Principles of Business: Section 1 Nature of Business Flashcards

A comprehensive set of vocabulary flashcards covering the nature of business, economic systems, and organizational structures as detailed in the lecture transcript.

Enterprise

Businesses that produce goods or services for sale to consumers.

Entrepreneur

One who undertakes the responsibility and risks of employing land, labour and capital and who decides how these resources are to be used; a person who conceptualizes an idea and takes the necessary steps to transform the idea into a marketable product or service.

Entrepreneurship

The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit.

Barter

To trade by exchanging goods or services for other goods or services, not for money.

Profit

The excess revenue over expenses, calculated by subtracting the total expenses of a business from the total revenue earned by the business.

Loss

This arises when the total expenses of a business is more than the total revenue.

Trade

The buying and selling of goods and services.

Organisation

A group of persons that come together for a common purpose, such as a business, firm, or association.

Economy

The range of economic activity where production, distribution and consumption of goods and services for individuals within society takes place.

Producer

A person who creates or makes products or services.

Consumer

Someone who buys goods or pays for services; the end user of the products manufactured by the producers.

Exchange

To provide goods or services and receive goods or services of approximately equal value in return.

Goods

Tangible commodities (products) which are usually owned by an individual, firm or state.

Services

Intangible commodities; the non-material equivalent of a good.

Market

A place where buyers and sellers meet; a collection of transactions of the same nature occurring when potential sellers and buyers are in contact and there is a means of exchange.

Commodity

A primary product (agriculture, mining, and semi processed products) or article of trade that is a basic good used in commerce and interchangeable with other commodities of the same type.

Capital

Cash or goods used to generate income either by investing in a business or a different income property; the net worth of a business where assets exceed liabilities.

Labour

Work of any type or human effort.

Specialization

Concentrating on one task; a system whereby each person does the job for which he/she is best suited or has the necessary skills.

Economics

The study of production, consumption and transfer of wealth.

Wants

A desire for something.

Needs

Something a person must have for basic survival to maintain a minimum standard of living.

Scarcity

The fundamental economic problem arising because resources are limited ($finite$) while society's demand for resources is unlimited ($infinite$).

Production

The creation of goods and services to satisfy man’s wants.

Resources

A source of wealth to the country.

Productivity

Output of a man’s working hours; the level of output produced for each unit of input.

Industry

A group of productive enterprises or organisations that produce or supply goods, services, or sources of income related by their primary business activities.

Factors of Production

The economic resources used to produce goods and services: land, labour, capital and entrepreneurial ability.

Economic Activity

Any activity which allows for the acquisition of capital/money in order to meet one’s needs.

Direct Production

Referring to the meeting or satisfaction of one's needs without the assistance of others, often directly from nature.

Indirect Production

Producing to satisfy the wants of others in society.

Division of labour

The splitting up of a main task into several smaller ones.

Occupational immobility

The difficulty in finding a job other than the one in which a worker has specialized if they become unemployed.

Money

Anything that is commonly acceptable as a medium of exchange and a means of carrying out a transaction.

Medium of exchange

A good or token commonly accepted as payment in exchange for goods and services and for the settlement of debt.

Legal tender

Money that by law must be accepted as a medium of exchange in the settlement of a debt.

Quasi Money

Substitute money such as postal orders, soda machine tokens, cheques and credit cards.

Near Money

Assets that can easily be turned into cash, such as certificates of deposit and bills of exchange.

Cheque

An order to the bank to make payments to the payee stated on it; they are not money but instructions to a bank to pay money from an account.

Bearer cheque

A fully negotiable cheque because whoever bears it is entitled to claim its cash value at the bank.

Order cheque

A cheque made out to a specified person who is entitled to receive its value or order it to be applied to someone else's benefit.

Open cheque

A cheque that may be presented for immediate payment at the bank on which it is drawn.

Crossed cheque

A cheque that must be paid into the bank account of the person named on it or into the account of the bearer.

Bills of exchange

Unconditional orders written and signed by one party requiring another party (usually a bank) to make a payment at a later date, often used in international trade.

Debit cards

Plastic cards used to make payments for purchases electronically with funds transferred directly and immediately from the user's bank account.

Credit cards

Cards issued by a bank or business allowing somebody to purchase goods and services and pay for them later, with interest.

Bank draft

A cheque made out by a bank on behalf of a customer to allow for substantial payments; also known as a bank manager's cheque.

E-Commerce

The use of the internet to buy and sell goods.

Electronic transfer

The transfer of money from one bank account to another through computer links.

Telegraphic money transfer

A fast way of transferring money from an account in one country to an account in another country, also known as a wire transfer.

Treasury bill

Bond investments from the government where a customer receives their money back after a set time plus a percentage of interest.

