Edexcel AS Business Theme 2 Key Terms

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Capital
The money provided by the owners in a business
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Capital Expenditure
Spending on business resources that can be used repeatedly over a period of ime
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Internal Finance
Money generated by the business or it's current owners
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Retained Profit
Profit after tax that is 'ploughed back' into the business
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Revenue Expenditure
Spending on business resources that have already been consumed or will be very shortly
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Sale and Leaseback
The practice of selling assets, such as property or machinery, and leasing them back from the buyer
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Authorised Share Capital
The maximum amount that can be legally raised
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Bank Overdraft
An agreement between a business and a bank that means a business can spend more than it has in it's account (overdrawn). The overdraft limit is agreed and interest is only charged when the business goes overdrawn
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Capital Gain
The profit made from selling a share for more than it was bought
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Crowd Funding
Where a large number of individuals (the crowd) invest in a business or project on the internet, avoiding the use of a bank
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Debenture
A long-term loan to a business
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Equities
Another name for an ordinary share
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External Finance
Money raised from outside the business
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Issued Share Capital
Amount of current share capital arising from the sale of shares
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Lease
A contract to acquire the use of resources such as property or equipment
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Peer-to-Peer Lending (P2P)
Where individuals lend to other individuals without prior knowledge of them, on the internet
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Permanent Capital
Share capital that is never repaid by the company
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Secured Loans
A loan where the lender requires security, such as property, to provide protection in case the borrower defaults
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Share Capital
Money introduced into the business through the sale of shares
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Unsecured Loans
Where the lender has no protection if the borrower fails to repay the money owed
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Venture Capitalism
Providers of funds for small or medium sized companies that may be considered too risky for other investors
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Collateral
An asset that might be sold to a pay day lender when a loan cannot be repaid
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Incorporated Business
A business model in which the business and the owner(s) have separate legal identities
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Limited Liability
A legal status that means shareholders can only lose the original amount they invested in a business
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Long-Term Finance
Money borrowed for more than one year
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Rights Issue
Issuing new shares to existing shareholders at a discount
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Short-Term Borrowing
Money borrowed for less than 12 months
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Undercapitalised
A business is not raising enough capital when setting up
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Unincorporated Business
A business model in which there is no legal difference between the owner(s) and the business
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Unlimited Liability
A legal status which means that business owners are liable for all business debts
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Business Plan
A plan for the development of a business, giving details such as the products to be made, resources needed, and forecasts such as costs, revenues and cash flow.
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Cash-Flow Forecast
The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month
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Cash Inflows
The flow of money into a business
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Cash Outflows
The flow of money out of a business
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Net Cash Flow
The difference between the cash flowing in and the cash flowing out of a business in a given time period
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Solvency
The degree to which a business is able to meet it's debts when they fall due
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Consumer Income
The amount of income reamaining after taxes and expenses have been deducted from the wages
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Consumer Trends
The habits or behaviours of consumers that determine the goods and services they buy
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Economic Growth
The rise in output of an economy as measured by growth in the Gross Domestic Product (GDP), usually as a percentage
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Economic Variables
Measures within the economy which have effects on businesses and consumers. Examples include unemployment, inflation and exchange rates.
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Extrapolation
Forecasting future trends based on sales data
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Forecasting
A business process, assessing the probable outcome using assumptions about the future
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Sales Forecast
Projection of future sales revenue, often based on previous sales data
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Time Series Data
A method that allows a business to predict future levels from past figures
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Average Cost / Unit Cost
The cost of producing one unit, calculated by dividing the total cost by the output
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Fixed Cost
A cost that does not change as a result of a change in output in the short run
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Long Run
The time period where all factors of production are variable
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Profit
The difference between total costs and total revenue, it can be negative
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Profit
The difference between total costs and total revenue, it can be negative
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Sales Revenue
The value of output sold in a particular time period, it is calculated by price x quantity of output
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Sales Volume
The quantity of output sold in a particular time period
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Semi-Variable Cost
A cost that consists of both fixed and variable elements
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Short Run
The time period where at least one factor of production is fixed
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Total Cost
The entire cost of producing a given level of output
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Total Revenue
The amount of money the business receives from selling output
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Variable Cost
A cost that rises as output rises
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Break-Even
Where a business generates just enough revenue to cover it's total costs
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Break-Even Chart
A graph containing the total cost and total revenue lines, illustrating the break-even output
