Business definitions

• Capital expenditure (capex) are large investments made by businesses into fixed assets such as buildings, machinery and vehicles.
• Acid test ratio


  Used to measure cash flow in a business. Its formula is: Current Assets-Closing Stock / Current Liabilities. Ideally the answer should be 1:1, which means that for every euro that falls due in the short-term, there is one euro to meet it.
• Acquisition


  The overall term for procuring another business. It is the purchase of one company by another. E.g. The purchase of Jurys Inn by Lone Star Funds for 911 m.
• Advertising

  The communication of information about a product or service to the general public in the hope of selling the good or service. It can inform, persuade or remind.
• Agenda


  A list of items to be dealt with at a meeting - the agenda should be relevant to those at the meeting.
• Agreement


  The first element of contract law. One party makes a proposal to give or do something - which is called an offer - and the other party replies with a positive, unqualified assent to all terms of the offer. This is called acceptance.
• Arbitration


  A method of solving conflict between parties. An independent party acts like a referee and listens to both sides of the argument before the arbitrator (referee) finds an independent solution to the dispute. E.g. An arbitrator's solution was rejected by the Association of Secondary Teachers of Ireland, as it offered less than the original pay claim.
• Articles of association


  The internal rules and regulations of a company. Contains details of the following: Share capital breakdown, Voting rights attached to each share, Procedure for calling a meeting.
• Batch production


  The making of a limited group of identical goods. They are usually cheaper than job, have unskilled labour, have machines that are flexible. The goods are in various sizes. Production is interrupted and goods are kept in stock. E.g. tins of beans.
• Brand


  The use of a legally registered name as a trademark, which gives exclusive rights to the owner. A brand creates a myth of superiority in the consumers mind, which means that the consumer is willing to pay more for the good or service.
• Break-even point


  A production position where the firm makes neither a profit or a loss. Total cost = Total revenue.
• Business plan


  A document which maps out a business future under a series of headings. It guides the firm towards its targets. It is used to attract investors.
• Capacity


  It is part of product pricing.
• Cash flow

  Cash flows show the difference between money flowing in and money flowing out of a business or household. A forecast shows a firm's cash position in the future.
• Sectors of industry


  Refer to the industrial divisions in an economy i.c. primary, secondary and tertiary. In Ireland, the tertiary sector is the most important.
• Channels of distribution


  Is the means of getting the goods from the producer to the consumer e.g. Manufacturer → Consumer (this is normally used for expensive specialist products e.g. fitted kitchens. This channel is also called direct selling.)
• Community enterprise


  Refers to the promotion of a proactive and entrepreneurial mentality in the local economy. It reduces the dependence on multinational investment. It uses a bottom-up approach, self-help policy and a social and economic perspective.
• Conciliation


  This method of conflict resolution is used to solve conflicts in the workplace. An independent third party, usually an Industrial Relations Officer provided by the Workplace Relations Commission, works with both parties to facilitate the search for a mutually acceptable solution to end the conflict.
• Consideration


  This is a contract element where each party must give something of value to the other party. e.g. consumer receives the goods and the retailer receives the monetary reward. It must be real, transferable, but need not be adequate.
• Consumer


  A person who uses goods for private purposes to gain personal satisfaction and does not purchase goods for the purpose of re-sale. A consumer aims to satisfy needs and wants within a financial constraint called a budget. They seek value for their purchase
• Control


  The comparison of the results with the original plans, and showing performance. The firm must take corrective action to deal with deviations, which are affecting objectives. The firm wants to: Set standards, Compare actual results with plans, Correct deviations, Learn from mistakes.
• Cooperative relationship

  This is where joint action or effort is required to enable people to work and operate together so that there will be mutual benefit (WIN-WIN relationship) e.g. if the entrepreneur has a well-researched idea backed up by a business plan and the investor is impressed and supplies finance for the project then the relationship is co-operative.
• Co-operative


  Unique, democratic ownership options. Members are workers, suppliers, and customers. There is usually a common interest. They were introduced to Ireland for farm produce.
• Co-ordination


  The linking together of all the various departments of the organisation to achieve a shared objective. It avoids duplication and prevents conflict in the organisation. It is part of the leadership process.
• Council of Ministers


  The main decision-making body of the EU. It consists of one government minister from each country. Each council represents a different topic, e.g. Council of Agricultural Ministers.
• Credit control


  Ensures that the firm deals with the right debtors (they owe us) and minimises bad debts. It sets levels of credit, e.g. €1,000. It sets time limits, e.g. 60 days. Effective credit control improves cash flow.
• Desk research


  A type of market research.

  It involves accessing information that has already been gathered.

  It is called secondary research.

  It is relatively cheaper than field research.

  Can provide information on consumer and competitor spending patterns easily and quickly.

  Can be internal (internal sales reports) and external (central statistics office, internet )
• Electronic Data Interchange (EDI)


  The use of structured documents sent from one computer to another via the telephone system. Businesses need to have compatible systems and it may prove to be expensive for small businesses. It has revolutionised stock control and improved speed and efficiency, and has reduced the paper chain. It reduces the costs of unnecessary overstocking. It is used to transmit money electronically.
• Empowerment


  This is the transfer of real responsibility by the manager of the firm. It places decision-making, control and responsibility in the hands of employees in the organisation. It is an advanced form of delegation.
• Entrepreneur


  One of the four factors of production and it involves taking the human initiative and using a moderate degree of risk to combine the factors of production into a business unit. The entrepreneur spots a gap in the market and this is called a niche market.
• Equity


  The owner's stake in a firm. It consists of ordinary shares and reserves.
• Ethical business practice


  Refers to a set of moral principles that cause a person or firm to act in a certain way. An ethic involves a valued judgement on what is right and what is wrong. Tells you to do the right thing in all situations regardless of the effect on profits.
• EU directive


  (DO LATER) Part of the decision-making process of the European Union. It suggests that a law should be changed but leaves it to the member state to implement it before the deadline, e.g. the Irish government introduced the plastic bag tax in response to an EU directive on waste reduction.
• EU policy


  An agreed means of achieving agreed objectives, e.g. the Social policy improves the lives of individuals.
• European Commission


  Made up of 28 commissioners, one from each member state. It initiates legislation for the EU. It also ensures that legislation is applied by all member states.
• European Parliament


  An elected body of 751 members. It has the power to amend certain laws. It supervises EU community activities and sets up committees to investigate problems in the EU.
• European Union


  A group of 28 member states with close economic and political ties. It is a trading bloc and has common policies to achieve members' aims.
• Exchange rate


  The price of one currency in terms of another, e.g. the April 2020 exchange rate is 188p sterling.
• Exporting


  The process of sending goods and services abroad. The Irish economy is so small that Irish firms must seek markets overseas.
• Feasibility study


  Allows the firm to look at the impact of the product on the areas of costs, revenues and profits. The demand for sales is forecast, and contribution and breakeven point are established. It also looks at the environmental effects. It is an investigative report into viability.