate with and achieve understanding by the public.
Incentives such as special offers or special deals directed at consumers or retailers to achieve short-term sales increases and repeat purchases by consumers.
Payment by a company to the organizers of an event so that the company name becomes associated with the event.
The use of social-networking sites of SMS text messages to increase brand awareness of sell products.
Involving a high quantity of capital equipment compared with labor input.
Meeting the objectives of the enterprise by using inputs productively to meet consumers' needs.
Producing output at the highest ratio of output to input.
Intangible capital of a business that include human capital (well-trained and knowledgeable employees), structural capital ( databases and information systems), and relational capital ( good links with supplier and customer).
Involving a high level of labor input compared with capital equipment.
Level of Production
The number of units produced during a time period.
Converting inputs into outputs.
The ratio of outputs to inputs during production.
Producing a limited number of identical products- each item in the batch passes through one stage of production before passing onto the next stage.
CAD (Computer Aided Design)
The use of computer programs to create 2-D or 3-D graphical representations of physical products.
CAM (Computer Aided Manufacturing)
The use of computer software to control machine tools and related machinery in the manufacturing of component or complete products.
Diseconomies of Scale
Factors that cause average costs of production to rise when the scale of operation is increased.
Economies of Scale
Reductions in a firm's unit costs of production that result from an increase in the scale of operations.
Enterprise Resource Planning
The use of a single computer application to plan the purchase and use of resources in an organization to improve the efficiency of operations.
Producing items in a continually moving process.
Producing a one-off item specially designed for the customer.
The use of flexible computer-aided production systems to produce items to meet individual consumers' requirements at mass-production cost levels.
A business with operations or production bases in more than one country.
A business that operated from more than one location.
The relocation of a business process done in one country to the same or another company in another country.
The ability of a business to vary both the level of production and the range of products following changes in customer demand.
Preparing input resources to supply products to meet expected demand.
A business location that gives the best combination of quantitative and qualitative factors.
The use of a new or much improved production method or service delivery method.
These are non-measurable factors that may influence business decisions.
These are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability.
Scale of Operation
The maximum output that can be achieved using the available inputs. This scale can only be increased in the long term by employing more of all inputs.
All the stages in the production process from obtaining raw materials to selling to the consumer ( Front point of origin to point of consumption).
Production systems that prevent waste by using the minimum of nonrenewable resources so that the levels of production can be sustained in the future.
Taxes or other limitations on the free international movement of goods and services.
The minimum inventory level that should be held to ensure that production could still take place should a delay in delivery occur or should production rates increase.
Economic Order Quantity
The optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock holding costs.
Inventory (Ch. 24)
Materials and goods required to allow for the production and supply of products to the customer.
This inventory-control method aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order.
The normal time taken between ordering new stocks and their delivery.
The number of units ordered each time.
A detailed document giving evidence about a new or exiting business, and that aims to convince external lenders and investors to extend finance to the business.
Involves the purchase of assets that are expected to last for more than one year, such as building and machinery.
The use of small amounts of capital from a larger number of individuals to finance a new business venture.
Permanent finance raised by companies through the sale of shares.
Selling of claims over debtors to a debt factor in exchange for immediate liquidity- only a proportion of the value of the debts will be received as cash.
An asset is sold to a company that agrees to pay fixed repayments over an agreed time period- the asset belongs to the company.
Obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. This avoids the need for the business to raise long-term capital to buy the asset. Ownership remains with the leasing company.
The ability of a firm to pay its short-term debts.
Long-Term Bonds or Debentures
Bonds issued by companies to raise debt finance, often with a fixed rate of interest.
Loans that do not have to be repaid for at least one year.
Providing financial services for poor and low income customers who don't have access to banking services, such as loans and overdrafts offered by traditional commercial banks.
Bank agrees to a business borrowing up to an agreed limit as and when required.
Is spending on all costs and assets other than fixed assets and includes wages and salaries and material bought for stock.
