AQA Year 1 a

Financial objective

Goal or target pursued by the finance department (or function) within an organisation

Profit

Measures the extent to which revenues from selling a product over some time period exceed the costs incurred in producing it

Cash flow

The movement of cash into and out of a business over time

Income statement

Records a business' sales revenue over a trading period and all relevant costs incurred as well as the business' profit or loss

Gross profit

Income received from sales minus the cost of goods and services sold

Direct costs

Expenditure that can clearly be allocated to a particular product or area of the business e.g. raw materials and components

Indirect costs

Expenditure that relates to all aspects of a business' activities, such as maintenance costs for buildings or senior managers' salaries

Operating profit

The financial surplus arising from a business' normal trading activities and before taxation

Profit for the year

A measure of a business' profits that takes into account a wider range of expenditures and incomes including taxation

Revenues

The earnings or income generated by a firm as a result of its trading activities

Objectives

The medium to long term goals established to coordinate the business

Investment

The purchase of assets such as property, vehicles and machinery that will be used for a considerable time by the business

Non-current assets

Items that a business owns and which it expects to retain for one year or longer

Capital expenditure

Spending undertaken by businesses to purchase non-current assets such as vehicles and property (it is another form of investment)

Capital structure

Refers to the way in which a business has raised the capital required to purchase its assets

Budgets

Financial plans that forecast revenue from sales and expected costs over a time period

Variance analysis

The process of investigating any differences between forecast data and actual figures

Cash flow forecasts

State the inflows and outflows of cash that the managers of a business expect over some future period

Trade credit

The period of time given by suppliers before customers have to pay for goods and services

Break even output

That level of output or production at which total costs exactly equal revenue from sales

Contribution

The difference between revenue and variable costs

Margin of safety

Measures the amount by which a business' current level of output exceeds break-even output

Profitability

A measure of financial performance that compares a business' profits to some other factors such as revenue

Profit margin

A ratio that expresses a business' profit as a percentage of its revenues over some trading period

Big data

A term used to describe a massive volume of both organised and non-organised information that is very large

Primary market research

Gathers data for the first time for a specific purpose

Internal source of finance

A source of finance that exists within the business

External source of finance

An injection of funds into the business from individuals, other businesses or financial institutions

Short term finance

Finance needed for a limited period of time, normally less than one year

Long term finance

Sources of finance that are needed over a longer period of time, usually over a year

Bank loan

The amount of money provided by a business for a stated purpose in return for a payment in a the form of interest charges

Overdraft

Exists when a business is allowed to spend more than it holds in its current bank account up to an agreed limit

Venture capital

Funds advanced to businesses thought to be relatively high risk in the form of share and loan capital

Share capital

Finance invested into a company as a result of the sale of shares in the business

Mortgages

Long term loans, repaid over periods of up to 50 years, and used to purchase property

Debentures

Loans with fixed interest rates that are long term and may not even have a repayment date

Crowdfunding

Practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet

Opportunity cost

The next best alternative that is foregone

Trade credit

Offered when purchasers are allowed a period of time (frequently 30,60 or 90 days) to pay for products they have bought

Human resource objectives

The targets pursued by the HR function or department of the business

Labour productivity

Measures the output of a firm in relation to its number of employees

Quality

The extent to which a product meets the customers needs

Employee engagement

Describes the connection between a business's employees and its mission, goals and objectives

Employee involvement

Exists in a business in which people are able to have an impact on decisions and actions that affect their working lives

Training

A process whereby an employee gains job related skills and knowledge

Talent development

The development and guidance of outstanding or star employees who have the potential to make major contributions to an organisation's performance and success

Diversity

Recognising the differences between individual employees and also the differences that may exist between different groups of employees

Unit labour costs

Measure the labour cost per unit of output produced

Revenue

The earnings or income generated by a firm as a result of its trading activities (also called turnover or sales revenue)

Labour turnover

The percentage of a business's employees who leave the business over some period of time (normally a year)

Labour retention

The extent to which a business holds onto its employees

Human resource plan

Assesses the current and future capacity of a business's workforce and sets out actions necessary to meet the business's future human resource needs

