Business- Chapter 1

Business

Business

a person or organisation that produces a good or supplies a service

Service

an intangible item that is something you cannot physically touch

aim of a business

to provide goods and services that customers need or want

Entrepreneur

someone who is willing to take the risks involved in starting a new business

Capital

the equipment used to make goods or services

Enterprise

the skills of the people involved in the business

Land

is where a business is located

Labour

the skills and number of staff

Opportunity cost

is the sacrifice we make whenever we decide to do something

Interest

is the money paid by banks as a reward to attract people to save with them

Good

physical products that are either produced or purchased to be sold

Customer

a person who buys goods or services from a shop or business.

consumer

is the final user of a purchased product or service

entrepreneurship

is when an individual who has an idea acts on that idea

interest rates

is the price of money, it is the cost of borrowing or the reward for saving

inflation

measures how much more expensive goods and services become over a certain period

Sole trader

is an individual who owns and runs their own business

profit

is the money a business pulls in after accounting for all expenses.

Unlimited liability

is when one or more business owners or partners are liable for their company's expenses

partnership

is where two or more people run a business

shareholder

is a person that has invested money in a corporation in exchange for a share of the company

stakeholder

are anyone with a vested interest in the actions of a business

stock exchange

is a location where the shares of companies are bought and sold

Aim

is the overall long-term target or goal of the business

objective

is the results companies hope to maintain as their organization grows.

private sector

the part of the economy not run by the government

public sector

businesses and industries that are owned or controlled by the government

dividends

is a reward paid to the shareholders for their investment

Business plan

is a documented strategy for a business that highlights its goals and its plans for achieving them

risk

is the possibility of something bad happening

revenue

is the money coming into a business from sales

total costs

the fixed costs and the variable costs added together

fixed costs

does not change

variable costs

is what changes

internal growth

is when a business expands from within

External growth

is when a business grows by joining with other businesses

Franchise

is when one business gives another person or business the right to trade using its name

Franchisee

is a business owner who is licensed to open businesses that already exist

Franchisor

sells the right to open a store to sell products or services

E-commerce

The buying or selling goods online and is when buyers and sellers join to trade over the internet

Merger

is where two or more businesses agree to become integrated to form one business under joint ownership

Takeover

is where a business buys another business

Business plans

a business plan is a written document that describes a business, its objectives and its strategies

Benefits of a business plan

Outlines everything that needs to be done

Helps entrepreneurs clarify their objectives

Internal source of finance

from within the business

External source of finance

from sources outside the business

example of internal

Family and friends

example of external

bank loan or mortgage

Friends and family

terms and conditions can be agreed between you and them

Retained profit

profit kept within the business from profit after tax

Selling unwanted assets

a business can sell off assets that it no longer needs

New share issue

shares represent ownership of a company

Bank loan

a set amount of money borrowed from the bank to be paid back overtime

Collateral

if you cant pay back a loan they can take assets from you to sell

Mortgage

a long term loan secured against an asset

Overdraft

the ability to withdraw more money from a bank account than you actually have

Trade credit

goods or services are received now but paid for a later date

Hire purchase

spreading the cost of an asset over a period of time

government grants

money given to a business from the government

cash flow statement

a record of all the cash flowing into and out of the business

opening balance

cash available at the start of the month

closing balance

cash available at the end of the month

Net cash flow

the difference between total cash in and out

cash flow forecast

predicting the future cash inflow and outflow