M-money

Refers to the use of cell phones to make payments or to transfer money electronically.

Mobile wallet

The system of using a cell phone as a way of making payment via validated codes sent to a provider.

Business organisation

A single individual or a group of persons who have pooled their resources to provide goods and services in order to make a profit.

Private Sector

The part of the economy funded by private individuals and owned and controlled by private firms with the objective to make a profit.

Public Sector

The part of the economy financed by the government through taxpayers and controlled and operated by the government or its agents.

Sole trader

A person who has total ownership of and responsibility for managing his or her business, enjoying all profits and bearing all risks.

Partnership

An association of $2$ to $20$ partners operating a business for the common goal of making a profit ($10$ minimum for banking).

Ordinary partner

A partner in a partnership who has unlimited liability and is fully liable for the debts of the business.

Sleeping or dormant partner

A partner who contributes capital but does not take an active part in the management of the partnership.

Partnership Deed

A document outlining the agreed upon terms and conditions of a partnership, such as capital contributions and profit sharing terms.

Cooperatives

Voluntary, nonprofit making organisations formed and operated by their members who pool resources and shares.

Joint-stock company

A business jointly owned by persons who have bought shares in the enterprise.

Shares

Units of ownership representing equal proportions of a company's capital, entitling the holder to a proportion of the profits.

Shareholder

An owner of shares in a company.

Ordinary shares

Common stock that entitles the shareholder to share in earnings and to vote at annual general meetings.

Preference shares

Preferred stock that entitles the shareholder to a fixed periodic income (interest) but generally no voting rights.

Dividends

A payment from profits to shareholders authorized by the shareholders.

Unlimited Liability

A condition where loss is not limited to investment but extends to the personal property of the owner.

Limited Liability

A condition where the loss of a shareholder is limited only to the amount invested in the company.

Memorandum of Association

A document governing a company's relationship with the outside world, containing the company name, registered office address, and objectives.

Articles of Association

A document providing guidance for the internal running and operations of a company, covering procedures for meetings and director obligations.

Prospectus

An invitation to the public to buy shares in a public limited company, including detailed info to estimate prospects.

Private limited company

An incorporated business consisting of $2 - 50$ members whose membership is usually restricted to family and friends.

Public limited company

An incorporated company with at least $7$ shareholders and no maximum limit, whose shares are traded openly on the stock market.

Board of directors

A group elected by shareholders to manage a public limited company and develop strategic goals.

Internal growth

Expansion achieved through physical expansion, increasing output, employing more workers, or investing in modern technology.

External growth

Expansion achieved through the sale of shares, mergers, acquisitions, takeovers, or franchising.

Merger

When two companies willingly come together to form a new company.

Acquisition

When a larger or more powerful company absorbs a smaller company under friendly terms, making the acquired firm a subsidiary.

Franchising

A system where a franchisor grants a license to use a brand and reproduce products in exchange for royalty payments.

Vertical merger

When two or more companies at different stages of production merge together.

Horizontal merger

When businesses at the same level or stage of production join together.

Conglomerate

A type of diversified merger where companies producing unrelated products come together.

Multinational Company

A company with branches or subsidiaries in multiple countries, such as Courts or Barclays Bank.

State Corporations

Independent organisations set up by government to carry out a service, usually non-profit but self-financing.

Nationalised industries

Firms which were once privately owned but have been taken over by the government.

Economic System

The way in which a society uses its economic resources to produce and distribute goods and services.

Traditional economy

An economy based on customs where nearly the whole population is engaged in subsistence agriculture and trade is carried out through bartering.

Subsistence agriculture

Occurs when farmers grow food crops to meet the basic needs of themselves and their families with little or no surplus.

Free enterprise

Also known as Capitalism or Laissez-faire; a market system with free competition where prices are determined by supply and demand without government interference.

Price mechanism

The system where prices are determined by the forces of demand and supply.

Planned Economy

Also known as a command economy; an economic system where a central authority or government makes all economic decisions.

Mixed Economy

An economic system combining characteristics of market and command economies, where both private businesses and the government manage the economy.

Public Good

A commodity or service made available to all members of society, administered by governments and paid for through taxation.

Merit goods

Socially desirable goods which are likely to be under-produced and under-consumed through the market mechanism, such as education and health care.

Stakeholders

Any individual, institution, group or agency which has a vested interest in how well a business performs.

Internal stakeholders

Individuals within an organization, such as owners, managers, and employees, who have a special interest in its activities.

External stakeholders

Individuals or groups not employed by the organization who have a vested interest, such as government, customers, suppliers, and lenders.

Business ethics

Socially determined principles regarding businesses doing the ‘right thing’ and behaving in a fair and honest way.