AS BUSINESS STUDIES
GLOSSARY
COMPILED BY: CEDAR BUSINESS
DEPARTMENT
INDEX
Contents
UNIT 1: Business and its Environment.................................................................................................................. 3
1. Enterprise .............................................................................................................................................................. 3
2: Business Structrure.......................................................................................................................................... 4
3: Size of Business ............................................................................... Error! Bookmark not defined.
4: Business Objectives.......................................................................................................................................... 7
5: Stakeholders in a Business ........................................................................................................................... 9
UNIT 2: People in Organisations ............................................................................................................................... 9
10: Management and Leadership ................................................................................................................... 9
11: Motivation ....................................................................................................................................................... 10
12: Human Resource Management ............................................................................................................ 12
Unit 3 Marketing ............................................................................................................................................................ 13
16. What Is Marketing? ..................................................................................................................................... 13
17. Market Research .......................................................................................................................................... 16
18. The Marketing Mix – Product & Price ............................................................................................... 18
Unit 4 Operations and Project Management.................................................................................................... 23
22 . The Nature of Operations ....................................................................................................................... 23
23. Operations Planning................................................................................................................................... 24
24. Inventory Management ............................................................................................................................ 27
UNIT 5 Finance and Accounting............................................................................................................................. 28
28. Business Finance .......................................................................................................................................... 28
29. Costs.................................................................................................................................................................... 30
30. Accounting fundamentals........................................................................................................................ 31
UNIT 1: Business and its Environment
Chapter 1: Enterprise
Consumer Goods: The physical and tangible goods sold to the general public - they
include durable consumer goods and non - durable consumer goods.
Example: Consumer durable good: cars and washing machines
Non - consumer durable goods: food, drinks and sweets that can only be used one
Consumer Services: The non - tangible products sold to the general public.
Example: Insurance services and hotel accommodation
Factors of Production: These are the resources needed by business to product goods or
services.
Example: Land, labour, capital and enterprise
Land:This term includes not only land itself but all the renewable and non - renewable
resources of nature.
Example: Coal, crude oil and timber
5. Labour: manual and skilled labour make up the workforce of the business.
6. Capital: This is not just the financed need to set up a business and pay for its
continuous operations but also physical goods used by industry to aid in the product of
other goods and services.
Example: Machines and commercial vehicles
7. Enterprise: this is the driving force and provided by risk- taking individuals, that
combine the other factors of production into a unit capable of producing goods and
services. It provides a managing, decision - making and coordinating role.
8. Creating Value: Increasing the difference between the cost of purchasing bought - in materials and the price the finished goods are sold for.
9. Added Value: The difference between the cost of purchasing bought - in - materials
and the price the finished goods are sold for.
Example: Jewellers: well -designed shop - window display, attractive shop fittings, well dressed and knowledgeable shop assistants and beautiful boxes offered to customers to
put new jewellery in. These features might allow an increase in jewellery prices above
the additional costs involved
10. Opportunity Cost: The benefit of the next most desired option which is given up.
Example: If consumers choose to buy the smartphone over a pair of trainers, then the
trainers become the opportunity cost OR if the government chooses to build a fighter
plane, then the hospital becomes the opportunity cost
11. Entrepreneur: Someone who takes the financial risk of starting and managing a new
venture.
Example: Bill Gates and Steve Jobs
12. Social Enterprise: A business with mainly social objectives that reinvests most its
profits into benefiting society rather than maximising returns to owners.
Example: The KASHF Foundation in Pakistan provides micro-finance (very small loans)
and social-support services to women entrepreneurs who traditionally find it very
difficult to receive help
13. Triple Bottom Line: The three objectives of social enterprise: economic, social and
environmental.
Example:
Economic: Make a profit to reinvest back into the business and provide some return to
owners.
Social: Provide jobs or support for local, often disadvantaged communities.
Environmental: To protect the environment and to manage the business in an
environmentally sustainable way.
Chapter 2: Business Structure
1. Primary Sector Business Activity: Firms engaged in the extraction of natural
resources so they can be used and processed by other firms.
Example: Oil extraction, fishing and farming
2. Secondary Sector Business Activity: Firms that manufacture and process products
from natural resources.
Example: Brewing, baking, clothes - making and construction
3. Tertiary Sector Business Activity: Firms that provide services to consumers and other
businesses.
Example: Retailing, transport, insurance, banking, hotels and tourism
4. Public Sector: Comprises of organisations accountable to and controlled by central or
local government (the state)
Example: Military and police
5. Private Sector: Comprises of business owned and controlled by individuals or groups
of individuals.
Example: Sole proprietors
6. Mixed Economy: Economic resources are owned controlled by both private and
public sectors.
Example: England and Canada
7. Free - Market Economy: Economic resources are owned largely by the private sector
with very little state intervention.
Example: Hong Kong, with its extremely low tax rates, minimal regulations on
businesses, and highly capitalist system of economics, ranks as 89.8% economically free,
which is the highest rating in the world.
8. Command Economy: Economic resources are owned, planned and controlled by the
state.
Example: North Korea
9. Sole Trader: A business in which one person provides the permanent finance and in
return, has full control of the business and is able to keep all of the profits.
Example: Small retailers, plumbers, builders
10. Partnership: a business formed by two or more people to carry on a business
together with shared capital investment and, usually, shared responsibilities.
