BUSINESS PAPER 2

definitions

Job production

... is the process of production where products are made individually.

Batch production

... is the process of production where one type of product is made (in a batch) and then production is switched to making a different product.

Flow production

... is the production of one product that takes place continuously using a production line or assembly line - this is sometimes called mass production.

Automation

... is a production process involving machinery that is not controlled by a person but is usually controlled by a computer.

Robotics

... is the use of robots in the process of production.

Product processes

... are the three methods or processes of production - job, batch and flow.

Quality control

... is a system for inspecting the quality of the goods or services produced and assessing that they are of a good standard.

Quality

... is the concept of a good or service being fit for purpose.

Returns

... are goods which customers take back because there are problems with the quality of them.

Recalls

... occur when there is a fault with a product and the business asks for the products to be returned so that they can be replaced or repaired.

E-commerce

... is the bringing together of buying and selling electronically.

Customer service

... is the name given to the area of a business that deals with customer enquiries.

Customer engagement

... is the contact between the business and customer.

Click and collect

... is ordering online and collecting goods from a store at some later point in time.

Face to face selling

... is usually completed in a shop where there is direct contact between buyer and seller.

Telesales

... are sales conducted over the telephone.

After-sales service

... is advice and help given to a customer after they have bought a product or service.

Product knowledge

... is the detailed knowledge of a product or service that staff within a business use to help inform and persuade a customer to buy.

Fit for purpose

... means that goods must do what they are meant to do.

As described

... means that goods must be as the business has described them.

Satisfactory quality of goods

...refers to the concept that how the goods are made is reflected in the price - a high price product should be of a high quality (to justify the price tag).

Reputation

... is what customers say and feel about a business. Damage to reputation can have a significant impact on the business.

Transport infrastructure

... is the provision of roads, railways, ports and airports in an area for transporting goods and people.

Proximity

... means "nearness to". It can refer to proximity to the market, to raw materials and to labour supplies.

Location

... refers to the place where a business is sited.

Labour

... is a factor of production. It is the workers employed by the business to produce the goods and services.

Raw materials

... are materials that are processed in some way to create the finished goods and services.

Logistics

... refers to the management of the transportation and storage of goods.

Procurement

... refers to the management of purchasing within a business.

Suppliers

... are parties who supply goods and/or services to a business.

Finance function

... is sometimes referred to as the finance department and is only found in larger businesses.

Financial information

... includes details of profit, loss, cash-flow, break-even, profit margin and average rate of return; these can be very useful in helping businesses make decisions.

Interest

... the amount of money that has to be paid on borrowed money OR the reward received on saved money/deposits.

Security/collateral

... is something of value that is offered to a lender as a form of guarantee of repayment

Time period

... is the length of time for which the finance is required.

Loans

... are sums borrowed for a certain period of time.

Overdraft

... is an arrangement with a bank that a business can spend more money than it has in its account.

Trade credit

...is an arrangement whereby a supplier allows the business to receive goods/stock, but pay at a later date (usually within 28 days)

Retained profit

... is profit that is not distributed to shareholders - it is put back into the business.

Sale of assets

...items of value that are sold by the business.

Owners' capital

... is money put into the business by the owner.

Taking on a partner

... is adding a new partner to the partnership who contributes additional capital, skills and/or experience.

Share issue

... is money raised by selling new shares.

Crowdfunding

... is money raised through an appeal to the public.

Revenue

... the money that comes in from sales (price x quantity).

Fixed costs

... costs that do not change as the level of output changes e.g. rent

Variable costs

... costs that change as output changes e.g. raw materials, component parts, packaging

Total costs

... fixed costs + variable costs

Gross Profit

... Revenue minus cost of sales

Gross Profit Margin

... (Gross profit divided by revenue) x 100 - it is expressed as a percentage

Net Profit

... Gross profit minus expenses

Net Profit Margin

...(Net profit divided by revenue) x 100 - it is expressed as a percentage

Loss

... a loss occurs when the total costs of the business are greater than its revenue.

