key terms pt 1

• Advertising

  A method of communicating information about the product; the business pays for advertising time/space.
• Aim

  The intention to reach a goal
• Air pollution

  The presence or introduction of harmful substances into the air causing disease, allergies or damage to humans, animals, plants or the built environment.
• Asset

  Something the business owns; it has a value.
• Average rate of return

  The average profit for the year as a percentage of the original investment.
• Boston matrix

  A tool for analysing the contribution made by each product in a business' product portfolio. It plots each product's position according to its market share and the rate of growth of the market.
• Brand image

  The consumers' perception of the brand; its character, qualities and shortcomings. It is developed over time and operates as a consistent theme through advertising campaigns.
• Break-even chart

  A diagrammatic representation of the costs and revenue for a product; it plots total costs against total sales revenue, showing the break-even point where they cross.
• Break-even output

  The point at which the business' total sales equals the total costs. There is neither profit nor loss.
• Buffer stock

  A stock of raw materials held in reserve to protect the production process from unforeseen shortages.
• Business plan

  A detailed statement of how the business intends to operate, either at start-up or during a given period of time. Business plans are based on forecasts and so cover only a short time.
• Cash

  Money that the business has in cash or at the bank.
• Cash flow forecast

  A financial planning tool that estimates the money coming into and going out of the business on a month-by-month basis; it allows the business to predict times when additional finance may be needed to maintain liquidity.
• Cash inflow

  Money received by the business from its operations or investments
• Cash outflow

  Money paid out by the business to fund its operations or investment activities
• Centralisation

  Maintaining control by keeping authority at the senior levels of the organisation.
• Chain of command

  The line through the hierarchy that shows who is responsible for whom from top to bottom of an organisation.
• Channels of distribution

  The route the ownership of the product transfers from the seller to the buyer; it may be a single transaction or pass through others such as wholesalers, distributors, agents and retailers.
• Closing balance

  The amount that remains in the account at the end of an accounting period.
• Commission

  An amount of money paid to an employee that is based on a percentage of the sales he/she achieved; paid in addition to a basic salary.
• Competition

  The rivalry between businesses looking to sell their goods/services in the same market.
• Competitive pricing

  Setting the price of a product so that it is in line with competitors' prices.
• Consumer law

  Laws designed to ensure that businesses make products that are safe and of good quality, and that they deal with customers honestly and fairly.
• Consumer spending

  The money spent by households on goods and services to satisfy their needs and wants
• Contracts of employment

  A legal document that sets out the terms and conditions of the job for the employer and the employee.
• Cost

  The money spent by a business on goods and services.
• Cost-plus pricing

  Setting the price of a good or service at an amount higher than the cost of producing it so that a profit is made.
• Customer

  Individuals, businesses or organisations that purchase goods/services and make decisions about which supplier to choose.
• Customer engagement

  The relationship between the business and the customer that puts the customer's requirements at the centre of the operation to build brand loyalty.
• Customer loyalty

  The likelihood that past customers will continue to buy from the business, enhanced by high quality customer service and/or reward programmes.
• Customer satisfaction

  Whether customers are pleased with the goods/services they receive; whether they would purchase again.
• Decentralisation

  Where authority is spread widely through the organisation.
• Delayering

  The reorganisation of the organisation's employees so that there are fewer levels of management.
• Delegation

  Allocating a task to someone who would not normally be responsible for it.
• Demand

  The quantity of a particular product that will be bought at particular price over a specific time.
• Directors

  The people who are elected by the shareholders to run the business on their behalf.
• Diseconomies of scale

  When a business grows too large, leading to a possible increase in unit cost.
• Disposal of waste

  The removal, storage or destruction of unwanted material. Methods include recycling, burning and landfill sites.
• Dividend

  A portion of the after-tax profit that is paid to shareholders according to the number of shares they own.
• E-commerce

  Business transactions carried out electronically on the internet.