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Break-Even Output
The output a business needs to produce so that it's total revenue and total costs are the same
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Break-Even Point
The point at which total revenue and total costs are the same
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Contribution
The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit.
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Margin of Safety
The range of output between the break-even level and the current level of output, over which a profit is made.
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Budget
A quantitative economic plan prepared and agreed in advance
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Budgetary Control
A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences
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Historical Figures
Quantitative information based of past trading records
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Production Cost Budget
A firm's planned production costs for a future period of time
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Sales Budget
A firm's planned sales for a future period of time- can be measured in terms of volume or value
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Variance
The difference between actual financial outcomes and those budgeted
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Variance Analysis
The process of calculating variances and attempting to identify their causes
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Zero-Based Budgeting / Zero Budgeting
A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder
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Amortisation
The writing off of an intangible asset
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Cost of Sales
The direct costs of a business
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Exceptional Costs
A one-off cost, such as a large bad debt
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Gross Profit
The difference between revenue/turnover and the cost of sales
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Gross Profit Margin
Gross profit expressed as a percentage of revenue/turnover
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Operating Profit
The difference between gross profit and business overheads, such as selling and administrative expenses
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Operating Profit Margin
Operating profit expressed as a percentage of revenue/turnover
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Net Profit
The difference between operating profit and interest or exceptional items
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Net Profit Margin
Net profit expressed as a percentage of revenue/turnover
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Statement of Comprehensive Income
A financial document showing a company's income and expenditure over a particular time period (usually a year)
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Revenue / Turnover
The total income of a business resulting from sales of goods or services
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Acid Test Ratio
Similar to the current ratio but excludes stock from current assets, a more severe test of liquidity
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Assets
Resources that belong to a business
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Capital
Money put into the business by owners
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Current Assets
Liquid assets, will be converted into cash within the next year
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Current Liabilities
Money owed by the business that must be repaid within one year
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Current Ratio
Asses whether or not a business has enough resources to meet any debts that arise in the next 12 months, it is found by dividing current liabilities into current assets
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Intangible Assets
Non-physical assets, such as brand names, patents and customer lists
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Inventories
Stocks held
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Liabilites
Money owed by the business to banks or suppliers
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Liquidity
The ease with which assets can be converted into cash
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Net Assets
Total assets - Total Liabilities
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Non-Current Assets
Long-term resources that will be used by the business repeatedly over a period of time
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Non-Current Liabilities
Money owed by the business for more than one year
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Shareholder's Equity
The amount of money owed by the business to shareholders
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Statement of Financial Position (Balance Sheet)
A summary at a particular point in time of the value of a firm's assets, liabilities and capital
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Trade and Other Payables
Money owed by the business to suppliers and utilities
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Trade and Other Receivables
Money owed to the business by customers
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Working Capital
The funds left over to meet day-to-day expenses after current debts have been paid.
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Administration
A failing business appoints a specialist to rescue the business or wind it up
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External Factors
Factors beyond the control of businesses cause it to collapse
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Internal Factors
Factors that businesses are able to control cause it to collapse
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Overtrading
The situation where a business does not have enough cash to support its' production ans sales, usually because it is growing too fast
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Batch Production
A method that involves completing one operation at a time on all units before performing the next
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Capital Intensive
Production methods that make more use of machinery than labour
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Capital Productivity
The amount of output each unit of capital produces
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Cell Production
A method that involves producing a family of products in a small self-contained unit within a factory
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Division of Labour
Specialisation in specific tasks or skills by an individual
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Downsizing
The process of reducing capacity, usually by laying off staff
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Efficiency
Producing a level of output where average cost is minimized
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Flow Production
A method that involves large scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line
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Job production
A method that involves employing all factors to complete one unit of output at a time
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Kaizen
A Japanese term that means continuous improvement
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Labour Intensive
Production methods that make more use of labour than machininery
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Labour Productivity
The amount of output each unit of labour produces
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Lean Production
An approach to operations that focuses on the reduction of resource use
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Outsourcing
Giving work to sub-contractors to reduce costs
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Production
The transformation of resources into goods or services
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Productivity
The output per unit of input per time period
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Specialisation
