Business Studies dictionary

Above-the-line promotions – marketing Branding – the process of creating

communications using mass advertising media. distinctive and durable perceptions of a
Accountant – a person who specializes in product in the minds of consumers.
keeping and inspecting financial records and Break-even analysis – using cost and revenue
preparing financial statements. data to calculate the break-even level of output.
Accounting year – the 12-month period for which Break-even level of output – the minimum
a business prepares its income statement. level of output a business will need to
Accounts receivable – a balance sheet term for produce and sell to cover its costs.
debtors. It is the total amount of money owed to the Building regulations – rules governing how
business by customers who have purchased items buildings, including factories, shops and
on credit terms payable within the next 12 months. offices, should be constructed.
Accounts payable – a balance sheet term for creditors. Business cycle – recurrent periods of recession,
It is the total amount of money owed by the business recovery and boom in business activity and
to suppliers who have sold items on credit terms that it economic growth in a national economy.
must repay within the next 12 months. Business objective – a goal or aim the owners,
Acid test ratio – current assets less inventories managers and employees in a business work towards.
expressed as a ratio of current liabilities. Business stakeholders – people and
Ancillary firms – firms that supply business support organizations with a direct or indirect interest
services to other organizations, such as transportation, in business activities and performance.
marketing and equipment maintenance services. Business plan – a written statement about a business
Appreciation (in the value of a currency) – a rise idea: how it will be organized, what the owners want
in the value or market price of a national to achieve with it and how they will do so.
currency against another currency or currencies. Business target – an objective expressed as a
Arbitration – a process involving the judgement of an value or volume to achieve by a given date.
independent person or body to help resolve industrial
Capital employed – long-term capital from non-
disputes between workers and employers.
current liabilities and shareholders’ funds
Autocratic leadership – telling employees invested in a business (therefore also equal to
what to do without consultation. total assets – current liabilities).
Average cost – the cost of producing each unit of output. Capital expenditure – money spent on the
Balance of payments – a record of all the purchase or acquisition of non-current assets
financial transactions between a country and such as premises and machinery.
all the other countries with which it trades. Capital-intensive – a firm or production process
Balance sheet – a statement recording the value of assets, that requires more capital equipment than labour.
liabilities and capital of a business on a given date. Cash flow cycle – the continuous flow of cash
Bankruptcy – a term used for a business that is into and out of a business over time.
declared in law as unable to pay its debt. Cash flow forecast – a projection of anticipated
Batch production – production of a limited number of monthly cash inflows and outflows to estimate
identical products to meet a specific requirement or future cash requirements.
customer order. Each new batch may be slightly Cash inflow – cash received by a business.
different from the last one produced. Cash outflow – cash paid out by a business.
Below-the-line promotions – marketing Cash reserve – a holding of cash over and above
promotions that do not use mass media. what is needed to meet immediate payments.
Brand name – a name used to identify and distinguish The reserve is held on the business premises or
specific goods, services or businesses from others. in an easy-access bank account.

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 Cost-plus pricing – adding a mark-up for profit
Cash – notes and coins available for immediate payment. over the average cost of producing a product.
Centralized organization – an organization in which Creditors – people, suppliers and other
authority, responsibility and decision-making is organizations to whom a business owes money.
concentrated at the top of the chain of command. Current assets – cash, inventories and accounts
Chain of command – the line of management receivable. They will be used up by a business
authority in a hierarchical organization. within the next 12 months to make payments.
Closed shop – trade union membership in a Current liabilities – accounts receivable, bank
firm is made a compulsory condition of overdrafts and any other amounts owed by a
employment within that firm. business to other people or organizations that will
fall due for payment within the next 12 months.
Collateral – assets of value that a customer can offer as
security against a loan. If the customer is unable to repay Current ratio – the value of current assets expressed
the loan the lender can sell off the assets instead. as a ratio of the value of current liabilities.

