AICE Business review all terms
Terms in this set (337)
people or groups of people who can be affected by and therefore have an interest in any action by an organization.
the view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders.
is a vital interest in the business or its activities.
a moral or legal duty to perform or to not perform some action
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.
Secondary Sector Business Activity
firms that manufacture and process products from natural resources, including computers, brewing, baking, and clothes-making and construction.
Tertiary Sector Business Activity
firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications.
comprises organizations accountable to and controlled by central or local government (that state).
comprises businesses owned and controlled by individual or groups of individuals.
production, distribution or trade of goods and services within a geographical location.
economic resources are owned largely by private sector with very little state intervention.
Command Market Economy
economic resources are owned, planned and controlled by the state (government).
Mixed Market Economy
economic resources are owned and controlled by both private and public sectors
a business in which on person provides that permanent finance and, in return, has full control of the business and is able to keep all of the profits.
a business formed by two or more people to carry on a business together, with shared capital investment and usually shared responsibility.
a corporate company which has to follow certain rules and regulations.
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.
legal identity separate from that of its owners; the company itself can be taken to court, not the owners.
the death of an owner or director does not lead to its break up or dissolution; ownership transfers to the inheritance of the shares.
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.
a certificate confirming part ownership of a company and entitling the shareholder owner to dividend and certain shareholder rights.
a person or institution owning shares in a limited company.
Public Limited Company
a limited company, often a large business with the legal right to sell shares to the general public- shares prices are quoted on the national stock exchange.
Memorandum of Association
this states the name of the company, the address of the head office through which it can be contracted, the maximum share capital for which the company seeks authorization and the declared aims of the business.
Articles of Association
this document covers the internal workings and control of the business- for example, the names of directors and the procedures to be followed at meetings will be detailed.
common forms of organizations with have certain features; all members can contribute to the running of the business, sharing workload, all members have a vote, and all members share profit/loss.
a business that uses the name, logo and trading systems of an existing successful business.
two or more businesses agree to work closely together on a particular project and create a separate business division to do so.
a business organization that owns and controls a number of separate businesses but does not unite them into one unified company.
a business enterprise owned and controlled by the state - also known as nationalized.
deciding which item to purchase, the item consumers give up
someone who take financial risk of starting and managing a new venture
financed needed to set up a business and pay for continuing operations
providing goods and services to meet consumers' needs and wants
a business that takes a risk to provide a product or service with the aim of making a profit.
different of amount from the selling price and cost of materials
uses resources to provide a product or service which allows us to enjoy a higher standard of living
the amount when you take the selling price and subtract ALL expenses
renewable and non-renewable resources of nature, such as coal, oil and timber
Triple Bottom Line
three objectives of social enterprise (economic, environmental, social)
manual and skilled labor make up the workforce of the business
physical and tangible goods sold to the general public (food, drinks)
selling goods and services for a higher price than the cost of materials
business with mainly social objectives that reinvest most of its profits into benefiting society.
non-tangible products sold to the general public (hotel accommodations)
an acronym which can be used to provide a more comprehensive definition of goal setting.
AIM (Business Objective)
appropriate strategy, detailed plan of action, goal/target a business strives to achieve.
"Chunks", break the goal down into specific details for operational decisions. Relates to the whole organization.
goals set by senior managers to coordinate between all divisions, specific goal/target for each region.
specific goal/target for each department to meet; example: marketing, sales, human resources.
all individual employees of each department are given a specific goal/target to do their part to meet business objective.
a statement of the business's core aims, phrased in a way to motivate employees' and to stimulate interest by outside groups.
Corporate Social Responsibility
this concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment.
method of coordinating and motivating all staff in an organization by dividing its overall aim into specific targets for each department, manager and employee.
Ethical Code (Code of Conduct)
a document detailing a company's rules and guidelines of staff behavior that must be followed by all employees.
an action or plan carefully thought out to achieve a specific objective.
total value of sales made by a business in a given time period.
the total value of all long-term finance invested in the business.
the total value of a company's issued shares. Current share price x total number of shares issued.
sales of the business as a proportion of total market sales. Total sales of business/total sales of industry x 100
business size is 10 employees or less.
expansion of a business by means of opening new branches, shops or factories (also known as organic growth).
is when a business or a company increases its profits through mergers and acquisition rather than its operation.
measurement completed to determine the size of a business.
responsible for setting objectives, organizing resources and motivating staff so the organization's aims are met.
the art of motivating a group of people towards achieving a common objective (aim).
views workers enjoys work, find work as natural as rest or play, accept responsibility, creative and take active part in contributing ideas and solutions.