Example:
McDonalds: Richard and Maurice McDonald
Apple Inc: Steve Jobs and Paul Allen
11. Limited Liability: The only liability - or potential loss - a shareholder has if a
company fails is the amount invested in the company, not the total wealth of the
shareholder.
12. Private Limited Company: A small to medium - sized business that is owned by
shareholders who often members of the same family; this company cannot sell shares
to the general public.
Example: Ernst & Young
13. Share: A certificate confirming part ownership of a company and entitling the
shareholder owner to dividends and certain shareholder rights.
14. Shareholder: A person or institution owning shares in a limited company.
15. Public Limited Company: A limited company, often a large business, with legal right
to sell shares to the general public - share prices are quoted on the national stock
exchange:
Example: Pakistan State Oil Company Ltd (PSO)
16. Memorandum of Association: This states the name the company, the address of the
head office through which it can be contracted, the maximum share capital for which
the company seeks authorisation and the declared aims of the business.
17. Articles of Association: This document covers the internal workings and control of
the business such as the name of the directors and the procedures to be followed at
meetings will be detailed.
18. Cooperatives: A cooperative is an autonomous association of people united
voluntarily to meet their common economic, social and cultural needs and aspirations
through a jointly owned and democratically controlled business.
19. Franchise: A business that uses the name, logo and trading systems of an existing
successful business.
Example: Ben and Jerrys, Mc Donalds and Subway
20. Joint Venture: Two or more businesses agree to work closely together on a
particular project and create a separate business division to do so.
Example: Sony-Ericsson - Sony-Ericsson is a joint venture between Sony and the Swedish
company Ericsson.
21. Holding Company: A business organisation that owns and controls a number of
separate businesses, but dos not unite them into one unified company.
Example: HSBC Holdings PLC and Goldman Sachs
22. Public Corporations: A business enterprise owned and controlled by the state also
known as nationalised industry.
Example: Publicly owned TV channels
Chapter 3: Size of Business
1. Revenue: The total value of sales made by a business in a given period of time.
Formula: Selling Price x Quantity
2. Capital Employed: The total value of all long - term finance invested in the business.
3. Market Capitalisation: The total Value of a company’s issued shares.
Formula: Current Share Price x Total Number of Shares Issued
4. Market Share: Sales of the business as a proportion of total market sales
Formula:
Total Sales of Business
x 100
Total Sales of Industry
5. Internal Growth: Expansion of a business by means of opening new branches, shops
or factories (also known as organic growth).
Example: A retailing business opening more shops in towns and cities where it had
previously had none such as Starbucks
Chapter 4: Business Objectives
1. SMART criteria: The most effective business objectives usually meeting the
following “SMART” criteria:
S- SPECIFIC: Objectives should focus on what the business does and should apply
directly to that business. A hotel may set an objective of 75% bed occupancy over the
winter period. This objective is specific to this business.
M - MEASURABLE: Objectives that have a quantitative value are likely to prove to
bemore effective targets for directors and staff to work towards such as increase sales
in the south - eats region by 15% this year.
A - ACHIEVABLE: Setting objectives that are almost impossible in the time frame given
will be pointless. They will demotivate staff who have the task of trying to reach these
targets.
R - REALISTIC AND RELEVANT: Objectives should be realistic when compared with the
resources of the company and should be expressed in terms relevant to the people who
have to carry them out.
T- TIME SPECIFIC: A time limit should be set when an objective is establish -by when
does the business expect to increase profits by 5%?
2. Corporate Aims: These are very long - term goals that a business hopes to achieve.
The core central purpose of a business’s activity is expressed n its corporate aims.
Example: New car and truck designs are an important strategy to help Daimler (car
manufacturer) achieve its long-term aim
3. Mission Statement: A statement of the business’s core aims, phrased in a way to
motivate employees and to stimulate interest by outside groups.
Example: GOOGLE: ‘To organize the world’s information and make it universally
accessible and
useful.’
4. Corporate Objectives: Based on the central aim and mission of the business, but they
are expressed in terms that provide much clearer guide for management action or
strategy.
Example: Profit maximisation, profit satisficing, growth, increasing market share,
survival and corporate social responsibility
5. Corporate Social Responsibility (CSR): This concept applies to those businesses that
consider the interests of society by taking responsibilities for the impact of their
decisions and activities on customers, employees, communities and the environment.
Example: Google Green is a corporate effort to use resources efficiently and support
renewable power. But recycling and turning off the lights does more for Google than
lower costs
6. Management by Objectives: A method of coordinating and motivating all staff in an
organisation by dividing its overall aim into specific targets for each department,
manager and employee.
7. Ethical Code: A document detailing a company’s rules and guidelines of staff
behaviour that must be followed by all employees.
5: STAKEHOLDERS IN A BUSINESS
1. Stakeholders: People or groups of people who can be affected by - and therefore
have an interest in - any action by an organisation.
Example: Owners/shareholders, customers, suppliers, employees, government and local
communities
2. Stakeholder Concept: The view that businesses and their managers have
responsibilities and to a wide range of groups, not just shareholders.
UNIT 2: People in Organisations
Chapter 10: Management and Leadership
1. Manager: Responsible for setting objectives, organisation resources and motivating
staff so that the organisation’s aims are met.
