Business Terms and Definitions

Business Terms

• Above the line (ATL) promotion: Massive, untargeted campaigns to raise brand awareness. Common advertising methods include television, print media, and radio. It's costly and difficult to measure success.

• Below the line (BTL) promotion: Small, highly targeted advertising campaigns. These ads aim at specific individuals and have measurable returns on investment, including outdoor advertising, direct marketing (email/social media), loyalty cards, and flyers. It's easier to track and measure success.

Assembly Plant

• A factory where large items (like cars or electronics) are assembled from parts made in other factories.

Assets

• Current assets: Short-term assets owned for less than a year, including stock, raw materials, and cash.

• Fixed (Non-current) assets: Long-term assets owned for more than a year, such as vehicles, equipment, and buildings.

Audits

• The examination of a business's financial reports by an independent party.

Break-even

• The point where costs and income are equal, with neither profit nor loss. Calculated by fixed costs divided by (selling price per unit - variable cost per unit).

Capital Employed

• The total of long-term liabilities plus shareholders' equity. This figure should match the net assets.

Cash Flow

• The movement of money into and out of a business over a period of time. Cash flow includes cash in bank accounts, payments to suppliers, employees, and for overheads. Managing cash flow is crucial for business operations. Businesses can secure credit terms with suppliers for raw materials, stock, or products.

Cash Flow Forecasting

• Predicting future cash flow in and out of a business. Usually done for a 12-month period and is important for new businesses, rapidly growing businesses, and those with seasonal sales. Allows businesses to plan for future expenditures, investments, and hiring needs.

Certificates of Incorporation

• The document that certifies a company's formation as a separate legal entity from its owners.

Charities

• Organizations that provide support and promote a cause, thereby helping society.

Consumer Cooperatives

• Businesses democratically owned and operated by consumers.

Consumer Goods

• Products used by end consumers like TVs and sofas.

Cooperatives

• Businesses owned by member-owners. Each member gets a voice in the company's operations and decision-making.

Data Interpretation on Financial Statements

• Businesses gain insights and make judgments on various aspects of their performance. This includes viewing performance over time, comparing performance with competitors, and understanding a perspective from various stakeholders.

Economies of Scale

• Cost advantages that result from increasing production scale. As output increases, average costs tend to decrease. Larger production volumes often have lower per-unit costs.

Diseconomies of Scale

• When a business grows too large, leading to a rise in per-unit costs. This can happen due to issues in management, coordination, and efficiency.

Dividend

• A portion of a company's profit distributed to its shareholders.

Flotation

• The process of selling shares on the stock exchange for the first time. This allows companies to raise large amounts of capital.

Globalisation

• Operating on an international scale to provide goods and services on a market-wide basis.

Goods and Services

• Goods: Tangible items that can be used and stored.
• Services: Intangible actions that cannot be stored, like a haircut, a doctor’s visit, etc.

Gross Profit Margin

• The percentage of revenue left after deducting the cost of goods sold. It helps assess a business's profitability.

Income Statement

• A financial document showing a business's financial performance during a specific period. Includes details on revenue, costs of sales, other expenses, and profits.

Incorporated

• Businesses that have a separate legal identity from their owners. This limits liability; the owners are not responsible for all debts.

Infrastructure

• Facilities that support daily economic activities, like transportation systems, electricity grids, etc.

Initial Public Offering (IPO)

• The first time a private company sells stock to the public.

Just-in-Time Inventory

• Inventory management where materials are received from suppliers only as needed. This aims to minimize storage costs and reduce waste.

Liabilities

• Current liabilities: Short-term debts to be paid within a year (e.g., overdraft, trade credit, short-term loans).
• Long-term liabilities: Debts to be paid in more than a year (e.g., mortgages, long-term loans).

Limited Liability

• Business owners are only liable for debts up to the amount of their investment in the company.

Location Factors

• Factors businesses consider when choosing a location, including customer proximity, competition, cost of rent, transportation access, etc. These factors are especially important for companies offering customer service like restaurants and retail stores.

Market Orientation

• Businesses prioritize meeting customer needs and wants when designing and making products.

Market Segmentation

• Dividing a target market into smaller, more homogenous groups. This allows businesses to develop targeted marketing campaigns.

Market Share

• The proportion of a market that a particular business controls. Calculated by dividing the business's sales by the total market sales.

Marketing Advantages

• Increased customer spending, brand awareness, improved customer relationships, and opportunities for cross-selling and upselling.

Marketing Disadvantages

• Expense, difficulty accurately assessing campaign costs, difficulty with accurate planning, and potential for less-than-desirable results from certain campaigns.