Collective bargaining – negotiation between Customers – consumers who buy goods or

organized workers, usually through a trade services from business organizations.
union, and their employer or employers to Debenture – a loan certificate issued for sale by
agree wages and working conditions. a company that can be bought and resold by
Communication barriers – obstacles and investors. The final holder of the certificate at
problems that prevent effective communication. maturity is repaid in full plus interest.
Communication breakdowns – a failure to Debt finance – repayable long-term loans.
communicate accurately and effectively. Debtor – a customer that owes a business money for
Competition – rivalry between businesses trying to goods and services it purchased on trade credit.
win consumers’ acceptance, sales and loyalty. Decentralized organization – an organization in which
Compulsory redundancy – when a job is cut and a lot of authority, responsibility and decision-making
the employee is forced to leave employment in is delegated to lower levels of management.
return for monetary compensation. Default – failure to repay debt finance.
Computer-aided design (CAD) – the use of Delegation – assigning tasks to other
computer systems to create, modify and employees in a chain of command.
optimize the design of a product.
Delivery lead time – the time lag between
Computer-aided manufacturing (CAM) – the use of
placing an order for a product and its delivery.
computers to control and monitor the use of machinery
Department – subdivision of a business organization that
and equipment in a manufacturing process.
specializes in performing a particular job or function.
Consumer protection laws – legal controls on
businesses designed to protect consumers from Depreciation (in the value of a currency) – a fall
misleading or inaccurate marketing claims, unfair in the value or market price of a national
trading practices and the production and sale of currency against another currency or currencies.
damaged, faulty or dangerous goods and services. Destruction pricing – cutting price, sometimes
Consumers – people and organizations who are below costs, to force a rival out of business.
willing and able to buy goods and services. Developed economy – a country with a wide
Consumption – the using up of goods and range of industries and a large tertiary sector.
services to satisfy consumer needs and wants. Developing economy – a country that is seeking to
Contracting market – a market in which consumer develop its resources, create jobs and increase
demand and sales revenues are falling over time; incomes and living standards through industrialization.
there is a downward trend in sales. De-industrialization – the decline of manufacturing
Cost of sales – the cost of the items sold, for example and the growth of services in developed economies.
the cost of purchasing the goods from suppliers or the Democratic leadership – consulting
variable costs of the materials and labour used to employees before making decisions.
produce the goods or to provide the services sold.