Existing shareholders are given the right to buy additional shares at a discounted price.
Capital needed by an entrepreneur to set up a business.
Risk capital invested in business startups or expanding small businesses that have good profit potential but do not find it easy to gain finance from other sources.
The capital needed to pay for raw materials, day-to-day running costs and credit offered to customers. In accounting terms; working capital=current assets - current liabilities.
Break-Even Point of Production
The level of output at which total costs equal total revenue. Neither a profit nor a loss is made.
Contribution Per Unit
Selling price less variable cost per unit.
These costs can be clearly identified with each unit of production and can be allocated to a cost center.
Costs that do not vary with output in the short run.
Costs that cannot be identified with a unit of production or allocated accurately to a cost center.
Margin of Safety
The amount by which the sales level exceeds the break-even level of output.
The extra cost of producing one more unit of output.
Costs that vary with output.
Accounts Payable (Creditors)
Value of debts for goods bought on credit payable to suppliers. Also known as trade payables.
Liquid Assets / Current Liabilities.
An item of monetary value that is owned by a business.
Cash Flow Statement
record of the cash received by a business over a period of time and the cash outflows from the business.
Cost of Sales (cost of goods sold)
This is the direct cost of purchasing the goods that were sold during the financial year.
Assets that are likely to be turned into cash before the next balance-sheet date.
Debts of the business that will usually have to be paid within one year.
Current Assets / Current Liabilities.
The share of the profits paid to shareholders as a return for investing in the company.
Arises when a business is valued at or sold for more than the balance-sheet value of its assets.
Equal to sales revenue less cost of sales.
Gross Profit Margin
(Gross Profit / Revenue) x 100.
Profit that can be repeated and sustained.
Records the revenue (or loss) ,costs and profit of a business over a given period of time.
Items of value that do not have a physical presence, such as patents and trademarks.
Intellectual Capital or Property
The amount by which the market value of a firm exceeds its tangible assets less liabilities. It is anintangible asset.
Inventories (Ch. 30)
Stocks held by the business in the form of materials, work in progress and finished goods.
A financial obligation of a business that it is require to pay in the future.
Current assets minus inventory (stocks).
One-off profit that cannot easily be repeated or sustained.
Assets to be kept and used by the business for more than one year. Used to be referred to as fixed assets.
The value of debts of the business that will be payable after more than one year.
Gross profit minus overhead expenses.
Operating Profit Margin
(Operating Profit / Revenue) x 100.
Profit for the Year
Operating profit minus interest costs and corporation tax.
The profit left after all deductions including dividends, have been made. This is ploughed back into the company as a source of finance.
The total value of capital raised from shareholders by the issue of shares.
Total value of assets-total value of liabilities.
Statement of Financial Position (Balance Sheet)
An accounting statement that records the values of a business's assets, liabilities, and shareholders' equity at one point in time.
Trade Receivables (Debtors)
The value of payments to be received from customers who have bought goods on credit; also known as trade receivables.
Presenting the company accounts in a favorable light- to flatter the business performance.
Unpaid customers' bills that are now very unlikely to ever be paid.
The sum of cash payments to a business (inflows) less the sum of cash payments (outflows).
Cash Flow Forecast
Estimate of a firm's future cash inflows and outflows.
Payments in cash received by a business such as those from customers (debtors) or from the bank.
Payments in cash made by a business, such as those to suppliers and workers.
Closing Cash Balance
Cash held at the end of the month becomes next month's opening balance.
Monitoring of debts to ensure that credit period are not exceeded.
Suppliers who have agreed to supply products on credit and who have not yet been paid.
When a business cannot meet its sort-term debts.
When a firm ceases trading and its assets are sold for cash to pay suppliers and other creditors.
Net Monthly Cash Flow
Estimated difference between monthly cash inflows and outflows.
Opening Cash Balance
Cash held by the business at the start of the month.
Expanding a business rapidly without obtaining all of the necessary finance so that a cash-flow shortage develops.