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.
leadership position, senior managers are elected into office by shareholders in a limited company, head of major functional department.
leadership style based on the approach that the manager is in a better position than the workers to know what is best for an organization. Father Like, will listen, explain issues, BUT leader makes decision.
views workers as lazy, disliking work and unprepared to accept responsibility, needing to be controlled and made to work.
leadership style that leaves much of the business decision making to the workforce, a hands off approach and reverse of the autocratic style. Let workers do it.
completed a study in the 1950's which outlined the importance of a leader's attitude towards its staff.
completed a study in 1973 that identified roles common to the work of all managers. Has 3 categories: Interpersonal, Informational, and Decisional.
leadership position, individual responsible for people, resources or decision making, some authority over staff below them in the hierarchy.
leadership style that promotes the active participation of workers in taking decisions. Establishes a two way of communication between leader and workers.
leadership style that keeps all decision making at the center of the organization. Usually found in military setting.
leadership position, elected by workers (peers), discuss areas of common concern with managers.
leadership position, appointed by management to watch over the work of others, not a decision making role, will have responsibility for leading a team of people in working towards pre-set goals.
desire of workers to see a job done quickly and well; internal and external factors that stimulate people to take actions that lead to achieving a goal.
theory on how to motivate workers to increase performance, used scientific management approach, believed in piece work payment and economic man.
man was driven or motivated by money alone and the only factor that could stimulate further effort was the change of earning extra money.
theory on how to motivate workers to increase performance, used Hawthorne effect", assumed changing working conditions would increase workers performance (lighting, air temp)
theory on how to motivate workers used human needs approach; workers will strive to satisfy their needs
sense of self-fulfillment reached by felling enriched and developed by what one has learned and achieved
theory on how to motivate workers used "two factor theory" Job Satisfaction and Job Dissatisfaction; research based around questionnaires and interviews
motivators (motivating factors)
job satisfaction factors- achievement, recognition, work itself, responsibility and advancement
job dissatisfaction factors- company policy, supervision, salary, relationships with others, working conditions
aims to use the full capabilities of workers by giving them the opportunity to do more challenging fulfilling work
process theorist, believed that all employees have some variation of the following motivating factors: achievement, authority/power, affiliation; studies focused on why people choose certain behaviors in order to reach personal goals.
process theorist, believed that employees choose to behave in ways that they believe will lead to outcomes they value; expectancy theory which has three beliefs: valence, expectancy and instrumentality.
time based wage rate
payment to a worker made for each period of time worked (hourly rate of pay)
a payment to worker for each unit produced (farming)
annual income that is usually paid on a monthly basis (doesn't change + or -)
a payment to a sales person for each sale made
a payment made in additional to the contracted wage or salary
performance related pay
a bonus scheme to reward staff for above average work performance
a bonus for staff based on the profits of the business-usually paid as a proportion of basic salary (shares in business)
benefits given, separate from pay, by an employer to some or all employees ( example: company car)
increasing the flexibility of employees and the variety of work they do by switching from one job to another
attempting to increase the scope of a job by broadening or deepening the tasks undertaken
involves the restructuring of a job-usually with employees' involvement and agreement- to make work more interesting, satisfying and challenging
voluntary groups of workers who meet regularly to discuss work related problems and issues
workers are actively encouraged to become involved in decision-making within this organization
production is organized so that groups of workers undertake complete units of work
(HRM) Human Resource Management
the strategic approach to the effective management of an organization's workers so that they help the business gain a competitive advantage
process of identifying the need for a new employee, defining the job to be filled and they type of person needed to fill it and attracting suitable candidates for the job
involves the series of steps by which the candidates are interviewed, tested and screened for choosing the most suitable person for vacant post
a detailed list of the key points about the job to be filled - stating all its key tasks and responsibilities
a detailed list of the qualities, skills and qualifications that a successful applicant will need to have
a legal document that sets out the terms and conditions governing a worker's job
measures that rate at which employees are leaving an organizations, measured by number of employees/average number of people employed x 1oo
work-related education to increase workforce skills and efficiency
introductory training programe to familiarize new recruits with the systems used in the business and the layout of the business site.
instruction at the place of work on how a job should be carried out.
all training undertaken away from the business, examlpe: work related courses
the process of assessing the effectiveness of an employee judged against pre-set objectives
being dismissed or sacked from a job due to incompetence or breach of discipline
ending a worker's employment contract for a reason that the law regards ads being unfair.
when a job is no longer required, the employee doing this job becomes unnecessary through no fault of their own.
a situation in which employees are able to give the right amount of time and effort to work and to their personal life outside work, for example to family or other interests
practices and processes aimed at achieving a fair organization where everyone is treated in the same way and has the opportunity to fulfill their potential
practices and processes aimed at creating a mixed workforce and placing positive value on diversity in the workplace
management process responsible for identifying, anticipating and satisfying consumers requirement profitably. Does this by getting the right product at the right price to the right place at the right time.
a quantified picture of consumers of a firm's products, showing proportions of age groups, income levels, location, gender and social class.
identifying different segments within a market and targeting different products or services to them.
a sub group of a whole market in which consumers have similar characteristics.
selling the same products to the whole market with no attempt to target groups within it.
is the quantity of a product that consumers are willing and able to buy at a given price in a time period.