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 Employee share ownership – rewarding employees with
Diversification – a business strategy that involves shares in the ownership of the company they work for.
producing a variety of different products and/or
Employment contract – a formal legal agreement
expanding into different markets to expand total
between an employer and an employee that details the
sales and reduce the risk to the business from a fall
workplace duties and responsibilities the employee will
in demand for any one product or in any one market.
perform in return for an agreed wage or salary.
Direct costs – costs that can be attributed to a specific
Employment laws – legislation that governs the rights
activity or the production of a particular product.
and responsibilities of employees and their employers.
Disciplinary procedure – formal rules and actions
Employment tribunal – (or industrial tribunal) a court
followed in an organization when an employee
of law that determines a dispute over employment
breaches his or her contract of employment.
rights between an employer and an employee.
Diseconomies of scale – rising average costs due
Enterprise – business know-how, skills and
to a business being too big to operate efficiently.
qualities including the willingness to take
Dismissal – terminating the employment of an employee. considered financial and other business risks.
Direct discrimination – the unequal treatment of job Entrepreneur – a person with the know-how and
applicants or employees because of differences in their willingness to take the risks and decisions
race, religion, sex, disability, age or other characteristics. necessary to set up and run a business.
Disposable income – personal income that is Entrepreneur – an enterprising person who is willing
available to spend or save after the deduction and able to take the risks and decisions necessary to
of personal income or payroll taxes. organize resources to produce goods and services.
Disruptive technologies – new products, materials Entrepreneurship – the process of identifying a
or processes that completely change the way business opportunity, organizing the resources
businesses produce and operate or completely needed to start and run a business and taking
change what consumers want and buy. both the risks and the rewards it involves.
Distributed profit – profit after tax paid out to the business Ethical firms – businesses that take account of
owners or as dividends to company shareholders. the impact their decisions and actions can
Distribution channel – the people and organizations have on other people and organizations,
involved in the physical movement and the transfer communities and the natural environment.
of goods and services from producers to consumers. Equity finance – permanent capital raised
Division of labour – the dividing up of a production process by a company from the sale of its shares.
into a number of sequential tasks, with each one Exchange rate – the market price or value of a
completed by a different worker or group of employees. national currency in terms of another currency.
Downsizing – reducing the size of the Expanding market – a market in which consumer
workforce in an organization. demand and sales revenues are rising over time;
Dumping – exporting cheap, subsidized goods to there is an upward trend in sales.
another country to force its firms out of business. Exports – goods and services sold overseas.
E-commerce – promoting, buying and selling goods Their sale involves the receipt of revenues
and services using electronic systems connected from consumers in other countries.
to the Internet. This can be business to business Extension strategies – marketing methods used to
(B2B) or business to consumer (B2C). extend sales and the profitable life of a mature product.
Economic boom – a period during which business External benefit – a benefit created by a business
activity, output and prices increase rapidly. activity that is enjoyed by people or
Economic growth – an increase in the total organizations without them having to pay for it.
output or GDP of a national economy. External communications – sending or receiving
Economic recession – a period of declining business information and messages to or from individuals
activity, falling output, employment and incomes. or organizations outside of a business.
Economies of scale – a fall in the average cost of producing External cost – a cost imposed by a business
each unit due to an increase in the scale of production. activity on other people or organizations.

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 Fringe benefits – non-financial rewards or “perks”.
Full-time employment – a job that usually
External growth – an increase in the size of a firm through
requires 35 or more hours of work each week.
the takeover of, or merger with, other enterprises.
Gearing ratio – the proportion of total capital invested by
External economies of scale – cost advantages
a business in assets that has been financed by debt.
arising from locating near to other similar
businesses. This is because areas where similar General partner – a partner with unlimited liability.
businesses cluster together attract ancillary firms. Globalization – increasing trade, interconnections
External recruitment – attracting job applicants and interactions between people, firms and
from outside an organization to fill job vacancies. governments in different national economies.
External sources of finance – money raised Going concern – a business that has sufficient
from organizations and individuals that are financial and other resources to continue
not part of the business. operating indefinitely. A business that is no longer
a going concern is a business that is bankrupt.
Factor substitution – replacing one factor of
production with another in a production process. For Government grant – a non-repayable sum of money
example, advanced capital equipment has replaced given by a local, state or central government to
labour in many modern production processes. another person or organization for a particular
purpose; for example, to fund business start-up
Factors of production – productive resources
including the purchase of equipment and/or training.
used to make goods and services.
Gross domestic product (GDP) – the value of
Firms – organizations that produce goods and services.
the total annual output of a national economy.
Final accounts – the income statement and balance sheet a
Gross profit – revenue from sales less the
business will produce at the end of its accounting year. cost of the items sold.
Fixed capital – money invested in non-current Gross profit margin – gross profit as a
assets with long productive lives, including percentage of revenue.
premises, machinery and vehicles.
Health and safety laws – legal controls
Fixed costs – costs that do not vary with designed to set minimum standards of safety
output (also known as overheads). and cleanliness to reduce the risk of injury
Flat structure – an organization with a short and ill health resulting from working.
chain of command and in which managers Hierarchy – the layers of management and
have a relatively wide span of control. command in an organization.
Flotation – when shares in a public limited company Highly geared – a term used to describe a business
are made available for sale to the general public
that has far more debt finance than equity finance.
for the first time through a stock exchange.
Hire purchase – paying for a non-current asset
Flow production – mass production of a large in instalments. The supplier continues to own
number of identical items in a continuous, the asset until it has received payment in full.
usually automated, process.
Horizontal communications – messages and information
Footloose industries – industries that have no need to
passed between different departments in an organization.
locate near their markets or sources of materials.
Horizontal integration – the formation of a
Foreign direct investment (FDI) – direct investment
larger enterprise through merger or takeover
in productive assets in a country by an individual or
between two or more firms in the same
business of another country, either by buying an
industry and at the same stage of production.
established company or by expanding the
operations of an existing business in that country. Illiquid – term used to describe a business that
has insufficient cash or other current assets it
Foreign exchange market – the global market for
can convert quickly and easily to cash.
buying and selling national currencies. The market
determines the price or rate at which one currency Imports – goods and services purchased from
can be exchanged for another national currency. countries overseas. Their purchase involves
making payments to producers in other countries.
Franchise – an agreement by one company with another
business organization to permit the distribution of its
goods or services using its trademark or brand name.