2. Leadership: The art of motivating a group of people towards achieving a common
objective
Example: Jeff Bezos, CEO - AMAZON
3. Autocratic Leadership: A style of leadership that keeps all decision - making at the
centre of the organisation.
Example: Donald Trump of Trump Organization
4. Democratic Leadership: A leadership style that promotes the active participation of
workers in taking decisions.
Example: Apple Inc - Apple survived because Steve Jobs learned how to adapt. He
became a democratic/participative leader.
5. Paternalistic Leadership: A leadership style based on the approach that the manager
is in a better position than the workers to know what is best for an organisation.
6. Laissez - faire Leadership: A leadership style that leaves much of the business
decision - making to the workforce - a “hands - off” approach and the reverse of the
autocratic style.
Example: Warren Buffet - Buffet very much stays hands-off with his management style
because he has surrounded himself with people that he knows can perform their job
adequately and creatively without his help.
7. Informal Leadership: A person who has no formal authority but has respect of
colleagues and some power over them.
8. Emotional Intelligence (EI): The ability of managers to understand their own
emotions, and those of the people they worth with, to achieve better business
performance.
Chapter 11: Motivation
1. Motivation: The internal and external factors that stimulate people to take actions
that lead to achieving a goal.
2. Self - actualisation: A sense of self - fulfilment reached by feeling enriched and
developed by what ones learned and achieved.
3. Motivating Factors (motivators): Aspects of a worker’s job that can lead to positive
job satisfaction, such as achievement, recognition, meaningful and interesting work and
advancement at work.
Example: Responsibility and growth
4. Hygiene Factors: Aspects of a worker’s job that have the potential to cause
dissatisfaction, such as pay, working conditions, status and over - supervision by
managers.
Example: Work conditions and salary
5. Job Enrichment: Aims to use the full capabilities of workers by giving them the
opportunity to do more challenging and fulfilling work.
Example: Taking on bigger tasks, a trusted role and training for growth.
6. Time Based Wage Rate: Payment to a worker made for each period of time worked.
Example: One hour
7. Piece Rate: A payment to a worker for each unit produced.
8. Salary: Annual income that is usually paid on a monthly basis.
9. Commission: A payment to a sales person for each sale made.
10. Bonus: A payment made in addition to the contracted wage or salary.
Example: Most common for employees of banks
11. Performance - related Pay: A bonus scheme to reward staff for above - average
work performance.
12. Profit sharing: A bonus for staff based on the profits of the business - usually paid as
a proportion of basic salary.
13. Fringe Benefits: Benefits given, separate from pay, by an employer to some or all
employees.
Example: Company car, insurance, education for kids
14. Job Rotation: Increasing the flexibility of employees and the variety of work they do
by switching from one job to another.
Example: An administrative employee might spend part of the week looking after the
reception area of a business, dealing with customers and enquiries.
15. Job Enlargement: Attempting to increase the scope of a job by broadening or
deepening the tasks undertaken.
Example: Adding customer service tasks for administrative staff
16. Job Redesign: Involves the restructuring of a job - usually with employees’
involvement and agreement - to make work more interesting, satisfying and challenging.
17. Quality Circles: Voluntary groups of workers who meet regularly to discuss work related problems and issues.
18. Worker participation: Workers are actively encouraged to become involved in
decision - making within the organisation.
19. Team - working: Production is organised so that groups of workers undertake
complete units of work.
Chapter 12: Human Resource Development
1. Human Resource Management (HRM): The strategic approach to the effective
management of an organisation’s workers so that they help the business gain a
competitive advantage.
2. Recruitment: The process of identifying the need for a new employee, defining the
job to be filled and the type of person needed to fill it and attracting suitable candidates
for the job.
3. Selection: Involves the series of steps by which candidates are interviewed, tested
and screened for choosing the most suitable person for a vacant post.
4. Job Description: A detailed list of the key points about the job to be filled - stating all
its key tasks and responsibilities.
Example: Assistant Director - Assisting in developing and implementing plans and goals
for the department, working with the director to coordinate and supervise daily
operations and ensuring compliance with regulations and internal policies
5. Person Specification: A detailed list of the qualities, skills and qualifications that a
successful applicant will need to have.
Example: A Bachelor’s Degree in a particular field OR 5 years experience working on the
tools within the plumbing industry or at least 3 years working in a face to face customer
service role in a fast paced environment
6. Employment Contract: A legal document that’s sets out the terms and conditions
governing a worker’s job.
Example: Working hours and holiday entitlement
7. Labour Turnover: Measures the rate at which employees are leaving an organisation.
It is measured by:
Formula:
Number of employees leaving in 1 year
x 100
Average number of people employed
8. Training: Work - related education to increase workforce skills and efficiency.
Example: Promote safety and health among employees and educate workers about the
effective use of technology
9. Employee Appraisal: The process of assessing the effectiveness of an employee
judged against pre - set objectives.
10. Dismissal: Being dismissed or sacked from a job due to incompetence or breach of
discipline.
11. Unfair dismissal: Ending a worker’s employment contract for a reason that the law
regards as being unfair.
Example: Pregnancy, race, gender or religion of a worker
12. Redundancy: When a job is no longer required, the employee doing this job
becomes necessary through no fault of their own.
