Asset stripping National Minimum Wage

The practice of buying businesses and breaking The minimum pay per hour all workers are entitled
them up. The profitable parts are sold for cash and to by law.
the rest are closed down.

Average rate of return or accounting rate of Net cash flow

return (ARR)
Cash inflows minus cash outflows.
A method of investment appraisal that measures
the net return per annum as a percentage of the
initial spending.

Backward vertical integration Net present value (NPV)

Joining with a business in the previous stage of The present value of future income from an
production. investment project, minus the cost.

Business continuity plan Network diagram

Shows how a business will operate after a serious A chart showing the order of the tasks involved in
incident and how it expects to return to normal in completing a project, containing information about
the quickest time possible. the times taken to complete the tasks.

Capital cost Nodes

New venture. Positions in a network diagram which indicate the

start and finish times of a task.

Centring Objective (or goal)

A method used in the calculation of a moving A target of or outcome for a business that allows it
average where the average is plotted or calculated to achieve its aims.
in relation to the central figure.
 Corporate objectives Oligopoly

The objectives of a medium to large-sized business A market dominated by a few large businesses.
as a whole.

Corporate Social Responsibility (CSR) Organic growth

A business assessing and taking responsibility for A business growth strategy that involves a business
its effects on the environment and its impact on growing gradually using its own resources.
social welfare. It involves the idea that businesses
bear a responsibility that stretches beyond their
shareholders.

Corporate strategy Organisational change

The plans and policies developed to meet a A process in which a large company or organisation
company's objectives. It is concerned with what changes its working methods or aims, for example
range of activities the business needs to undertake in order to develop and deal with new situations or
in order to achieve its goals. It is also concerned markets.
with whether the size of the business organisation
makes it capable of achieving the objectives set.
Correlation Organisational, organisation, corporate or
business culture
The relationship between two sets of variables.
The values, attitudes, beliefs, meanings and norms
that are shared by people and groups within an
organisation.

Correlation coefficient Payback period

A measure of the extent of the relationship The amount of time it takes to recover the cost of
between two sets of variables. an investment project.

Critical path Penetration

The tasks involved in a project which, if delayed, Using tactics such as the marketing mix to increase
could delay the project. the growth of existing products in an existing
market.
 Critical path analysis (CPA)/network analysis PESTLE analysis

A method of calculating the minimum time Analysis of the external political, economic, social,
required to complete a project, identifying delays technological, legal and environmental factors
which could be critical to its completion. affecting a business.

Cultural dimensions Portfolio analysis

A set of characteristics that form the international A method of categorising all the products and
context of business culture. services of a firm (its portfolio) to decide where
each fits within the strategic plans.

Decision tree Present value

A technique which shows all possible outcomes of The value today of a sum of money available in the
a decision. The name comes from the similarity of future.
the diagrams to the branches of trees.

Departmental and functional objectives Product development

The objectives of a department within a business. Marketing new or modified products in existing
markets.

Discounted cash flow (DCF) Profitability or performance ratios

A method of investment appraisal that takes Illustration of the relative profitability of a

interest rates into account by calculating the business.
present value of future income.

Diseconomies of scale Rate of absenteeism

Rising long-run average costs as a business The number of staff who are absent as a
expands beyond its minimum efficient scale. percentage of the total workforce. It can be
calculated for different periods of time, e.g. daily
or annually.
 Distinctive capability Ratio analysis

A form of competitive advantage that is A numerical approach to investigating accounts by

sustainable because it cannot easily be replicated comparing two related figures.
by a competitor.

Diversification Remuneration

Developing new products in new markets. The reward for work in the form of pay, salary or
wages, including allowances and benefits, such as
company cars, health insurance, pension, bonuses
and non- cash incentives.

Earliest start time Return on capital employed (ROCE)

How soon a task in a project can begin. It is The profit of a business as a percentage of the total
influenced by the length of time taken by tasks amount of money used to generate it.
which must be completed before it can begin.

Economies of scale Risk assessment

The reductions in average costs enjoyed by a Identifying and evaluating the potential risks that
business as output increases. may be involved in an activity that a business
proposes to undertake, ensuring compliance with
health and safety legislation.

Ethical codes of practice Risk mitigation plans

Statements about how employees in a business Identify, assess and prioritise risks, and plan
should behave in particular circumstances where responses to deal with the impact of these risks on
ethical issues arise. the operation of the business.