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 Inventories – stocks of materials, work-in-
progress and finished goods stored by a
Import tariff – an indirect tax added to the prices of business to ensure uninterrupted production
imported goods to reduce consumer demand for them. and to meet peaks in consumer demand.
Incorporated business – a business organization Job analysis – identifying a job vacancy and
with a separate legal identity from its owners. the tasks and responsibilities of that job.
Income statement – a financial statement used Job description – a document describing the
to record and report the income, expenses, tasks and responsibilities required to do a job.
profit or loss of a business.
Job enlargement – adding tasks to a job
Insolvency – the inability of a business to pay without increasing responsibility.
its debts because it has run out of cash.
Job enrichment – increasing the degree of
Internal growth – or organic growth, involves an increase challenge in a job by adding tasks that
in the scale of production within a firm through the require more skill and responsibility.
employment of additional factors of production.
Job production – the production of a single
International competitiveness – how the prices of items item or items made to order, usually
traded internationally compare. For example, an involving labour-intensive techniques.
increase in the prices of imported goods will make
Job rotation – enabling employees within a
them relatively less competitive than the same goods
team to swap tasks with each other.
produced by domestic firms in the importing country.
Indirect discrimination – when a group of people
Job satisfaction – how content an employee is
is disadvantaged by their sex, race, religion or
with his or her job.
other characteristics because they fail to meet Joint venture – a contractual agreement between
an unjustified requirement for a job. two or more organizations to share the expertise,
investment, management, costs, profits and risks
Induction training – teaching new employees
of forming a new business. The new business
about the organization they work for.
may produce and sell an existing product to a
Industrial action – organized disruptive actions, new market or develop an entirely new product.
such as a strike or work to rule, that workers may
Joint-stock companies – limited companies or
take to increase their bargaining power over wage
corporations – are jointly owned by their shareholders.
or other demands or to address their grievances.
Just-in-time inventory control – keeping inventories
Industrial sector – a group of firms specializing in similar
of materials and work-in-progress to a minimum by
products or using similar production processes.
taking delivery of new parts and materials only
Industrial structure – the relative size and when they are needed for production.
importance of industrial sectors in an economy. Kaizen – the continuous improvement of production
Inflation – a sustained rise in the average level of processes to remove waste and increase efficiency.
prices in a national economy.
Labour-intensive – a firm or production process
Informative advertising – advertising that provides factual that uses more labour than capital equipment.
information about goods, services or organizations.
Labour productivity – average output or
Insolvency – inability to pay short-term debts. revenue per employee.
Internal communications – messages and information Laissez-faire leadership – allowing
passed between people within an organization. employees the freedom to organize their
Internal recruitment – filling a job vacancy from work and make their own decisions about
the existing workforce within an organization. how best to achieve business objectives.
Lateral integration – or conglomerate merger, involves
Internal sources of finance – capital that a
merger or takeover between two or more firms in
business can raise from its own resources.
different industries to form a single, larger enterprise.
International trade – the exchange of goods,
Lean production – improving efficiency and
services and money across national borders.
eliminating waste in a production process so that
Internet – the shared global computing network products can be made better, cheaper and faster.
that enables electronic communications
between all connected computing devices.
5