Marketing Mix (4 P's)

• The combination of elements used when promoting a product/service including product, price, place(distribution), and promotion.

Markup Percentage

• The percentage by which the cost of something is increased to determine its selling price (Markup percentage = (selling price - cost) / cost × 100).

Mass Market

• A very large market targeting products with wide appeal and demand to a broad consumer base.

Mission Statement

• A concise description of a business's values , aims, and desired position within the market.

Natural Monopoly

• A situation where barriers to entry prevent new competitors from entering a market. A natural monopoly often arises due to the high initial capital investment or fixed costs involved in setting up the company.

Needs and Wants

• Needs: Essential items or services.
• Wants: Desirable but not essential items or services.

Net Assets

• A company's total assets minus its total liabilities. Essentially, the net worth of the business.

Net Cash Flow

• The difference between all cash inflows and outflows. (net cash flow = total cash inflows - total cash outflows).

Net Profit Margin

• The percentage of revenue that remains as net profit after all expenses have been paid.

Operating Profit Margin

• Ratio showing operating profit as a percentage of sales revenue. Operating profit is calculated as revenues minus operating costs (excluding interest, taxes, and dividends).

Partnerships

• A business with two or more owners. A documented agreement outlines terms and responsibilities.

Portfolio

• The collection of goods and services offered by a company.

Price Skimming

• A strategy of entering the market with a premium price to collect as much revenue as possible from those customers who are prepared to pay this price. As the market becomes more competitive, this price is lowered.

Price Strategies

• Cost-plus pricing: Calculate costs and add a markup.
• Competitive pricing: Setting prices based on competitors' prices.
• Price skimming: Initially charging a high price, then lowering it to attract a wider market.
• Penetration pricing: Starting with a low price to gain market share quickly.
• Value-based pricing: Setting the price based on customer perceived value.

Product Life Cycle

• The stages a product goes through from its launch to its withdrawal, including introductions, growth, maturity, and decline stages.

Product Orientation

• Focusing on product design and innovation, and neglecting the specific needs and wants of the consumer.

Productivity

• The output per person during a time period (e.g., units produced per worker).

Profit Maximisation

• The goal of maximizing profit within a business.

Privatisation

• Businesses that were formerly owned by the government are now owned by the private sector.

Producer Goods

• Goods used in production (e.g., machines, tools). Generally, these are industrial products that are made for the purpose of being sold or utilized in the production of another product. 

Profit Margin

• The profit earned by a business as a percentage of the revenue. (Profit margin = (net profit/ revenue) *100).

Public Corporations

• Companies owned by and run by the government through appointed directors.

Public Limited Companies (PLCs)

• Businesses that offer their shares to the public on the stock market.

Qualifications

• Formal certificates given to people recognizing their knowledge and skills. 

Qualitative Data

• Non-numerical data, like opinions, observations, and descriptive information.

Quantitative Data

• Numerical data, like figures that can be graphed (e.g., sales figures, revenues).

Retail Cooperatives

• Businesses where members are consumers and work together democratically, with each member getting one vote.

Secondary Research

• Using data already collected and analyzed by others that includes online research, market reports, or newspaper articles.

Sectors

• Categories of businesses, including primary (e.g., mining), secondary (e.g., manufacturing), and tertiary (e.g., services).

Shareholders

• Individuals who own shares of a company and are partial owners.

SMART Aims

• Targets that are Specific, Measurable, Achievable, Realistic, and Time-bound.

Social Enterprises

• Businesses with a mission to contribute to the community, in addition to making profit.

Sole Trader

• A business owned and run by one person, where the owner is responsible for all business debts (unlimited liability).

Stakeholders

• Individuals or groups affected by a business's actions, such as employees, customers, government agencies, suppliers, etc.

Statement of Financial Position (Balance Sheet)

• A financial report that details the company's assets, liabilities, and equity (net worth) at a specific point in time.

Stock Market

• The public market where securities (stocks and bonds) are traded.

Subsidies

• Money granted by the government or a public body to support an industry or business. This often aims to keep prices low.

Surveys

• Method for collecting data and information from a large number of people.

Unincorporated

• Businesses whose legal identity is not separate from their owners. Their owners assume full responsibility for the business's debts.

Unlimited Liability

• The full legal responsibility of a business owner/s for debts accrued by the company.

Value-Based Pricing

• Setting prices based on the perceived value the customer places on the product or service. This considers factors such as quality, features, uniqueness, and customer needs.

Test your knowledge of essential business terms including promotions, assembly plants, assets, and audits. This quiz covers both marketing strategies and financial concepts within the business domain. Perfect for students and professionals looking to refresh their understanding of key business vocabulary.