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