Example: Over the two years to 2013, Nokia Siemens, the mobile (cell) phone
manufacturer, made 20,000 workers redundant worldwide in order to cut costs and
restore profitability.
13. Work - life Balance: 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 to family or
other interests.
Example: Leave Work at a reasonable hour and allow flexible schedules
14. Equality Policy: Practices and processes aimed at achieving a fair organisation where
everyone is treated in the same way and has the opportunity to fulfil their potential.
15. Diversity Policy: Practices and processes aimed at creating a mixed workforce and
placing positive value on diversity in the workplace.
Unit 3 Marketing
Chapter 16. What Is Marketing?
1. Marketing Objectives: the goals set for the marketing department to help the
business achieve its overall objectives.
Example: increase company sales by 25% by 2016.
2. Marketing Strategy: long-term plan established for achieving marketing objectives.
Example: using CRM or developing the products by creating a new USP.
3. Market Orientation: an outward-looking approach basing product decision on
consumer demand, as established by market research.
Example: Facebook and Coca-Cola.
4. Product Orientation: an 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.
Example: Apple products.
5. 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.
Example: Cadbury used its reputation for chocolate brand reputation to extend into
related products such as desserts.
6. Societal Marketing: 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.
Example: The Body Shop which is known to be original, natural and ethical beauty
brand.
7. Demand: the quantity of a product that consumers are willing and able to buy at a
given price in a time period.
Example: demand for sweaters in winter.
8. Supply: the quantity of a product that firms are prepared to supply at a given price in
a time period.
Example: production of more warm clothes in winter.
9. Equilibrium Price: the market price that equates supply and demand for a product.
10. Market Size: the total level of sales of all producers within a market. Companies are
interested in knowing the market size before.
Example: launching a new product or service in an area.
11. Market Growth: the percentage change in the total size of a market (volume or
value) over a period of time.
Example: a new technology might only be marketable to a small set of consumers, but
as the price of the technology decreases and its usefulness in everyday life increases,
more consumers could increase demand.
12. Market Share: the percentage of sales in the total market sold by one business.
Example: a business has 25% market share in an industry. This is calculated by the
following formula:
Firm’s sales in time period
x 100
total market sales in time period
13. Direct Competitor: businesses that provide the same of very similar goods or
services.
Example: Samsung and Apple.
14. USP (Unique Selling Proposition): the special feature of a product that differentiates
it from competitor’s products.
Example: Apple’s IOS software.
15. Product Differentiation: making a product distinctive so that it stands out from
competitor’s products in consumer’s perception.
Example: Samsung’s latest iris scanner.
16. Niche Marketing: identifying and exploiting a small segment of a larger market by
developing products to suit it.
Example: sports channels like STAR Sports and Fox Sports target a niche of sports
enthusiasts.
17. Mass Marketing: selling the same products to the whole market with no attempt to
target groups within it.
Example: soaps or soft drinks.
18. Market Segment: a sub-group of a whole market in which consumers have similar
characteristics.
Example: males or females and adults or children.
19. Market Segmentation: identifying different segments within a market and targeting
different products or services to them.
Example: toys for children and premium cars for high income adults.
20. Consumer Profile: a quantified picture of consumers of a firm’s products, showing
proportions of age groups, income levels, location, gender and social class.
Example: it may be done in many industries to be profitable.
Chapter 17. Market Research
1. Market Research: this is the process of collecting, recording and analyzing data about
customers, competitors and the market.
Example: collecting data using questionnaires.
2. Primary Research: the collection of first-hand data that is directly related to a firm’s
needs.
Example: using focus groups to collect relevant data.
3. Secondary Research: collection of data from second-hand sources.
Example: using government statistics or using the internet to collect information.
4. Qualitative Research: research into the in-depth motivations behind consumer
buying behavior opinions.
Example: subjective opinions about a product.
5. Quantitative Research: research that leads to numerical results that can be
statistically analyzed.
Example: quantifying results from a closed ended questionnaire.
6. Focus Groups: a group of people who are asked about the attitude towards a
product, service, advertisement or new style of packaging.
Example: asking a group of women about a particular beauty product.
7. Sample: the group of people taking part in a market research survey selected to be
representative of the overall target market.
Example: sample of 100 people.
8. Random Sampling: every member of the target population has an equal chance of
being selected.
Example: the names of 25 employees being chosen out of a hat from a company of 250
employees. In this case, the population is all 250 employees, and the sample is
random because each employee has an equal chance of being chosen.
9. Systematic Sampling: every nth item in the target population is selected.
Example: A sample of 50 patients required from the register of 1000 patients available
in the records section of a teaching hospital. The sample fraction here will be 50/ 1000 =
1/ 20, thus k = 20. The first member in the register is selected randomly between 1 and
20. The first and every 20th member is subsequently selected as sample members.
10. Stratified Sampling: 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.
Example: stratifying a population sample, in terms of gender (male or female).
11. Quota Sampling: when the population has been stratified and the interviewer
selects an appropriate number of respondents from each stratum.
Example: if the basis of the quota is college level and the research needs equal
representation, with a sample size of 100, we would select 25 first – year students,
another 25 second – year students, 25 third – year and 25 fourth – year students.