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 Market entry – targeting promotion and sales of a new
Leasing – renting the use of a non-current asset, or existing product at a group of consumers,
usually with the option to buy it at a later date. often overseas, that has not previously been
Lifestyle segmentation – dividing up targeted by the producer.
consumers into groups according to their Market leader – the firm with the largest share
hobbies, interests and opinions. of a market or market segment measured by
Legal minimum wage – the minimum amount of its share of the total number of units sold or
money workers must be paid for their total value of sales per period.
employment per period of time. Market research – the collection and analysis of
Limited liability – the legal responsibility of the data about consumers’ preferences, spending
owners of a business to repay its debts is limited to patterns and other market conditions.
the amount of capital they invest in the business. Market segment – an identifiable group of
Limited partner – a partner with limited liability. individual or business consumers sharing
similar characteristics or preferences.
Liquidity – a measure of the ability of a
business to raise cash from its current assets Market segmentation – grouping together consumers
to meet its immediate and short-term debts. who have similar characteristics,
preferences and buying habits.
Liquidation – a legal procedure to close a
bankrupt business involving the sale of its Market share – the proportion of total
remaining assets to pay off its debts. sales of a product achieved by one firm.
Liquid asset – an asset, such as money held in a Market – all the producers and consumers of a
bank account, that is easily converted into cash. given product.
Liquidity problem – not having enough liquid Market-oriented firm – a business that focuses
assets to convert to cash quickly. on identifying consumer needs and wants
using market research.
Liquidity ratios – or solvency ratios, measure
the ability of a business to settle its current Marketing budget – a financial plan for the
liabilities from its cash and other current assets marketing of a product.
Logistics – the science of moving things, Marketing mix – the combined elements of a
including managing inventories, transportation marketing strategy focused on the design,
and distribution systems. price, promotion and place of sale of a product.
Long-term finance – funds available to a Market size – the total sales revenue or turnover for
business over many years, usually for a particular product over a given period of time.
investments in Non-current assets. Marketing strategy – a plan detailing the
Management functions – the roles and responsibilities marketing objectives of a business and the
of managers, including planning, organizing, co- actions and resources needed to achieve them.
ordinating, commanding and controlling how labour Marketing – the anticipation, identification, creation
and other resources are used in an organization. and satisfaction of consumer needs and wants.
Management – the organization and co- Merger – combining two or more firms with the
ordination of people and activities in order to agreement of the owners to form a larger enterprise.
achieve agreed aims and objectives.
Micro-finance – small loans and other
Managing director – the most senior manager financial services provided by specialist
in a company (also called the chief executive organizations to people who are poor
officer or CEO in some companies). and unable to use traditional banks.
Manufacturing – the process of converting Mission statement – a brief written statement of the
natural resources into other products. purpose and objectives of a business organization.
Market conditions – features or characteristics of a Mixed economy – an economy that combines
given market, including the degree of competition private sector and public sector ownership of
between producers and the numbers, types and resources and provision of goods and services.
spending levels of different groups of consumers.

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 Organizational chart – a diagram of an
Mortgage – a long-term loan to buy property. organizational structure.
Motivation – a desire to work hard and the Organizational structure – how roles,
satisfaction obtained from doing so. responsibilities and management authority
Motivational theories – ideas about what are allocated within an organization.
motivates people at work. Overheads – or indirect costs, are the day-
Multi-skilling – training employees in a variety of skills to-day running costs of an organization.
so they are more flexible in the work they can do. Overstocking – or holding excess inventory,
Multinational – a company or corporation with means a business has purchased and stored
business operations in more than one country. far more goods than necessary or desirable.

