Business 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

1 of 9


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

2 of 9


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

3 of 9


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

4 of 9


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

5 of 9


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 

6 of 9


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 

7 of 9


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

8 of 9


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 

9 of 9


No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all Business Plans resources »