12. Cluster Sampling: using one or a number of specific groups to draw samples from
and not selecting from the whole population, example: using on town or region.
Example: neighborhoods, school districts, and class rooms.
13. Open Questions: those that invite a wide-ranging or imaginative response – the
results will be difficult to collate and present numerically.
Example: How would you describe this product?
14. Closed Questions: questions to which a limited number of pre-set answers is
offered.
Example: Do you like this product? Yes/ No.
15. Arithmetic Mean: calculated by totaling all the results and dividing by the number of
results.
Example: 1, 2, 3, 4, 5
Mean = 1+2+3+4+5 = 3
5
16. Mode: the value that occurs most frequently in a set of data.
Example: 1, 2, 3, 3, 5, 7, 3, 8, 9
Mode = 3
17. Median: the value of the middle item when data have been ordered or ranked. It
divides the data into two equal parts.
Example: 1, 2, 3, 4, 5, 6, 7
Median = 4
18. Range: the difference between the highest and the lowest value.
Example: 1, 2, 3, 4, 5, 6, 7
Range = 7 – 1 = 6
19. Inter-quartile Range: the range of the middle 50%of the data.
Example: 1, 2, 3, 4, 5, 6, 7
IQR = Q3 – Q1 = 6 – 2 = 4.
Chapter 18. The Marketing Mix – Product & Price
1. Marketing Mix: the four key decisions that must be taken in the effective marketing
of a product.
Example: it includes product (cellphones, soaps etc.), price (skimming/ penetration),
place (malls, outlets), and promotion (brochures, advertisements).
2. Customer Relationship Management (CRM): using marketing activities to establish
successful customer relationships sot that existing customer loyalty can be maintained.
Example: making an app for customers to track their orders or change them.
3. Brand: an identifying symbol, name, image or trademark that distinguishes a product
from its competitors.
Example: Nestle, Gucci
4. Intangible attributes of a product: subjective opinions of customers about a product
that cannot be measured of compared easily.
Example: design
5. Tangible attributes of a product: measurable features of a product that can be easily
compared with other products.
Example: size, speed
6. Product: the end result of the production process sold on the market to satisfy a
customer need.
Example: Milk, cosmetics
7. Product Positioning: the consumer perception of a product or service as compared to
its competitors.
Example: Subway’s slogan is “eat fresh” which, in the competitive fast food market, is
simple two-word slogan stands out by clearly differentiating their offering on the
healthiness and the freshness of their menu offering.
8. Product Portfolio Analysis: analyzing the range of existing products of a business to
help allocate resources effectively between them.
Example: comparing market growth of each product with its market share to analyze
which product is more profitable.
9. Product Life Cycle: the pattern of sales recorded by a product from launch to
withdrawal from the market and is one of the main forms of portfolio analysis.
Example: some of the stages include, survival, maturity and decline.
10. Consumer Durable: manufactured product that can be reused and is expected to
have a reasonably long-life.
Example: a car or washing machine.
11. Extension Strategies: these are marketing plans to extend the maturity stage of the
product before a brand new one is needed.
Example: changing color or features of a product.
12. Price Elasticity of Demand: measures the responsiveness of demand following a
change in price.
Example: In the case of relatively inelastic demand for gasoline. As the price of gasoline
increases, the quantity demanded doesn't decrease all that much. This is because there
are very few good substitutes for gasoline and consumers are still willing to buy it even
at relatively high prices.
13. Mark-Up Pricing: adding a fixed mark-up for profit to the unit price of a product.
Example: For example, if a product is worth $100, the selling price with a
25% markup would be $125. Gross Profit Margin = Sales Price – Unit Cost = $125 – $100
= $25. Markup Percentage = Gross Profit Margin/Unit Cost = $25/$100 = 25%.
Sales Price = Cost X Markup Percentage + Cost = $100 X 25% + $100 = $125
14. Target Pricing: setting a price that will give a required rate of return at a certain level
of output/ sales.
Example: if a stock is trading at $60, and the company has a bad quarter and analysts
reduce the price target from $70 to $50, it is going to generate selling activity and
reduce the share price closer to the $50 target.
15. Full-Cost Pricing: setting a price by calculating a unit cost for the product (allocated
fixed and variable costs) and then adding a fixed profit margin.
16. Contribution-Cost Pricing: setting prices based on the variable costs of making a
product in order to make a contribution towards fixed costs and profit.
17. Competition-Based Pricing: a firm will base its prices upon the price set by its
competitors.
Example: if a competitor sets its price $5 per unit, the reaction of a firm would be similar
to charging that price.
18. Dynamic Pricing: offering goods at a price that changes according to the level of
demand and the customer’s ability to pay.
Example: the San Francisco Bay Bridge charges a higher toll during rush hour and on the
weekend, when drivers are more likely to be travelling
19. Penetration Pricing: setting a relatively low price often supported by strong
promotion in order to achieve a high volume of sales.
Example: discount stores such as Walmart charges lower price to gain maximum
revenue.
20. Market Skimming: setting a high price for a new product when a firm has a unique
or highly differentiated product with low elasticity of demand.
Example: cellphone brand such as Apple charges higher for its products because of the
unique nature.