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 competitor's products in the consumer perception.
USP (Unique Selling Point)
the special features of a product that differentiates it from competitors' products.
business that provide same product/service but in different sector of market
business that provide the same or very similar goods/service
place or mechanism where buyers and sellers meet to engage in exchange; groups of customers who are interested in a product/service.
the percentage of sales in the total market sold by one business.
the percentage change in the total size of a market over a period of time.
the total level of sales of all producers within a market (measured by units or revenue)
where the business locates (local, regional, national, and global)
the market price that equates supply and demand for a product.
is the quantity of a product that the firms are prepared to supply at a given price in a time period
this approach considers not only the demands of consumers but also the effects on all members of the public (society) involved in some way when firms meet these demands.
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.
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.
an outward approach basing product decision on consumer demand, as established by market research.
goals set for the marketing department to help the business achieve goals.
is the long term plan established for achieving marketing objectives
monetary worth of (something).
fulfillment of one's wishes, expectations, or needs
food, shelter, clothing
Individual need- desire for knowledge, recognition, affection, self-esteem, self-expression
is a basic requirement that an individual wishes to satisfy.
Total population is interested in product/service (everyone wants this item/service)
the segment of the available market that the business has decided to serve by directing its products towards this group of people. (Specific market you are selling to
Research the collection of first -hand data that is directly related to a firm's needs; field
Inter Quartile Range
the range of the middle 50% of the data
the difference between the highest and lowest value
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
calculated by totaling all the results and dividing by the number of results
questions to which a limited number of pre-set answers is offered
those that invite a wide range or imaginative response; the results will be difficult to collate and present numerically
using one or a number of specific groups to draw samples from and not selecting from the whole population, ex. using one town or region
when the population has been stratified and the interviewer selects an appropriate number of respondents from each stratum
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
this is the process of collecting, recording and analyzing data about customers, competitors, and the market
the group of people taking part in a market research survey selected to be representative of the overall target market
a group of people who are asked about their attitude towards a product, service, advertisement or new style of packaging
research into the in-depth motivations behind consumer buying and behavior or opinions
research that leads to numerical results that can be statistically analyzed
the collection of data from second-hand sources; desk
Inelastic price of demand
if a product has a large change in price is accompanied by a small amount of change in quantity demanded, % is less than 1.
Elastic price of demand
if a product has a small change in price and is accompanied by a large change in quantity demanded, % is more than 1.
the four key decisions that must be taken in the effective marketing of a product
setting a high price for a new product when a firm has a unique or highly differentiated product with low price elasticity of demand.
setting a relatively low price often supported by strong promotion in order to achieve a high volume of sales.
Price elasticity of demand
measure the responsiveness of demand following a change in price.
manufactured product that can be reused and is expected to have a reasonably long life, such as a car or washing machine.
setting a price that will give a required rate of return at the certain level of output/sales.
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 and its one of the main forms of product portfolio analysis.
a firm will base its price upon the price set by its competitors.
offering goods at a price that changes according to the level of demand and the customer's ability to pay.
Intangible attributes of a product
subjective opinions of customers about a product that cannot be measure or compared easily
Customer relationship management (CRM)
using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained.
these are marketing plans to extend the maturity stage of the product before a brand new one is needed.
an identifying symbol, name, image or trademark that distinguishes a product from its competitors.
the consumer perception of a product or service as compared to its competitors
Product portfolio analysis
analyzing the range of existing products of a business to help allocate resources effectively between them.
setting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and profit.
setting a price by calculating a unit cost for the product (allocated fixed and variable costs) and then adding a fixed profit margin.