Net cash flow – total cash inflows less total Overtrading – this happens when a business
cash outflows per period. expands too quickly and takes on more work
than it is able to finance and complete.
Net earnings – the take-home pay of an employee
after any payroll and income taxes, pension Partnership – a legal agreement between two or more
contributions and/or trade union subscriptions people, usually up to 20, to jointly own, finance and
have been deducted from gross earnings. run a business, and to share its profits.

Negative externalities – detrimental impacts on Penetration pricing – setting price low at

other people or organizations resulting from product launch to encourage sales and
the actions of another. consumer acceptance of the new product.
Niche marketing – a marketing strategy Performance ratios – measures of how well a
aimed at a small, specialized market. business is using its assets to earn profits.
Niche market – a small part or segment of a Performance-related pay – financial rewards given
large market consisting of consumers with to an employee or group of employees in
specialized tastes or preferences. recognition of high achievement and productivity.
Non-current assets – (or fixed assets) are long-lived Permanent capital – the non-repayable capital
assets, including machinery and equipment. They of a company, equal to the total of
remain productive for more than one year. shareholder’s funds invested in that company.
Person specification – or job specification, is a document
Non-current liabilities – (long-term liabilities or
loan capital) are loans and other amounts owed listing the skills, qualifications, experience and personal
by a business to other people or organizations qualities a person needs to do a specific job.
that will fall due for payment after one year. Personal selling – face-to-face marketing
Non-price competition – rivalry between businesses communications with a customer.
over different features of their products, such as Persuasive advertising – advertising designed to
quality, image and packaging, and their customer influence consumer preferences, encourage
services, after-sales care and advertisements. brand switching and increase sales.
Non-renewable resources – natural resources that cannot Physiological needs – basic human needs for
be replaced or reproduced once they have been used up. food, clothing and shelter in order to survive.
Off-the job training – training employees away Piece rate – a wage rate per unit of output
from their normal workplace. produced by an employee.
On-the-job training – training employees while Planning controls – laws and regulations
they carry out their normal duties. that restrict the type and scale of
Open communications – can be read or development in certain areas to protect
listened to by anyone. local residents and the natural environment.
Open economy – a country that trades freely Point- of-sale promotions – promotions
with other countries. targeted at the customer at places where a
product is displayed and sold.
Opportunity cost – the benefit lost by not consuming
or producing the next best alternative product.

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 Product portfolio – the range of different
Part-time employment – a job that usually products produced and marketed by a
requires less than 35 hours of work each week. business at any given point in time.
Policy instrument – a measure used by a government Product-oriented firm – a business that focuses
to achieve its economic objectives. They include on production processes and products.
public expenditures, taxes and interest rates.
Production – using resources to provide goods and
Positive externalities – beneficial impacts on people services to satisfy consumer needs and wants.
or businesses resulting from the actions of another.
Production – using resources to make goods and
Positive working capital – exists when a business has
services to satisfy consumer needs and wants.
sufficient money left over after it has paid its short-term
Productivity – a measure of the efficiency of use of
debts to continue paying its day-to-day running costs.
resources in a business by comparing the volume or value
That is, the cash and other liquid assets held by the
of output with the resource inputs used in production.
business exceed its current liabilities.
Pressure group – an organization or group of people Profit after tax – profit remaining after corporation
that aims to change the behaviour of a business tax or tax on profits has been deducted.
that fails to act in a socially or environmentally Profit maximization – choosing production
responsible way through publicity and protest. methods, outputs and prices that will earn the
Price competition – rivalry between similar businesses business the greatest amount of profit possible
over the selling prices of their products.
from the resources it uses.

Price elastic demand – when a small change in Profit margin – profit before tax as a
price causes a significant change in demand. percentage of revenue.
Price elasticity of demand – the responsiveness Profit margin – the difference between the selling
of consumer demand to a change in price.
price per unit and the average cost per unit.
Profit sharing – rewarding employees with a percentage
Price inelastic demand – when a change in price
causes only a modest change in demand. of the profits of the business organization they work for.