Chapter 19 The Marketing Mix – Promotion & Place
1. Promotion: the use of advertising, sales promotion, personal selling, direct mail,
trade fairs, sponsorship and public relations to inform consumers and persuade them.
2. Promotion Mix: the combination of promotional techniques that a firm uses to sell a
product.
Example: a firm may use advertisements along with billboard ads to promote its
products.
3. Above-the-line Promotion: a form of promotion that is undertaken by a business
paying for communication with consumers.
Example: firms have to pay a lot of amount for TV advertisements.
4. Advertising: paid-for communication with consumers to inform and persuade.
Example: TV and cinema advertising.
5. Below-the-line Promotion: promotion that is not a directly paid-for means of
communication, but based on short-term incentives to purchase.
Example: through public relations.
6. Sales Promotion: incentives directed at consumers or retailers to achieve short-term
sales increases and repeat purchases by consumers.
Example: special offers, buy one get one free.
7. Personal Selling: a member of the sales staff communicates with one consumer with
the aim of selling the product and establishing a long-term relationship between
company and consumer.
Example: department stores on the perfume and cosmetic counters.
8. Sponsorship: 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.
Example: Nike, Adidas
9. Public Relations: the deliberate use of free publicity provided by newspapers, TV and
other media to communicate with and achieve understanding by the public.
Example: print or TV campaigns.
10. Branding: the strategy of differentiating products from those of competitors by
creating an identifiable image and clear expectations about a product.
Example: apple used by Apple Computers.
11. Marketing or promotion budget: the financial amount made available by a business
for spending on marketing/ promotion during a certain time period.
12. Channel of Distribution: this refers to the chain of intermediaries a product passes
through from producer to final consumer.
Example: through intermediaries.
13. Internet (Online) Marketing: refers to advertising and marketing activities that use
the Internet, email, and mobile communications to encourage direct sales via electronic
commerce.
Example: social media.
14. E-Commerce: the buying and selling of goods and services by businesses and
consumers through an electronic medium.
Example: creating an online website for selling products.
15. Viral Marketing: the use of social media sites or text messages to increase brand
awareness or sell products.
Example: use of text messages or word of mouth as a means of promotion.
16. Integrated Marketing Mix: the key marketing decisions complement each other and
work together to give customers a consistent message about the product.
Example: making changes in product, along with adjusting the appropriate price,
distributing it to appropriate outlets or creating own store and promoting it via above
the line or below the line promotion.
Unit 4 Operations and Project Management
Chapter 22 .The Nature of Operations
1. Added Value: the difference between cost of purchasing raw materials and the price
the finished goods are sold for – this is the same as creating value.
Example: offering one year of free support on a new computer would be a value-added
feature.
2. Intellectual Capital: intangible capital of a business that includes human capital (well
trained and knowledgeable employees), structural capital (databases and information
systems) and relational capital (good links with supplier and customers).
Example: patents, trademarks and copyrights.
3. Production: converting inputs into outputs.
Example: sugarcane is first used as an input, then the juice of sugarcane is processed
through a conversion process, finally to get an output known as a refined sugar (used for
mass consumption).
4. Level of Production: the number of units produced during a time period.
Example: a designer designs 10 customized dresses.
5. Productivity: the ratio of outputs to inputs during production.
Example: output per worker per time period.
6. Efficiency: producing output at the highest ratio of output to input.
Example: a reduction in the number of workers needed to make a car.
7. Effectiveness: meeting the objectives of the enterprise by using inputs productively
to meet customer’s needs.
8. Labor Intensive: involving a high level of labor input compared with capital
equipment.
Example: labor intensive industries include agriculture, mining, hospitality and food
service.
9. Capital Intensive: involving a high quantity of capital equipment compared with labor
input.
Example: capital-intensive industries include oil production and refining.
Chapter 23. Operations Planning
1. Operations Planning: preparing input resources to supply products to meet expected
demand.
Example: techniques such as JIT may be used for this.
2. CAD (Computer Aided Design): the use of computer programs to create two-orthree-dimensional (2D or 3D) graphical representations of physical objects.
Example: AutoCad can be used for house drawings.
3. CAM (Computer Aided Manufacturing): the use of computer software to control
machine tools and related machinery in the manufacturing of components or complete
products.
Example: NX Tooling and Fixture Design offers a set of automated applications for mold
and die design, fixture design and other tooling processes built on a foundation of
industry knowledge and best practice.
4. Operational Flexibility: the ability of a business to vary both the level of production
and the range of products following changes in customer demand.
Example: use of multi skilled workers and machinery can help achieve this aim.
5. Process Innovation: the use of new or much improved production method or service
delivery method.
Example: Use of CAD and CAM, use of ERP.
6. Job Production: producing a one-off item specially designed for the customer.
Example: designer clothes, hand crafted shoes.
7. Batch Production: 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.
Example: cupcakes, confectionary items.
8. Flow Production: producing items in a continually moving process.
Example: cold drinks.
9. Mass Customization: the use of flexible computer aided production systems to
produce items to meet individual customer’s requirements at mass-production cost
levels.
Example: Motomaker by Motorola, footwear firm offers customers a design tool that
allows them to apply options, art and custom colors to base models.
10. Optimal Location: a business location that gives the best combination of
quantitative and qualitative factors.
Example: a retail store’s optimal location should be situated in the city’s suburbs where
there is high social density.