Expenses

... are the costs of operating a business (overheads).

Profitability ratios

... are ratios such as the gross and net profit margins - they help to assess the performance of the business

Average Rate of Return

... is a method of measuring and comparing the profitability of an investment over the life of the investment.

Break-even quantity

... this is the amount of goods/services the business must sell to earn enough revenue to cover its costs - at this point it is neither making a profit or a loss - the total revenue equals the total costs.

Break-even forecast

... this is a prediction that attempts to forecast the break-even quantity based on estimates of future revenues and costs.

Margin of safety

... this is the quantity by which actual output exceeds break-even output e.g if actual output is 100 units and break-even output is 70 units - the margin of safety is 30 units

Cash-flow forecast

... is a statement showing the expected cash-inflows and cash outflows over a period of time for a business.

Net cash-flow

... is the total inflow minus the total outflow of cash.

Closing balance

... is the net cash-flow (cash left over) at the end of the month. This month's closing balance becomes next month's opening balance e.g. if a business has a closing balance of £150 at the end of January, this is the opening balance at the start of February.

Opening balance

... this is the cash available at the beginning of the month; it is brought forward from the closing balance of the previous month e.g. an opening balance of £150 in February, means that the closing balance at the end of January was £150.

Total inflow

... the total amount of cash flowing into a business.

Total outflow

... the total amount of cash flowing out of a business.

Negative cash-flow

... this is when the cash-outflow is greater than the cash-inflow - it is also known as a cash-flow deficit.

Positive cash-flow

... this is when the cash-inflow is greater than the cash-outflow - it is also known as a cash-flow surplus.

Income

... is money that the business receives.

Expenditure

... is money that the business pays out.

Liquidity

... is the ability of the business to pay its short-term debts from its available cash / near cash assets.

Short-term debts

... debts that must be paid in the near future e.g. energy bills

Cash

... includes notes and coins BUT also near cash such as bank balances.

Profit

... is the total revenue minus the total costs.

Ethics

... is about what is right and wrong.

Child labour

... is the use of children, below the legal age of employment, in order to achieve low-cost production.

Ethical marketing

... is marketing activity that seeks to give customers information so that they can make the right choice / a good choice for themselves.

Fairtrade

... is a movement that encourages businesses to pay a fair price to suppliers in developing countries - consumers are often willing to pay more to support fairtrade.

Environmentally friendly

... describes consumer and business behaviour and actions that make consumption and production more sustainable.

Sustainable production

... is when production does not lead to the depletion of natural resources.

Renewable resources

... are resources that can be used more than once, such as wind and water power, or that can be recreated e.g. crops.

Non-renewable resources

... are resources that can only be used once e.g. oil.

Recycling

... is when resources are reused to produce something.

Global warming

... is the rise in average world temperatures.

Ethical businesses

... are businesses that behave in a morally correct way.

Waste disposal

... is the process of getting rid of unwanted materials.

Pollution

... is causing harm to the environment including air, land and water.

Climate change

... is the process of changing weather patterns (more extreme) and changing temperatures.

Economic climate

... refers to how well the country is doing in terms of levels of employment and income.

Income

... is the money that people receive from paid employment and money they earn from other assets such as savings, shares and property.

Customers

... are the people who buy goods and services for the benefit or satisfaction they get from consuming - customers usually buy from retailers.

Consumer income

... refers to the income consumers have and which might be used for spending.

Level of employment

... is the number of people in work in a country.

Level of unemployment

... is the number of people (looking for work) out of work in a country.

Gross Domestic Product

(GDP)

... is a measure of how much a country produces in a year - it influences the level of employment and income in a country.

Level of income

... the average income of people in a country.

Economic growth

... a period when GDP is rising causing income and employment to rise.

Recession

...a period when GDP is falling causing income and employment to fall.

Distribution of income

... refers to how the income is shared out amongst the population - the distribution can become more unequal if the incomes of the rich are rising faster than the incomes of lower earners.

International economic climate

... refers to what is happening to incomes and employment levels in different parts of the world.