Theme 2 - Managing Business Activities (2/2)

• Liabilities


  What a business owes
• Long term liabilities


  What a business owes over a longer term than the next 12 months (i.e. mortgages, long term loans)
• Current liabilities


  What a business owes within the next 12 months (i.e. suppliers debt, overdrafts, short term loans)
• Credit control


  The management of accounts owed on credit by the customers of a business
• Debt factoring


  Selling the rights to collect amounts owed by customers in order to release cash flow
• Business failure


  When a business fails and goes out of existence.
• Management control


  The systems and process enabling a business to be managed effectively, such as decision making, management authority and financial planning
• External shock


  A change in the external business environment that significantly impacts a business
• Production


  The amount of output produced in a period of time
• Job production


  A method of production where items are produced in small numbers or on a one off basis, usually to a customer specification (wedding cakes, building projects)
• Batch production


  A method of production where similar items are produced together, so each batch goes through one stage of the production process before moving to the next
• Flow production


  A method of production of associated with high volumes of the same product, where when one task is finished the next much be started immediately.
• Cell production


  A method of production where work is organised into teams who work together in a cell. Teams are given responsibility of doing a part of production as it moves through the process.
• Lean production


  A method of production that aims to maximise revenues while minimising costs. This involves ensuring minimal waste through quality control at each step of the process.
• Productivity


  The relationship between inputs into the production process and the resulting output
• Unit cost


  Total costs / number of units produced.

  The amount it costs to produce each unit.
• Non-productive (idle) resources


  Any resources not being used by a business, so if an employee is left with spare time or a machine is not operating. A sign of inefficiency.
• Efficiency


  How effectively a business uses it's resources to achieve outputs with minimal wasted resources / time / effort / money
• Economies of scale


  Cost advantages that a business can exploit by expanding their scale of production, reducing the average unit costs of production
• Internal economies of scale

  Economies of scale arising from the growth of the business itself
• External economies of scale

  Economies of scale occurring from the growth of the industry as a whole
• Labour-intensive business


  A business with a high proportion of its costs related to the employment of people
• Capital-intensive business


  A business with relatively low labour costs, but high costs arising the extensive use of machinery
• Production capacity


  The measure of how much output it can achieve in a given time
• Capacity utilisation


  The proportion of a business' capacity that is being used within a specific time period. What percentage of the total capacity was produced?
• Spare (excess) capacity


  Where actual output is less than capacity
• Excess demand


  Where demand for a business' products or services is more than their capacity
• Stock


  The raw materials, work in progress or finished goods held by a firm to enable production and meet demand
• Maximum stock level


  The maximum amount of stock a business can hold
• Re-order level


  The point at which a stock level can fall to before a new order of stock is places
• Lead time


  The amount of time between placing an order for stock and receiving the stock
• Minimum stock level


  The minimum amount of stock a business would want to hold in stock. If this is above zero this is also known as a buffer stock
• Buffer stock


  An amount of stock held as a contingency in case of unexpected orders so orders can be met in case of any delays from suppliers
• Quality


  Meeting the needs and expectations of the customers
• Value for money


  Where the customer is satisfied that the quality of a product / service is reflected fairly in the price
• Competitive advantage


  Something that gives a business / product / service an advantage over a competing business / product / service
• Quality control


  The process of inspecting products to ensure that they meet required quality standards
• Quality assurance


  The process of ensuring production quality meets the requirements of customers
• The economy


  The state of a country or region in terms of the production and consumption of goods and services and the supply of money
• The business cycle


  The cycle that every economy goes through - from boom to bust and recessions - as GDP changes from one quarter to the next.