Business Studies AS (1) Key terms

Key Definitions 

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Chapter 1 Enterprise

Enterprise: Refers to the term in which businesses or products are formed and introduced into the market. 

Entrepreneurs: individuals that have an idea or product that they try and develop into a business and encourage it to grow.

Opportunity cost: the real cost of taking a particular action or the next best alternative forgone 

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Chapter 2: Generating and Protecting business idea

Franchise: When a business gives another business the right to supply its product or service 

Copyright: legal protection against copying from authors, composers and artists.

Patent: An official document granting the holder the right to be the sole user or producer of a newly formed product or process for a specific period. 

Trademark: Signs or logos displayed on a company's product which distinguishes it from its rivals 

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Chapter 3: Transforming resources into goods and s

Resources: the elements that go into producing good and services 

Factors of production: The four elements - Land, Labour, Capital, Enterprise - used the production of goods and services. 

Production: the Process whereby resources are converted into a form that is intended to satisfy the requirements of potential customers 

Output: the finished products resulting from the transforming action processes 

Primary sector: Those organisation's involved in extracting raw materials (farmer, and foresters) 

Secondary sector: those organisations involved in processing or refining the raw materials from the primary sector into finished or semi-finished products. 

Tertiary sector: Those organisations involved in providing services to customers and to other business, in either the public or the private sector (education, Doctors)

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Adding Value: the process of increasing the worth of resources by modifying  them.

Value AddedSales revenue - the cost of materials brought in. 

USP: a feature of a product or service that allows it to be different from other products. 


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Chapter 4: Developing Business plans

Business plan: a report describing the marketing strategy, operational issues and financial implications of a business start-up. 

Benefits

  • A business plan is useful in helping entrepreneurs to clarify their objectives and to consider their business idea thoroughly.
  • It enables owners to know precisely what needs to be done in order to meet their business objectives, including targeting specific customer groups, product pricing costing, and sales forecast and marketing. 
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Chapter 5: Conducting start-up market research

Marketing: the anticipation and satisfying of customers' wants in a way that delight s consumers and also meets the needs of the organisation. 

Market research: the systematic and objective collection analysis and evaluation of information that is intended to assist the marketing process.

Primary Market research: When a company invest money to gain first hand information for a specific purpose 

Secondary Market research: the use of information that has already been collected for a different purpose 

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Sample: a group of respondents or factors whose views or behaviour should be representative of the target market as a whole. 

Random Sample: A group of respondents in which anyone can be selected and has an equal chance of being chosen 

Quota sample: a group of respondents comprising several different segments, each sharing a common feature (age or gender) 

Stratified sample: a group of respondents selected according to particular features but results are divided into sub-groups and their sizes are chosen specifically

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Chapter 6: understanding markets.

The Market: where buyers and sellers come together.

Demand: the amount that a product or service is wanted by consumers and the willingness to buy it at any given price over a period of time.

Market segmentation: The classification of potential customers into groups or sub-groups 

Segmentation analysis: where a firm uses quantitive or qualitative data or information to try to discover the types of consumer who buy the product and why.

Market size: the volume of sales of a product or the value of a product 

Market growth: the percentage change in a product over a period of time. 

Market share: 

  Market share = Sales of a prodcut or brand or company

                                              total sales in the market           x100

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Chapter 7: Choosing the right legal structure for

Unincoperated business: there is no distinction between the owner of the business and the business. Such businesses tend to be sole traders or partnerships 

Incorporated business: this has a legal indentity that is separate from the individual owners. such businesses are known as PLC's or LTD 

Unlimited liability: a situation in which the owners of a business are liable for all the debts that the business may incur 

Limited liability: A situation in which the liabitlity of the owners of a business is limited to the fully paid up value of the share capital.

Sole trader: a business that is run by one person.

Partnership: a form of business in which two or more people operate for the common goal of making a profit. 

Private limited company: a small to medium sized business that is usually run by the family or a small group of individuals 

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Public limited company: a business with limited liability; a share capital of over£50,000; atleast two directors, a qualified company secretary; and usually, a wide spread of shareholders. it has 'PLC' after the name.

 Ownership: providing finance and therefore taking risks

Control: managing the organisation and making decisions 

Stakeholder: any group of individuals with an inter est in a business

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Chapter 8: Raising Finance

Ordinary Share Capital: Money given to a company by share-holders in return for a share certificate that gives them part ownership of the company in return for a share certificate

Loan Capital: Money received by an organization in return for the agreement to pay interest during the period of the loan and to be repaid orgination's within a period of time period of time.

Bank loan: A sum of money given to a firm for a specific agreed purpose 

Bank Overdraft: When the bank allows an individual or firm to overspend its current account 

Venture capital: When an individual invests money into a business for a percentage share of that firm, Aslo deemed to be risky by other lenders

Personal sources of finance: Money that is put forward by the owner of the business from their own savings or wealth.

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Chapter 9: Locating the business

Teleworking: Working in a location that is separate from a central workplace, using telecommunications 

Least-cost site: the location that allows the firm to minimize its costs

Infrastructure: the network of utilities such as: transport links, Telecommunications and sewerage

Qualitative factors: based on the opinions and wishes of individuals. these factors can influence business decisions.

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Finance: Chapter 11: Calculating cost's, revenues

Price: the amount paid by a consumer for a product or service 

Total revenue: the income received from an organisation's activities.

Total Revenue = Price per unit x quantity of units sold.

Profit: the difference between the income of a business and its total costs 

Profit = total revenue - total costs

Fixed costs: costs that do not vary directly with output in the short run

Variable costs: costs that vary directly with output in the short run.

Total Cost's: The sum of fixed costs and variable costs ( FC + VC)


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Chapter 12: Using breakeven analysis

Contribution cost per unit: selling price per unit - variable cost per unit 

Total contribution: the difference between total revenue and the total variable costs

Total Revenue - Total Variable cost

Breakeven analysis: study of the relationship between total costs and total revenue to identify the output at which a business breaks even

Breakeven output: the level of output at which total sales is equal to total costs of production 

Breakeven output =           Fixed costs (£)        

                                   contribution per unit (£) 

Target profit output =  Fixed costs (£) + Target profit (£)

                                         contribution per unit (£)

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Chapter 13: Using Cash-flow forecasting

Cash flow: the amoutns of money flowing into and out of a business over a period of time.

Cash Inflows: Receitpts of cash, Typically arising from sales of items, Payments and debtors, Loans received, rent charged, sale of assets and interest received.

Cash outflows: payments of cash, typically arising from the purchase of items. 

Net cash flow: the sum of cash inflows to an organisation minus the sum of cash outflows over a period of time.

Cash-flow cycle: the regular Pattern of inflows and out flows of cash within a business 

Cash-flow forecasting: the process of estimating the expected cash inflows and cash outflows over a period of time. 

Liquidity: the ability to convert an asset into cash without loss or delay

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Chapter 14: Setting budgets

Budget: an agreed plan established in numerical or financial terms, the policy to be pursued and the anticipated outcomes of that policy.

Income budget: shows the agreed, planned income of a business over a period of time.

Expenditure budget: shows the agreed, planned expenditure of a business over a period of time 

Profit budget: shows the agreed, planned profit of a business over a period of time

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