Key Business Terminology - Course Guide

There is a range of Business Management terminology that you are required to understand and accurately define in order to perform well in the course. This terminology is listed in the course guide and is included below.

To support you to learn these terms, I have created Quizlet activities which can be accessed by clicking the white buttons included in each section.
To access the adaptive learning activities, you will need to join my Quizlet class by clicking this link.

Business organisations – types, ownership and funding

Test your understanding with this quizlet

Term

Additional Terms

Definition

Equity funding

Equity finance

The process of raising finance for a business from external sources including the sales of shares (equity finance)

Liability

Unlimited liability

Limited liability

The extent of a business owner’s liability or responsibility to the business’s debts

A business owner with unlimited liability may have to sell their own personal possessions to pay off business debts.

In contrast, a business owner with limited liability would only lose the amount they have invested in the business – their personal possessions could not be sold to pay for the business’s debts.

Organisation/s

Business/es,

Enterprises

These conduct business practice in the private and public sectors, to make a profit/surplus/break-even, e.g. limited liability companies’ partnerships, sole traders, charities, social enterprises, public corporations.

Partnership

A business of two or more people who contribute money to the business and then receive a share of the profit. Partners usually have unlimited liability.

Private Limited Company

Ltd.

Privately Held Company

Private sector company owned by shareholders, who have limited liability. Shares are traded privately and agreement of other shareholders is needed. Shareholders are limited to 50.

Private sector

Comprises organisations such as sole traders, partnerships and limited companies that are owned by private individuals or shareholders who provide the capital, take the risks and share in the profits made by the business.

Public Limited Company

Plc.

Limited Liability Company

Publicaly Held Company

Private sector company owned by shareholders, who have limited liability. Shares are traded freely on a stock exchange and there is no limit to the number of shares that can be owned.

Public sector

Comprises organisations such as public corporations which are owned, financed and managed by the government on behalf of the taxpayers/public. Any surpluses made from their trading activities are ploughed back into the organisation.

Shareholders

The owners of private and public limited companies who receive a share of the profits based upon the amount of shares they hold. Shareholders have limited liability for a business’s debts.

Sole trader

One-person business

Sole Proprietor

The simplest form of business. Owned by one individual who invests all the capital, takes all the risks and receives all the profits.

Sole traders have unlimited liability to the business’s debts.

Stock exchange

Stock market

A place where shareholders in public limited companies can buy and sell shares

Stock market flotation

Flotation

Initial Public Offering (IPO)

The process involved in becoming a public limited company; involves the purchase of shares in the company by investors which can then be sold on the stock market.

Financial Terminology

Test your Knowledge with this Quizlet

Accruals

Other payables

Money owed by a business for a product or service it has received for which it has not yet paid

Bad debts

Irrecoverable debts

A debt owed to the business that will never be paid (or recovered) and has to be written off

Bank and cash deposits

Cash and cash equivalents

Short-term highly liquid assets that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value

Bank interest paid

Finance costs

The cost of business loans

Bank interest received

Investment

revenue/finance

income

Interest earned by the business on its investments

Capital

Equity

The owner’s initial investment in the business minus the owner’s drawings from the business plus the net profit (or minus the net loss) since the business began

Cash flow

Cash inflow and outflows into and out of a business

Cash flow forecast

A forecast of cash inflows and cash outflows of a business over a specific period of time

Cash flow statement

Statement of cash flows

A summary of cash inflow and outflows into and out of a business over a specific accounting period, usually one year

Cost of goods sold

Cost of sales

The direct costs incurred in the production of oods or supply of services

Creditors

Trade payables

Money owed by a business to its suppliers

Current ratio

Working capital ratio

Current assets divided by current liabilities. Provides an indication of the business’s ability to cover its liabilities.

Debtors

Trade receivables

Money owed to a business by its customers

Expenses

Other operating expenses

Overhead expenses

Overheads

Business costs which do not depend on sales or production quantities, e.g. rent, heating, lighting, marketing

Financial statements

Final accounts

Accounts

A set of a business’s financial data for a specific period of time, usually one year, that can be used to monitor its performance relating to profitability, liquidity and efficiency

Gross profit margin

The percentage of sales revenue remaining after the cost of sales has been deducted from sales revenue

Interest paid

Finance costs

Interest paid by the business on its business loans

Liquid capital ratio

Liquid assets ratio

Acid test ratio

Current assets – inventory divided by current liabilities

Liquidity

The extent to which a business can convert its assets into cash to pay its short-term debts