Big data

Describes the enormous quantity of structured and unstructured data that is difficult to process using traditional techniques such as databases

Job design

The process of grouping together or dividing up tasks and responsibilities to create complete jobs

Job enrichment

Occurs when employee's jobs are redesigned to provide them with more challenging and complex tasks

Empowerment

A series of actions designed to give employees greater control over their working lives

Authority

The power to give orders, make decisions and to control events and people

Organisational structure

The way a business is arranged to carry out its activities

Organisational design

A process to ensure that the organisation is appropriately designed to deliver organisational objectives in the short and long term

Levels of hierarchy

Refer to the number of layers of authority within an organisation i.e. how many levels exist between the CEO and the shop floor employee

Span of control

The number of subordinates directly responsible to a manager

Chain of command

The line of communication and authority existing within a business i.e. a shop floor worker reports to a supervisor, who is responsible to a departmental manager and so on

Delegation

The passing down of authority (but not responsibility) down the organisational structure

Employer brand

The business's reputation as an employer

Human resource flow

The movement of employees through an organisation, starting with recruitment

Recruitment and selection

The process of filling an organisation's job vacancies by appointing new staff

Redundancy

Takes place when an employee is dismissed because a job no longer exists

Dismissal

Takes place when an employer terminates an employee's contract of employment and leads to employees exiting the human resource flow

Redeployment

Occurs when an employee is offered suitable alternative employment within the same business

Motivation

Describes the factors that arouse, maintain and channel behaviour towards a goal

Division of labour

The breaking down of production into a series of small tasks carried out repetitively by relatively unskilled labour

Time-and-motion study

Measures and analyses the ways in which jobs are completed, with a view to improving these methods

Commission

A method of payment in which the amount paid is related to the value of goods or services that an employee sells

Piece rate

A system whereby employees are paid according to the quantity of a product they produce

Performance related pay

Some part of an employee's pay is linked to the achievement of targets at work

Variable pay

A flexible form of pay that offers employees a highly individual pay system related to their performance at work

Employee welfare

A broad term covering a wide range of facilities that are essential for the well-being of a business's employees

Appraisal

The process of considering and evaluating the performance of an individual employee

Teamworking

When an organisation breaks down its production processes into large units instead of relying upon the use of the division of labour

Trade union

An organisation of workers established to protect and improve economic position and working conditions of its members

Collective bargaining

Entails negotiations between management and employee's representatives, often trade unions, over pay and other conditions of employment

Trade union wage premium

The percentage difference in average gross hourly earnings of union members compared with non-members

Works council

A forum within a business where workers and management meet to discuss issues such as working conditions, pay and training

Communication

The transfer of information between people

Arbitration

A procedure for the settling of a dispute, under which the parties agree to be bound by the decision of a third party

Industrial dispute

A disagreement between an employer and its employees, usually represented by a trade union, over some aspect of the terms and conditions of employment

Conciliation

A method of resolving individual or collective disputes in which a neutral third party encourages the continuation of negotiations

Good

A physical product such as a house or a designer suit

Service

An intangible item such as insurance or decorating

Product

A general term which includes goods and services

Gross Domestic Product (GDP)

Measures the total value of the production of an economy (that is all a country's businesses) over a period of time, normally one year

Mission statement

Sets out a business's overall purpose to direct and stimulate the entire organisation

Aims

Long term plans of the business from which its corporate objectives are derived

Objectives

Medium to long term goals established to coordinate the business

Profit

Measures the extent to which revenues from selling a product exceed the costs incurred in producing it over time

Cash flow

The amount of money moving into and out of a business over a time period

Stakeholders

Individuals or groups (such as employees, customers and local residents) who have an interest in the business

Revenues

The earnings or income generated by a firm as a result of its trading activities

Profit

The surplus of total revenue over total costs for a business over a trading period

Fixed costs

Costs that do not alter when a business alters its level of output. Examples include rent and rates.