Price skimming – setting the initial price high at Profit – gross profit less all other expenses.
product launch in order maximize profits in the Profit – a surplus of revenue over costs of production.
short run when there is little or no competition. Profitability – the ability of a business to continually
Price war – intense price competition generate revenues that exceed its costs.
between rival businesses. Promotional pricing – reducing the price of a
Primary research – new data collection from product for a short period of time to boost sales,
“field research”. for example to sell off old and unwanted inventory.
Primary sector – industries that produce or Psychological pricing – using prices to influence
extract natural resources. consumer perceptions of a product.
Private benefits – the financial benefits (sales Public corporation – a government-owned
revenues and other incomes) of a business activity. enterprise created to carry out a
Private costs – the financial (fixed and variable) governmental function or public service.
costs of a business activity. Public relations – actions to establish and maintain a good

Private sector – that part of an economy company and product image with the general public.
owned and operated by private individuals Public sector – that part of an economy
and privately owned businesses. owned and controlled by government and
Product benchmarking – comparing rival products government-owned organizations.
so that a firm is able to match or improve on them. Qualitative data – written or verbal information.
Product life cycle – the profile of sales and Quality assurance – the setting and monitoring
profitability of a product over its commercial lifespan. of quality standards across an organization and
It is characterized by a number of different stages ensuring that they are met.
starting with product development and launch and
Quantitative data – numerical information.
ending with maturity and eventual decline.

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 Sampling bias – choosing consumers to interview or
Quota sampling – choosing consumers to survey who are not fully representative of those in the
interview according to pre-specified target population in terms of their characteristics,
characteristics, such as age or sex. buying behaviour, tastes or opinions.
Quota – a limit on the volume of imported Search engine – an Internet application or
goods allowed into a country. website that hunts for, gathers and reports
Quality – producing a good or service that is fit for the information available on the Internet.
purpose intended and meets customer expectations. Secondary research – desk-based research
Quality control – checking the quality of a using data from existing sources.
good or service for any defects or errors at Secondary sector – industries involved in processing
the end of its production process. natural resources, manufacturing or construction.
Random sampling – choosing consumers to Selection – assessing the suitability of applicants for
interview or survey at random. a job and choosing the most suitable candidate.
Ratio analysis – using accounting ratios to measure, Separate legal identity – a business organization
monitor and compare the financial performance of considered to be legally separate from its owners.
a business over time and with other businesses. Shareholders – owners of limited companies or corporations.
Real income – the value of an income
Shareholders’ funds – the share capital and retained
measured in terms of how much it willa buy.
profits shareholders have invested in their company.
As prices rise, real income will therefore fall.
Also called shareholders’ equity or the owners’ capital.
Recruitment – the process of attracting job
Short-term finance – funds available to a
applicants, for example using job advertisements.
business for up to a year or so, usually used
Regional policy – government policy aimed at to fund operating expenditures.
encouraging businesses to locate in
Shortlisting – selecting the most promising
underdeveloped areas within a country.
candidates for a job from a set of job applications.
Research and development – improving existing products
Sifting – comparing and marking job applications
and the discovery, testing and development of new
products, materials or production processes, to gain a against the requirements of a person specification.
competitive advantage or to increase social welfare. Single union agreement – an agreement between
Restricted communications – messages or an employer and a trade union that the union
information intended only to be received by an can represent all workers in the organization.
identified person or group of people. Social benefit – the total benefit to society of a
Retailer – a business organization specializing business activity: the sum of the private and
in the sale of products to consumers. external benefits of that activity.
Social cost – the total cost to society of a business activity:
Retained profit – profit saved by a business
for reinvestment that is not returned to the the sum of the private and external costs of that activity.
owners as dividends. Social entrepreneur – a person who uses his or her
Return on capital employed (ROCE) – profit expressed business skills to set up and run organizations to
maximize improvements in social and
as a percentage of the capital employed in a business.
environmental well-being rather than profit.
Revenue – proceeds from the sale of goods and
Social enterprise – a private sector organization with social
services to customers.
or environmental objectives that reinvests surplus
Reverse engineering – taking apart competing revenues it makes towards meeting these objectives
products to discover their strengths and rather than paying them as profits to its owners.
weaknesses and how they were made.
Social media – Internet applications that enable
Revenue expenditure – money spent on users to create and share content or to
day-to-day running costs. participate in social networking.
Retained profit – profit after tax that has not Social needs – human desires to
been distributed to owners but is instead communicate and interact with other people.
held by the business for reinvestment.