11. Quantitative 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.
Example: comparing break-even level of output of two factories when deciding which
one to buy.
12. Qualitative Factors: non-measurable factors that may influence business decisions.
Example: security in the area which is considered to be bought.
13. Multi-Site Location: a business that operates from more than one locations.
Example: general stores; Walmart.
14. Offshoring: the relocation of a business process done in one country to the same or
another company in another country.
Example: outsource their customer support departments to other countries in order to
reduce costs.
15. Multinational: a business with operations or production bases in more than one
country.
Example: McDonalds.
16. Trade Barriers: taxes (tariffs) or other limitations on the free international
movement of goods and services.
Example: tariff, quotas.
17. Scale of Operation: the maximum output that can be achieved using the available
inputs (resources) – this scale can only be increased in the long term by employing more
of all input.
18. Economies of Scale: reduction in a firm’s unit (average) costs of production that
result from an increase in the scale of operations.
Example: bulk-buying, financial economies of scale.
19. Diseconomies of Scale: factors that cause average costs of production to rise when
the scale of operation is increased.
Example: communication problems.
20. Enterprise Resource Planning: the use of single computer application to plan the
purchase and use of resources in an organization to improve the efficiency of
operations.
Example: quick books, sage’ peach tree accounting to maintain information about
vendors, customers and users.
21. Supply Chain: 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.
Example: a service industry may have a broader supply chain compared to an
automobile company.
22. Sustainability: production systems that prevent waste by using the minimum of
non-renewable resources so that levels of production can be sustained in the future.
Example: use of solar energy.
Chapter 24. Inventory Management
1. Inventory (stock): materials and goods required to allow for the production and
supply of products to the customer.
Example: stock of fruits.
2. Economic Order Quantity: the optimum or least-cost quantity of stock to re-order
taking into account delivery costs and stock-holding cost.
3. Buffer Inventories: the minimum inventory level that should be held to ensure that
production could still take place should delay in delivery occur or should production
rates increase.
4. Re-order quantity: the number of units ordered each time.
5. Lead-time: the normal time taken between ordering new stocks and their delivery
time. The longer this period of time, then the higher will have to be the reorder stock
level. The less reliable suppliers are, the greater the buffer stock might have to be.
Example:
6. Just-in-time: 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.
Example: Lamborghini
UNIT 5 Finance and Accounting
Chapter 28. Business Finance
1. Startup Capital: the capital needed by an entrepreneur to set up a business.
Example: Bank loans and crowd funding
2. Working capital: 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.
Example: Bills for fuel and raw materials, wages and business rates.
3. Capital expenditure: the purchase of assets that are expected to last for more than
one year, such as building and machinery.
4. Revenue expenditure: spending on all costs and assets other than fixed assets and
includes wages and salaries and materials bought for stock.
5. Liquidity: the ability of a firm to be able to pay its short-term debts.
6. Liquidation: when a firm ceases trading and its assets are sold for cash to pay
suppliers and other creditors.
7. Overdraft: bank agrees to a business borrowing up to an agreed limit as and when
required.
8. Factoring: 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.
9. Hire purchase: an asset is sold to a company that agrees to pay fixed repayments over
an agreed time period – the asset belongs to the company.
10. Leasing: 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.
11. Equity finance: permanent finance raised by companies through the sale of shares.
12. Long-term loans: loans that do not have to be repaid for at least one year.
Example: debentures issued by the company.
13. Long-term bonds or debentures: bonds issued by companies to raise debt finance,
often with a fixed rate of interest.
14. Rights issue: existing shareholders are given the right to buy additional shares at a
discounted price.
15. Venture capital: risk capital invested in business start-ups or expanding small
businesses that have good profit potential but do not find it easy to gain finance from
other sources.
Example: Specialist organisations or wealthy individuals.
16. Microfinance: 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.
Example: Many business entrepreneurs in Bangladesh and other Asian countries have
received microfinance to help start their businesses. In some of these countries, more
than 75% of successful applicants for microfinance are women.
17. Crowd funding: the use of small amounts of capital from a large number of
individuals to finance a new business venture.
Example: Small and medium-sized businesses.
18. Business plan: a detailed document giving evidence about a new or existing
business, and that aims to convince external lenders and investors to extend finance to
the business.
Chapter 29. Costs
1. Direct costs: these costs can be clearly identified with each unit of production and can
be allocated to a cost centre.
Example: wages paid to employees on production line
2. Indirect costs: costs that cannot be identified with a unit of production or allocated
accurately to a cost centre.
Example: management salaries and wages paid to security staff
3. Fixed costs: costs that do not vary with output in the short run.
Example: management salaries and interest payments made by the business.
4. Variable costs: costs that vary with output.
Example: Expenditure on fuel, raw materials and components
5. Marginal costs: the extra cost of producing one more unit of output.
Example: the direct costs of materials and labour
6. Break-even point of production: the level of output at which total costs equal total
revenue, neither a profit nor a loss is made.
Example: Choosing between two locations for a new factory.
7. Margin of safety: the amount by which the sales level exceeds the break-even level of
output.