Variable costs

Costs that alter directly with the business's level of output, for example, fuel costs

Total costs

Fixed and variable costs added together

Average costs

Total costs of production divided by the level of production or output to give the cost of producing a single unit of output

Sole trader

A business that is owned and managed by one person, but it may employ other people

Unlimited liability

Occurs when an individual or group of individuals is personally responsible for all the actions of their business

Company

A business organisation that has its own legal identity and that has limited liability

Incorporation

The process of establishing a business as a separate legal entity that allows it to benefit from limited liability

Shareholder

An investor in and one of the owners of a company

Limited liability

Means that in an event of financial difficulties, the personal belongings of shareholders are safe

Dividends

A share in the profits of a company that are distributed to the holders of certain types of company shares

Market capitalisation

The total value of the issued shares of a public limited company

Takeover

Occurs when one company acquires control of another company by buying more than 50% of its share capital

Privatisation

The process under which the state sells businesses that it has previously owned and managed to private individuals and businesses

Market conditions

Number of features of a market such as the level of sales, the rate at which they are changing and the number and strength of competitors

Demand

A term used by economists to indicate the amount of a particular good or service that consumers or organisations want, and can afford, to buy at given prices

Gross Domestic Product (GDP)

Measures the value of a country's total output of goods and services over a period of time, normally one year

Real incomes

Incomes that are adjusted for the rate of inflation (or increase in prices) to show changes in purchasing power

Interest rates

The price of borrowed money

Fair trade

A social movement that exists to promote improved trading terms and living conditions for producers of products in less developed countries

Sustainable production

Occurs when the supply of a product does not impose costs on future generations by, for example, depleting non renewable resources

Leadership

Includes the functions of ruling, guiding and inspiring other people within an organisation in pursuit of agreed objectives

Management

Planning, organising, directing and controlling all or part of a business enterprise

Authority

The power or ability to carry through an action

Delegation

Passing authority down the organisational hierarchy

Empowerment

Provides subordinates with the means to exercise power or control over their working lives

Decentralisation

Passing authority from the centre of the organisation to those working elsewhere in the business

Programmed decisions

Familiar and routine decisions

Non programmed decisions

Less structured decisions that require unique solutions

Risk

The chance of incurring misfortune or loss

Uncertainty

A situation in which there is a lack of knowledge and events, outcomes or consequences are unpredictable

Opportunity cost

The next best alternative foregone

Scientific decision making

Based on data and uses logical, rational approach to decision making

Decision tree

A model that represents the likely outcomes for a business of a number of courses of action on a diagram showing the financial consequences of each

Probability

The chance of a particular event occurring

Expected values

The financial outcomes from a specific course of action adjusted to allow for the probability of it occurring

Net gains

The expected values of a course of action minus the costs associated with it

Ethics

Moral principles, which should underpin business decisions and actions

The external environment

Comprises those external forces (such as changes in competition or consumers' incomes) that can influence a business's activities

Stakeholders

Groups or individuals who have an interest in a business

Social responsibility

The duties a business has towards stakeholder groups such as employees, customers and the government

Market conditions

A number of features of a market, such as the level of sales, the rate at which they are changing and the number and strength of competitors

Communication

The exchange of information or ideas between two or more parties

Stakeholder engagement

A process by which managers involve individuals and groups who may be affected by their decisions in those decisions

Consultation

A process by which one group discovers the views of another one

Relationship marketing

An approach to marketing in which a company seeks to build long term relationships with its customers by providing consistent satisfaction

Business ethics

Refer to whether a business decision is perceived as morally right or wrong

Marketing objective

A target set for the marketing function, for example to increase sales by 10% within 3 years

Sales value

Measures the level of sales in a given period in pounds sterling (in the UK)

Sales volume

Measures the level of sales in a given period in terms of units sold

Market share

Measures the sales of one brand or business as a percentage of total market sales in a given period

Sales growth

The percentage change in sales volume or value over a given period

Market growth

The percentage change in the total sales in the market over a given period

Globalisation

The increasing trade between countries and the growing internationalisation of businesses

Marketing research

Involves gathering and analysing data relevant to the marketing process

Competitiveness

Measures the extent to which a business offers good value for money relative to competitors