Tangible attributes of a product
measurable features of a product that can be easily compared with other products
adding a fixed mark-up for profit to the unit price of a product.
the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform customers and persuade them to buy.
the combination of promotional techniques that a firm uses to sell a product.
a form of promotion that is undertaken by a business by paying for communicaiton with consumers. Example: advertising
paid for communication with consumers to inform and persuade. Example: TV, radio
promotion that is not a directly paid for means of communication, but based on short-term incentives to purchase.
incentives such as special offers or special deals directed at consumers or retailers to achieve short-term sales increases and repeat purchases by consumers.
a member of the sales staff communicates with one customer with the aim of selling the product and establishing a long-term relationship between company and consumer.
payment by a company to the organizers of an event or team/individuals so that the company name becomes associated with the event/team/individual
the deliberate use of free publicity provided by newspapers, TV and other media to communicate with and achieve understanding by the public
Marketing or promotion budget
the financial amount made available by a business for spending on marketing/promotion during a certain time period.
Channel of distribution
this refers to the chain of intermediaries a product passes through from producer to final consumer
refers to advertising and marketing activities that use the internet, email and mobile communications to encourage direct sales via electronic commerce.
they buying and selling of goods and services by businesses and consumers through an electronic medium
the use of social media sites or text messages to increase brand awareness or sell products
Integrated marketing mix
the key marketing decisions complement each other and work together to give customers a consistent message about the product. (all 4P's working together)
Business to business
Business to customer
Advertising Categories (2)
Informative and persuasive
are customers who are considered to have a high social networking potential.
Operation Management (Operations)
aiming to produce goods and services of the required quality, in the required quantity at the time needed, in the most cost effective way
natural resources used to produce a finished good/service. Ex) land, labour, capital
the difference between the cost of purchasing raw material and the price the finished goods are sold for.
intangible capital of a business that includes human capital (well trained and knowledgeable employees), structural capital (database and information systems) and relational capital (good links with supplier and customers)
well trained and knowledgeable employees
databases and information systems
good links with supplier and customers
the ratio or outputs to inputs during production, ex) output per worker per time period.
Level of Production
the number of units produced during a time period
converting inputs into outputs
Labour Productivity Equation
total outputs in given time period/total workers employed
Capital Productivity Equation
producing output at the highest ration of output to input
meeting the objectives of the enterprise by using inputs productively to meet customers' needs
involving a high level of labour input compared with capital equipment
involving a high quantity of capital equipment compared with labour input
preparing input resources to supply products to meet expected demand
CAD (Computer Aided Design)
the use of computer programs to creates two or three dimensional graphical representations of physical objects
CAM (Computer Aided Manufacturing)
the use of computer software to control machines tolls and related machinery in the manufacturing of components or complete products
the ability of a business to vary both the level of production and the range of products following changes in customer demand
the use of a new or much improved production method or service delivery method
producing a one off item specially designed for the customer (unique product)
producing a limited number of identical products, each item in the batch passes through one stage of production before passing on to the next stage
producing items in a continually moving process
the use of flexible computer aided production systems to produce items to meet individual customers' requirements at mass production cost levels
a business location that gives the best combination of quantitative and qualitative factors
these are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability
non measurable factors that may influence business decisions
a business that operates from more than one location
transferring a business function, like HR, to another company
the relocation of a business process done in one country to the same or another company in another country
a business with operations or production bases in more than one country
taxes (tariffs) or other limitations on the free international movement of goods and services
Scale of Operations
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
Economies of Scale
reductions in a firm's unit costs of production that result from an increase in the scale of operations
Diseconomies of Scale
factors that cause average costs of production to rise when the scale of operation is increased
Enterprise Resource Planning
the use of a single computer application to plan the purchase and use the resources in an organization to improve the efficiency of operations
all of the stages in the production process from obtaining raw materials to selling to the consumer from point of origin to point of consumption
production systems that prevent waste by using the minimum of non renewable resources so that levels of production can be sustained in the future
materials and goods required to allow for the production and supply of products to the customer.
What are the 3 forms (types) of inventory?
Raw Material, Work In Progress and Finished Goods
The task of ensuring that supplies of the right quality are delivered at the right time in sufficient quantities to allow smooth and unbroken production
Economic Order Quantity
the optimum or least cost quantity of stock to reorder taking into account delivery cost and stock holding cost.
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
the number of units ordered each time
The normal time taken between ordering new stocks and their delivery
Just In Time (JIT)
This inventory control method aims to avoid holding inventories by requiring supplies to arrive just as they are needed in production and completed products are produced to order
the use of small amounts of capital from a large number of individuals to finance a new business venture.
a detailed document giving evidence about a new or existing business, and that aims to convince external lenders and investors to extend fiancé to the business.
Start Up Capital
the capital needed by an entrepreneur to set up a business.
