Business Definitions
- Created by: meganborley
- Created on: 15-05-15 20:07
Definitions
Aim: the main objective of the business e.g survive, make a profit or grow
Articles of association: rule governing the internal running of a company
Assets: items of value owned by a business e.g cash, equipment and stock
Barriers to entry: the obstacles that restrict firms from breaking into a market and competing with established firms
Business cycle: fluctuations in the level of economic activity over time causing booms and slumps.
Capacity: the maximum amount a firm can make in a set time period using all its current resources
Capital: funds invested in a business, producer goods and assets available to the business
Capital employed: the total amount of funds invested into the business
Centralisation: authority is retained by senior managers at the top of the organisational chart
Chain of command: how instructions are passed down a business from superiors to subordinates
Definitions
Chain of production: the different stages of making, distributing and selling a product
Clearing price: market clearing price is the one price which leaves neither unsold products nor unsatisfied demand i.e equilibrium price
Collateral: assets pledged as securtiy by borrowers that can be sold by lenders if the loan is not repaid
Collusion: when rival producers cooperate or collaborate
Company: A company is a business with its own legal status separate from its owners called shareholders
Concentration ratios: the proportion of total sales (market share) of the largest firms
Confidence levels: the number of times out of 100 the results of a survey are expected to be representative
Corporate: whole organisation
Corporate objectives: specific targets of the entire organisation
Defintions
Credit: borrowed money
Creditor: any individual or organisation to whom money is owed
Current liabilities: short term business debts that must be paid back within a year
Decentralisation: authority is delegated down the chain of command to subordinates who are empowered to take decisions
Deed of partnership: a legal document setting out in writing the duties and responsibilities of partners
Deindustrialisation: decline in the size of the secondary sector
Delayering: a reduction in the number of layers of hierarchy within the organisational structure
Demographics: size and composition of the population
Diseconomies of scale: the disadvantages to the firm, in the form of higher unit costs, from increasing the size of operation
Dividends: that part of company profits paid out to shareholders
Definitions
Economies of scale: the advantages, in the form of lower unit costs, from increasing the size of operation
Equilibrium output: amount traded at the equilibrium market price
Equilibrium price: the price where the amount consumers demand equals amount producers supply
Equities: another term for company shares
Ethics: principles considered to be fair, honest and morally correct
Excess demand: demand exceeds supply at a given price leading to shortages
Excess supply: supply exceeds demand at a given price leaving unsold products in the market
Floatation: the process of becoming a plc by offering new shares for sale to members of the public
Franchise: one business (franchisor) grants another business (franchisee) a licence to sell its products and use its name
Franchisee: a business that uses the business idea, process or brand owned by franchisor
Definitions
Franchisor: the firm that grants a franchisee the legal right to use its idea, process, product or brand image
Gross profit margin: the proportion of a product's selling price that is gross profit
Incorporated business: an organisation with its own legal status separate from its owners.
Indirect costs: expenses of production such as rent that are independent of the level of output
Indirect taxes: a charge imposed by the government on the sale of goods or services
Interdependence: firms that reply on other businesses to provide inputs used in manufacture or an outlet of sales
Land: all natural resources (fields)
Limited liability: the responsibility of owners for the debts of a business is restricted to the amount of their investment in the firm
Limited liability partnership (LLP): partnerships in which partners are not responsible for debts
Definitions
Liquidation: The process by which a company is ended. Assets are turned into cash which is used to pay off liabilities
Market: any places where buyers and sellers meet to trade products
Market clearing price: the one price whihc leaves neither unsold products nor unsatisfied demand
Market power: the ability of a firm to influence price
Merger: two businesses combine to form one new organisation
Mission statement: a written expression of an organisations aims, purpose and values
Monopolistic competition: a type of market structure where many firms produce similiar products and there are low barriers to entry
Monopoly: a pure monopoly is a type of market structure where a single firm supplies the market and can exclude rivals from entering
Nationalisation: the sale of state-owned firms to private sector
Definitions
Objectives: a specific target an organisation sets itself to achieve through its activity
Oligopoloy: A type of market structure where a few large firms dominate the market- high barriers to entry
Opportunity cost: the best next alternative sacrificed when a choice is made
Partnership: business jointly owned and run by 2-20 people
Paternalistic leadership: a leadership style where managers typically treat staff as family making decisions for them that are in their best interest
Perfect competition: a type of market structure where many firms product identical products and there are no barriers to entry
Private limited company: a firm owned by a small number of shareholders who enjoy limited liability. Shares do not trade on public exchanges
Private sector: the part of the economy made up of households and firms and controlled by private individuals
Definitions
Privatisation: the sale of state-owned firms to the private sector
Rationalisation: the process of reorganising operations to reduce capacity
Retained profit: the amount of profit left over after tax and payments to owners have been made
Rights issue: an isse of new shares for cash to existing shareholders in proportion to their existing holdings
Severance: when a firm dismisses a worker for breaking a condition of employment
Share: a certificate that represents a part ownership of the company. Each share gives the right to one vote at meetings
Share capital: the total amount of money invested in a company bu its shareholders
Stakeholder: any group with an interest in an organisation's performance
Strategy: the long term plan of action by which an organisation aims to achieve its objectives
Strategic objective: long-term target
Definitions
Tactics: short-term, day-to-day decisions taken to achieve a strategy
Transparency: being clear and open about business activities
Underutilisation: occurs when an organisation is operating well below its maximum potential level of output
Unincorporated business: a firm with no separate, independent legal identity from its owners.
Unit cost: cost of producting one item
Unlimited liability: owners are peronsally responsible for the debts of a business, even if they must sell their own personal possessions
Value added: the financial worth a business adds to the resources they process into products
Working capital: the cash available to a business to fund its day-to-day operations or current assets minus current liabilities
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