Ethics Sanctions or Trade embargoes

In the context of business ethics, consideration of Sanctions are restrictions imposed on trade or
the moral 'rights and wrongs' of a decision at an investment with the aim of influencing a policy
often strategic level, in accordance with the law, change in another country. Trade embargoes can
and a business's code of conduct in relationship to be included in sanctions, where commercial
Corporate Social Responsibility. shipments are banned in and out of a particular
country, or where an embargo is placed on a
particular product.
 Evidence-based decision making Scatter graph

An approach to decision making that involves A graph showing the performance of one variable
gathering information and using a systematic and against another independent variable on a variety
rational approach to reach a conclusion. of occasions. It is used to show whether a
correlation exists between the variables.

External audit Scenario planning

An audit of the external environment in which a A strategic planning method designed to explore
business finds itself, such as the market within uncertainties, learn how to protect the business
which it operates or government restrictions on its from their worst consequences and prepare how
operations. to exploit any opportunities that might present
themselves.

External economies of scale Shareholder value

The cost reductions available to all businesses as A measure of company performance that
the industry grows. combines the size of dividends with the share
price.

External stakeholders Short term

Groups outside a business with an interest in its The time period where decisions only have aimpact
activities. on the operational activities of a business —
typically less than five years,

Finance cost SMART

Interest paid by a business on any orrowe money. Acronym for the attributes of a good objective:
Specific, Measurable, Agreed, Realistic and Time
specific.

Finance income Stakeholders

Interest received by a business on any money held Those with an interest in the activities of a
in deposit accounts. business.
 Forward vertical integration Strategic decisions

Joining with a business in the next stage of Decisions concerning policy that can have a long-
production. term impact on a business. Can be risky.

Free float Strong culture

The time by which a task can be delayed without A culture where the values, beliefs and ways of
affecting the following task. working are deeply embedded within the business
and its employees.

Gearing ratios Subjective decision making

Exploration of the capital structure of the business An approach to decision making where the
by comparing the proportions of capital raised by personal opinions of the key decision maker
debt and equity. strongly influence the course of action chosen.

Horizontal integration Succession planning

The joining of businesses that are in exactly the Identifying and developing people who have the
same line of business. potential to occupy key roles in a business in the
future.

Inorganic growth SWOT analysis

A business growth strategy that involves two (or An analysis of the internal strengths and
more) businesses joining together to form one weaknesses of the business and the opportunities
much larger one. and threats presented by its external environment.

Integration Synergy

The joining together of two businesses as a result The combining of two or more activities or
of a merger or takeover. businesses creating a better outcome than the sum
of the individual parts.
 Internal audit Takeover

An analysis of the business itself and how it The process of one business buying another.
operates.

Internal economies of scale Time series analysis

The cost reductions enjoyed by a single business as A method that allows a business to predict future
it grows. levels from past figures.

Internal stakeholders Total float

Groups inside a business with an interest in its The time by which a task can be delayed without
activities. affecting the project.

Investment Trade association

The purchase of capital goods. An organisation whose members are all involved in
the same industry or trade. The organisation
pursues the interests of these businesses.

Investment appraisal Transformational leadership

The evaluation of an investment project to Where new leadership such as a new CEO brings
determine whether or not it is likely to be about change with the purpose of improving
worthwhile. business performance.

Labour productivity Vertical integration

Output per worker in a given time period. The joining of two businesses at different stages of
production.
 Labour retention Window dressing

The number of employees that remain in a The legal manipulation of accounts by a business to
business over a period of time. present a financial picture that is to its benefit.

Labour turnover Market development

The rate at which staff leave a business. The marketing of existing products in new markets.

Latest finish time Merger

The latest time that a task in a project can finish. Occurs when two (or more) businesses join
together and operate as one.

Living wage Minimum efficient scale

An hourly rate of pay based on the basic cost of The output that minimises long - run average costs.
living, set independently of government and
updated annually.

Long term Mission statement

The time period where decisions have an impact A brief statement, written by the business,
on the vision, mission and objectives of a business describing its purpose and objectives, designed to
— typically longer than five years. encapsulate its present operations.

Management of change Monopoly

The process of organising and introducing new A market dominated by a single business.
methods of working within a business.
 Moving average

A succession of averages derived from successive

segments (typically of constant size and
overlapping) of a series of values.