Net current assets

Working capital

Current assets minus current liabilities

Net profit margin

The percentage of sales revenue remaining after all operating expenses have been deducted from sales revenue

Non-current assets

Fixed assets

Assets purchased (and owned) by the business for its long-term use such as plant and machinery

Non-current liabilities

Long-term liabilities

Long-term debt commitments which the business has to repay over a period longer than one year

Other income

Other operating income

Monies received from sources apart from sales revenue and investment income received by a business, e.g. income received from the sale of non-current (fixed) assets

Owner’s capital

Equity

The owner’s investment in the business minus the owner’s drawings from the business plus the net profit (or minus the net loss) since the business began

Prepayments

Other receivables

Money paid by a customer to a business in advance of the goods or services being supplied later on to the customer by the business

Profit

Profit for the year

Net profit

Money generated by a business from its trading activities after deducting its operating expenses

Retained profit

Retained earnings

The profit kept in the business rather than paid out to shareholders/owners as a dividend

Revenue

Sales; turnover

The money received by the business from selling its products or services

Revenue expenditure

Operating costs

The amount of money spent by the business on costs such as heating, lighting, marketing, insurance and transport

Statement of comprehensive income

Profit and loss account

Income statement

A financial statement which shows how the net profit/loss for the year has been derived

Statement of financial position

Balance sheet

A financial statement which details the value of a business’s assets (what it owns), its liabilities (what it owes) and equity/capital (the owner’s contribution)

Variance analysis

Variance accounting

An analysis of the differences in planned performance, e.g. costs, revenue, sales, against actual performance

VAT (Value added tax)

Purchase tax

A tax added to the purchase price of a product or service which is paid to the government

Other Specialist Terms

Test your Knowledge with this Quizlet

Buying

Procurement

The purchase of goods and services by a business to support its business operations

Digital media

Digitised content that can be read by computers and transmitted over the internet or computer networks.

Double bottom line

Triple bottom line

The outcome of social/environmental accounting in respect of the impact on financial performance (the bottom line) but incorporating both the environmental and social impact

Entrepreneur

Entrepreneurship

A person who takes business risks usually by starting up a business (because the business may make a loss) and receives the rewards (in the form of profits)

Exit strategy

An entrepreneur's plan to sell their ownership in a business to investors or another business

Intrapreneur

Intrapreneurship

An employee who uses the skill set associated with an entrepreneur to develop and take forward innovations to products or systems within the business

Local Enterprise Partnerships (LEPs); Enterprise Zones (EZs)

Agreements made between businesses and local government that aim to identify and support regional economic priorities

Marketing mix

Extended marketing mix

A set of components that are combined together by a business to establish a coordinated marketing strategy

Marketing strategy

A series of activities conducted by a business to inform consumers about the business’s products and service in order to persuade them to buy the goods and services

Social accounting

Environmental management accounting

The generation and analysis of financial and non-financial data to determine the impact of a business’s activities on people and the environment

Social enterprise

An organisation that focuses upon social issues such as the socially disadvantaged and the environment. Their profits/surpluses are reinvested into the enterprise to support their objectives.

Social entrepreneur

A person who is willing to take on the risk and effort to create an enterprise that will generate positive changes in society through its activities

STEEPLE analysis

PESTLE analysis

PEST analysis

A planning tool that enable a business to identify the external features that may impact upon its operations and longer-term strategic direction

The letters represent the various factors that can be analysed when analysing the external environment within which the business operates.

Stock

Inventory

Goods that are in various stages of being made ready for sale, including: finished goods (that are available to be sold); work-in-progress (meaning in the process of being made); raw materials (to be used to produce more finished goods)

Stock control

Inventory management

Inventory control

Business processes which aim to ensure that the business has efficient and cost-effective systems in place, in respect of goods or raw materials, to meet customer demand

Supply chain management

Logistics

management

The cost-effective processes involved in planning and controlling a product’s flow, from securing the raw materials used in production through to the distribution to the final customer

Sustainability

Development that meets the needs of the present generation, without compromising the ability of future generations to meet their own needs (Brundtland Report 1987)

The Bank of England

Central Bank

Reserve Bank

The Government’s Bank

Threats and ‘what-if scenarios’

Sensitivity analysis

Analysing the impact of different risk factors and threats on desired business outcomes

Unique selling point (USP)

Unique selling proposition (USP)

A specific feature of a product that differentiates it from its competitors, resulting in a potential competitive advantage

Viral marketing

Digital media incorporated into a marketing strategy that can be spread across the internet by social media