Primary market research

Involves gathering data for the first time

Secondary market research

Uses data that already exists

Target population

All the items or people that are relevant to the market research being undertaken

Sample

A group of people or items selected to represent the target population

Market mapping

Analyses market conditions to identify the position of one product or brand relative to others in the market in terms of given criteria

Confidence level

The probability that the research findings are correct

Confidence interval

The possible range of outcomes for a given confidence level

Brand

A "promise of an experience" and conveys to consumers a certain assurance as to the nature of the product or service they will receive

Patent

Protects new inventions and covers how things work, what they do, how they do it, what they are made of and how they are made

Trade mark

A sign which can distinguish the goods and services of a business from those of its competitors

Price elasticity of demand (PED)

Measures how responsive demand is to changes in the price, all other factors constant

Income elasticity of demand (YED)

Measures how responsive demand is to changes in the income, all other factors constant

Big data

Refers to large and complex data sets

Segmentation

Occurs when similar customer needs and wants are grouped within a market

Market segments

The groups of similar needs and wants within a market

Targeting

Occurs when a business decides which segments it wants to operate in

Niche marketing

Focuses on a particular segment of the market

Mass market

An approach that aims to provide products that meet some of the needs of the a large proportion of the market

Positioning

Identifies the benefit and price combination of a product relative to competitors

Marketing mix

The combination of marketing choices that can be used by a business to influence consumers to buy products

Consumer products

Goods bought for consumption by the general public

Industrial products

Goods bought for use in business processes

Product life cycle model

Shows the sales of a product over its life

Product portfolio analysis

Examines the market position of all of the products of a business, for example in terms of market share or market growth

Boston Matrix

Analyses all of the firm's products in terms of their market share and the growth of the market

Balanced portfolio

An appropriate mix of products in terms of their market shares and market growth

Social media

Refers to the social interaction among people where they create, share or exchange information and ideas in virtual communities

Viral marketing

A marketing technique that uses social media and networks to raise brand awareness and boost sales by getting users to recommend the promotional campaign to others

Multichannel distribution

Means that customers can buy the product in several ways, for example in store, online or 'click and collect'

E-commerce

The buying and selling of products through an electronic medium such as the internet

Operations management

Describes the activities, decisions and responsibilities of the managing production and delivery of products and services

Labour intensive

Means a relatively high proportion of labour in the production used compared to capital equipment, for example hairdressing

Capital intensive

Uses a relatively high proportion of capital equipment relative to labour, for example a bottling process

Supply chain

Is the series of activities involved in taking the initial resources to providing the final product

Operations objective

Is a target set for the operations function such as to improve the proportion of deliveries on time by 5% within two years.

Competitive advantage

Is a way in which a business offers superior value to its competitors

Total costs

Are made up of fixed costs and variable costs

Unit costs

Are the cost per unit, that is total cost/number of units

Capacity

Is the maximum output of a business at a moment in time given its resources

Capacity utilisation

Measures the existing output over a given period as a percentage of the maximum output

Labour productivity

Is the amount of output per employee

Efficiency

Is measured by the inputs used to generate output

Lean production

Occurs when managers reduce waste and therefore operations become more efficient

Quality

Is measured by the extent to which an operation meets its customer requirements

Quality assurance

Is the maintenance of target quality by attention to detail at every stage of the process

Quality control

Is the system of maintaining standards by testing or inspecting the output against stafndards

Mass customisation

Is the term for producing on a large scale while still enabling individual customer preferences to be met

Inventory

Is the goods or stock it holds

Part time staff

Work less than a full working week, for example 20 hours per week

Temporary staff

Work for a limited period of time, for example for the summer only

Supply chain

Refers to all of the providers of resources (such as money, people, finance, machinery, equipment) at different stages of the operations process

Vertical integration

Is the combination of two or more stages of production normally operated by separate companies

Corporate social responsibility

Refers to the extent to which a business takes into account its stakeholder views and accepts its obligations to society over and above the legal requirements

Outsourcing

Is when a business uses an outside supplier