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.
the purchase of assets that are expected to last for more than one year, such as building and machinery.
spending on all costs and assets other than fixed assets and includes wages and salaries and materials bought for stock.
the ability of a firm to be able to pay its short term debts.
when a firm ceases trading and its assets are sold for cash to pay suppliers and other creditors.
bank agrees to a business borrowing up to an agreed limit as and when required.
selling of claims over trade receivables 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.
permanent finance raised by companies through the sale of shares.
Long Term Loans
loans that do not have to be repaid for at least one year.
Long Term Bonds (Debentures)
bonds issued by companies to raise debt finance, often with a fixed rate of interest.
existing shareholders are given the right to buy additional shares at discounted price.
risk capital invested in business starts ups or expanding small business that have good profit potential but do not find it easy to gain finance from other sources
providing financial services for poor and low income customers who do not have access to banking services, such as loans and overdrafts offered by traditional commercial banks
these costs can be clearly identified with each unit of production and can be allocated to a cost centre.
costs that cannot be identified with a unit of production or allocated accurately to a cost centre
costs that do not vary with output in the short run
costs that vary with output
the extra cost of producing one more unit of output.
Break-Even Analysis (Point of Production)
the level of output at which total costs equal total revenue, neither a profit nor a loss is made
Break-Even Analysis Equation
BEA=fixed cost/contribution per unit (selling price-variable cost)
Margin of Safety
the amount by which the sales level exceeds the break-even level of output
Margin of Safety Equation
Margin of Safety=Actual Sales-Break Even Point
Contribution Per Unit
selling price less variable cost per unit
Double Entry Principle
every transactions has two sides
buying on credit (get product/service now, pay later)
Income Statement (profit and loss)
records the revenue, costs, and profit (or loss) of a business over a given period of time.
equal to sales revenue less cost of sales
the total value of sales made during the trading period=selling price x quantity sold
Cost of Sales
this is the direct cost of the goods that were sold during the financial year
gross profit minus overhead expenses
Profit for the Year
operating profit - interest and tax
the share of the profits paid to shareholders as a return for investing in the company
profit left after all deductions, including dividends, have been made, this is put back into the company as a source of finance
one-off profit that cannot easily be repeated or sustained
Profit that can be repeated and sustained
Statement of Financial
an accounting statement that records the values of a business assets, liabilities, and shareholders' equity at one point in time
total value of assets - total value of liabilities
an item of monetary value that is owned by a business
a financial obligation of a business that it is required to pay in the future
the total value of capital raised from shareholders by the issue of shares
Non-Current Assets (fixed assets)
assets to be kept and used by the business for more than one yea
items or values that do not have a physical presence, such as patents, trademarks and current assets
assets that are likely to be turned into cash before the next balance sheet date
stocks held by the business in the form of materials, work in progress and finished goods
Trade Receivables (Debtors)
the value of payments to be received from customers who have bought goods on credit
debts of the business that will usually have to be paid within one year
Account Payable (Creditors)
value of debts for goods bought on credit by the business payable to suppliers
Non Current Liabilities
value of debts of the business that will be payable after more than one year
Intellectual Capital or Property
the amount by which the market value of a firm exceeds its tangible asset less liabilities - intangible assets
arises when a business is valued at or sold for more than the balance sheet value of its assets
Cash Flow Statement
record of the cash received by a business over a period of time and the cash outflows from the business
Gross Profit Margin
this ratio compares gross profit with revenue
Gross Profit/Revenue x 100 (this will put in % form)
Operating Profit Margin (Net Profit Margin)
the ratio compares operating profit revenue
Operating Profit/Revenue x 100 (to put into a % form)
the ability of a firm to pay its short term debts
Current Assets/Current Liabilities
Acid Test Ratio
Liquid Assets/Current Liabilities
current assets - inventories
presenting the company accounts in a favorable light - to flatter the business performance
the sum of cash payment to a business
(inflows) less the sum of cash payments (outflows)
when a firm ceases trading and its assets are sold for cash to pay suppliers and other creditors.
when a business cannot meets its short term debts.
payments in cash received by a business, such as those from customers (trade receivables) or from the bank, eg receiving a loan.
payments in cash made by a business, such as those to suppliers and workers.
Cash Flow Forecast
estimate of a firms' future cash inflows and outflows.
Net Monthly Cash Flows
estimated difference between monthly cash inflows and outflows.
Opening Cash Flows
cash held by the business at the start of the month.
Closing Cash Balance
cash held at the end of the month becomes next month's opening balance.
monitoring of debts to ensure that credit periods are not exceeded.
unpaid customers' bills that are now very unlikely to ever be paid.
expanding a business rapidly without obtaining all of the necessary finance so that a cash flow shortage develops.
suppliers who have agreed to supply products on credit and who have not yet been paid.