Example: if the break-even output is 400 units and current production is 600 units, the
margin of safety is 200 units. Th is can be expressed as a percentage of the break-even
point. Production over break-even point = 200/400= 50.0 %
8. Contribution per unit: selling price less variable cost per unit.
Chapter 30. Accounting fundamentals
1. Income statement: records the revenue, costs and profit (or loss) of a business over a
given period of time.
2. Gross profit: equal to sales revenue less cost of sales.
3. Revenue (formerly called sales turnover): the total value of sales made during the
trading period = selling price × quantity sold.
Example: if 120 items are sold at $2 each, the revenue is $240.
4. Cost of sales (or cost of goods sold): this is the direct cost of the goods that were sold
during the financial year.
5. Operating profit (formerly referred to as net profit): gross profit minus overhead
expenses.
6. Profit for the year (profit after tax): operating profit minus interest costs and
corporation tax.
7. Dividends: the share of the profits paid to shareholders as a return for investing in
the company.
8. Retained earnings (profit): the profit left aft er all deductions, including dividends,
have been made, this is ‘ploughed back’ into the company as a source of finance.
9. Low-quality profit: one-off profit that cannot easily be repeated or sustained.
Example: a high profit figure resulting from the sale of a valuable asset for more than its
expected value might not be repeatable
10. High-quality profit: profit that can be repeated and sustained.
Example: Profits made from developing, producing and selling exclusive product
designs.
11. Statement of financial position (balance sheet): an accounting statement that
records the values of a business’s assets, liabilities and shareholders’ equity at one point
in time.
12. Shareholders’ equity: total value of assets – total value of liabilities.
Example: Retained earnings, issued share capital
13. Asset: an item of monetary value that is owned by a business.
Example: Equipment, inventory or trade receivables (debtors).
14. Liability: a financial obligation of a business that it is required to pay in the future.
Example: Overdraft or trade payables (creditors).
15. Share capital: the total value of capital raised from shareholders by the issue of
shares.
Example: Available to incorporated businesses.
16. Non-current assets: assets to be kept and used by the business for more than one
year. Used to be referred to as ‘fixed assets’.
Example: premises, equipment and vehicles
17. Intangible assets: items of value that do not have a physical presence, such as
patents, trademarks and current assets.
18. Current assets: assets that are likely to be turned into cash before the next balancesheet date.
Example: inventory, trade receivables and cash and cash equivalents.
19. Inventories: stocks held by the business in the form of materials, work in progress
and finished goods.
Example: Banks and insurance companies will hold supplies of stationery and retailers
have goods on display and in their warehouses.
20. Trade receivables (debtors): the value of payments to be received from customers
who have bought goods on credit.
Example: Current Assets
21. Current liabilities: debts of the business that will usually have to be paid within one
year.
Example: Overdraft or trade payables.
22. Accounts payable (creditors): value of debts for goods bought on credit payable to
suppliers; also known as ‘trade payables’.
Example: Current Liabilities
23. Non-current liabilities: value of debts of the business that will be payable aft er
more than one year.
Example: Mortgage or long-term bank loan
24. Intellectual capital or property: the amount by which the market value of a firm
exceeds its tangible assets less liabilities – an intangible asset.
Example: patents, trademarks, copyrights
25. Goodwill: arises when a business is valued at or sold for more than the balancesheet value of its assets.
Example: a strong customer base
26. Cash-flow statement: record of the cash received by a business over a period of
time and the cash outflows from the business.
27. Gross profit margin: This ratio compares gross profit (profit before deduction of
overheads) with revenue. gross profit margin % = gross profit/revenue× 100
28. Operating profit margin: This ratio compares operating profit (formerly this ratio
was referred to as the net profit margin) revenue.
operating profit margin % = operating profit/revenue× 100
29. Liquidity: the ability of a firm to pay its short-term debts.
30. Current ratio = current assets/current liabilities
31. Acid-test ratio: liquid assest/current liabilities
32. Liquid assets: current assets – inventories (stocks) = liquid assets
33. Window-dressing: presenting the company accounts in a favourable light – to flatter
the business performance.
Example: A business might sell off some assets so that it appears to have a lot of cash in
the business.
Chapter 31. Forecasting and managing cash flows
1. Cash flow: the sum of cash payments to a business (inflows) less the sum of cash
payments (outflows).
Example: Timing of payments to workers and suppliers and receipts from customers.
2. Liquidation: when a firm ceases trading and its assets are sold for cash to pay
suppliers and other creditors.
3. Insolvent: when a business cannot meet its short-term debts.
4. Cash inflows: payments in cash received by a business, such as those from customers
(trade receivables) or from the bank, e.g. receiving a loan.
5. Cash outflows: payments in cash made by a business, such as those to suppliers and
workers.
6. Cash-flow forecast: estimate of a firm’s future cash inflows and outflows.
7. Net monthly cash flow: estimated difference between monthly cash inflows and cash
outflows.
8. Opening cash balance: cash held by the business at the start of the month.
9. Closing cash balance: cash held at the end of the month becomes next month’s
opening balance.
10. Credit control: monitoring of debts to ensure that credit periods are not exceeded.
11. Bad debt: unpaid customers’ bills that are now very unlikely to ever be paid.
12. Overtrading: expanding a business rapidly without obtaining all of the necessary
finance so that a cash-flow shortage develops.
13. Creditors: suppliers who have agreed to supply products on credit and who have not
yet been paid.