The production of a limited range of goods
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Standardisation
Using uniform resources and activities or producing a uniform product
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Capacity Utilisation
The use that a business makes of it's resources
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Excess/Surplus Capacity
When a business has too many resources to produce it's desired level of output
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Full Capacity
The point where a business can produce no more output
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Mothballing
Leaving machines, equipment or building space unused, but maintained, so they could be brought back into use if necessary
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Over-Utilisation
The position where a business is running at full capacity and 'straining' resources
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Rationalisation
Reducing the number of resources put into the production process, usually undetaken because the business has excess capacity
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Under-Utilisation
The position where a business is producing less than full capacity
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Buffer Stocks
Stocks held as a precaution to cope with unforeseen demand
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Kanban
A card or object that acts as a signal to move or provide resources in a factory
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Lead Time
The time between placing the order and the delivery of goods
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Re-Order Level
The level of current stock when new orders are placed
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Re-Order Quantity
The amount of stock ordered when an order is placed
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Stock Rotation
The flow of stock into and out of storage
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Work-in-Progress
Party finished goods
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Quality
Features of a product that allow it to satisfy customers' needs, it may refer to some standard of excellence
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Quality Assurance
A method of working for a business that takes into account customers' wants when standardising quality
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Quality Chains
When employees form a series of links between customers and suppliers in business, both internally and externally
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Quality Circles
Groups of workers meeting regularly to solve problems and discuss work issues
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Quality Control
Making sure that the quality of a product meets specified quality performance criteria
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Statistical Process Control
The collection of data about the performance of a particular process in a business
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Total Quality Management (TQM)
A managerial approach that focuses on quality and aims to improve the effectiveness, flexibility and competitiveness of the business
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Appreciation of a Currency
A rise in the value of a currency
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Base Rate
The rate of interest around which a bank structures other interest rates
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Boom
The peak of the economic cycle where GDP is growing at it's fastest
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Consumer Price Index (CPI)
A common measure of price changes used in the EU
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Deflation
A fall in the general price level. Or economic growth if falling/negative.
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Depreciation
A fall in the value of a currency
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Downturn
A period in the economic cycle where GDP grows much more slowly
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Economic/Trade/Business Cycle
Regular fluctuations in the level of output in the economy
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Exchange Rate
The price of one currency in terms of another
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Fiscal Policy
Using changes in taxation and government expenditure to manage the economy
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Government Expenditure
The amount spent by the government in it's provision of public services
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Gross Domestic Product (GDP)
A common measure of national income, output or employment
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Index Linked
The linking of certain payment, such as benefits, to the rate of inflation
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Inflation
A general rise in prices
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Monetary Policy
Using changes in the interest rate and money supply to manage the economy
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Recession
A less sever form of depression
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Recovery
A period where economic growth begins to increase again after a recession
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Slump / Depression
The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment
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Taxation
The charges made by the government on the activities, earnings and income of businesses and individuals
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Anti-Competitive / Restrictive Practices
Attempts by firms to prevent or restrict competition
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Barriers to Entry
Obstacles that make it difficult for new firms to enter a market
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Collusion
Two+ businesses agreeing to a restrictive practice, such as price fixing
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Contract of Employment
A written agreement between an employer and an employee in which each has certain obligations
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Discrimination
Favouring one person over another
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Employment Tribunal
A court that deals with cases involving disputes between employers and employees
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National Minimum Wage
A wage rate set by the government below which it is illegal to pay people at work
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Unfair Dismissal
The illegal dismissal of a worker by a business
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Barriers to Entry
Factors which make it difficult or impossible for businesses to enter a market and compete with existing producers
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Cartel
A group of businesses which join together to agree on pricing and output in a market in an attempt to gain higher profits at the expense of customers
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Colluding
Where several businesses make agreements among themselves which benefit them at the expense of either rival businesses or customers
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Market Structures
The characteristics of a market, such as the size of the barriers to entry to the market, the number of businesses in the market or whether they produce identical products, which determine the behaviour of businesses within the market
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Other cards in this set

Card 2

Front

Spending on business resources that can be used repeatedly over a period of ime

Back

Capital Expenditure

Card 3

Front

Money generated by the business or it's current owners

Back

Preview of the back of card 3

Card 4

Front

Profit after tax that is 'ploughed back' into the business

Back

Preview of the back of card 4

Card 5

Front

Spending on business resources that have already been consumed or will be very shortly

Back

Preview of the back of card 5
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