Compiled by: Mudassir Karnolwal 03152112990 - 03002862716

 Trade union – (or labour union) an association
Socio-economic group – a group of consumers with representing employees in a particular workplace or
similar social, economic and/or educational status. industry, the aim of which is to negotiate improved
Sole trader – a business organization pay and working conditions with employers.
owned and controlled by one person. Trade credit – short-term finance provided by a
Span of control – the number of subordinate supplier to a business customer. The customer
staff a manager supervises. will often have between 30 and 90 days in which
to pay for each purchase from its supplier.
Specialization – focusing production on a
single or limited range of products in order to Two-way communications – these involve direct
make the best use of scarce resources. feedback from the receiver to the sender of a
message or information.
Stock market – the global market for the
purchase and sale of new or existing shares Unemployment – people who are willing and
(or stocks) in public limited companies. able to work but cannot find paid employment.
Subsidiary – a company that is completely or partly Unlimited liability – the owners of a business are
owned by another company or corporation. legally responsible for the full amount of its debts.

Sustainable development – producing goods and Value added – the difference between the price of a
services without depleting natural resources and product and the cost of the natural and man-made
harming the natural environment. materials, components and resources used to make it.

Takeover – the acquisition of one firm by another Variable costs – costs that vary directly with
with or without the agreement of its owners. output (also known as direct costs).
Tall structure – an organization with a long Venture capital – funding for business start-ups and
chain of command and in which managers small businesses with exceptional growth potential.
have a relatively narrow span of control. Verbal communications – spoken messages.
Target market – a group of consumers (or market Vertical communications – messages and information
segment) that a business will design its products passed up and down a chain of command.
and marketing strategies to appeal to.
Vertical integration – the formation of a larger enterprise
Teamworking – dividing the workforce into small groups through merger or takeover between two or more firms
of employees and giving them the responsibility for at different stages of production of the same product.
planning and organizing their own areas of work.
Voluntary redundancy – when an employee chooses to
Technological spillovers – the application of a new
leave employment in return for monetary compensation.
technology developed in one sector to the products
Wages – weekly or monthly payments in exchange
and production processes of other industrial sectors.
for labour supplied to a particular occupation.
Tertiary sector – service industries.
Working capital – money available to a business
Test marketing – a limited field trial of a new (from its holdings of cash or other assets that
product or promotion to test consumer reaction. can be sold off quickly for cash) to finance its
Time rate – a wage rate per hour worked by an employee. day-to-day operations or running costs.

Total quality management (TQM) – continuous Working capital – capital available to a business to pay
improvement in products and every business its day-to-day running costs. It is calculated as current
process at every stage of production. assets less current liabilities (or net current assets).

Trade barriers – policy instruments (including Wholesaler – an intermediary that buys and
import tariffs and quotas) used by a stores products in bulk from producers
government to protect businesses and jobs in and sells small quantities to retailers.
its national economy from global competition. Written communications – handwritten
Trade credit – deferred payment terms offered by suppliers or electronically typed messages.
for goods and services they supply to a business. Workforce planning – determining the right size,
Trade union – an organization of employees who skills and composition of a workforce a business
have joined together to negotiate improved pay will require to fulfil its future needs and objectives.
and working conditions with their employers.

Compiled by: Mudassir Karnolwal 03152112990 - 03002862716