Business Edexcel IAL Unit 2 Flashcards

Business Plan

A written document outlining a business’s aims, strategy, financial forecasts, and operations, used to guide decision-making and secure finance.

Owner’s Capital

Personal funds invested by the owner into the business, often used at start-up to avoid debt.

Retained Profit

Profit kept in the business after tax and dividends, used to fund growth or act as a reserve.

Sale of Assets

Raising finance by selling unused or non-essential fixed assets to improve cash flow.

Peer-to-Peer Funding

Borrowing money from individuals via online platforms, bypassing traditional banks.

Business Angels

Wealthy individuals who invest in start-ups for equity, often offering expertise too.

Crowdfunding

Raising small sums from many people online, often offering equity or rewards in return.

Loan

Borrowed money repaid over time with interest, usually from a bank.

Share Capital

Money raised by issuing shares in a limited company to external investors.

Venture Capital

Investment in high-risk businesses in exchange for equity and strategic input.

Overdraft

Short-term borrowing by withdrawing more than is in the bank account.

Leasing

Renting equipment or property long-term without owning the asset.

Trade Credit

Buying goods or services now and paying the supplier at a later date.

Grant

Non-repayable funding from government or organisations, often with conditions.

Sole Trader

A business owned and run by one person with unlimited liability.

Partnership

A business owned by 2–20 people sharing responsibility, profits, and liabilities.

Private Limited Company (Ltd)

A company with limited liability and private shareholders.

Public Limited Company (plc)

A large company with limited liability and publicly traded shares.

Franchise

A licensed business model where a franchisee operates under an existing brand.

Social Enterprise

A business that aims to make profit while achieving social or environmental goals.

Lifestyle Business

A business created to support the owner’s preferred lifestyle and interests.

Online Business

A business that operates primarily over the internet.

Limited Liability

Business owners are only liable for debts up to the amount they invest.

Unlimited Liability

Owners are personally responsible for all the business’s debts.

Articles of Association

A legal document that outlines the internal running and rules of a limited company.

Certificate of Incorporation

A document that confirms a business is registered and legally allowed to operate as a limited company.

Co-operatives

Businesses owned and operated by members, such as workers or customers, who share decision-making and profits.

Deed of Partnership

A legal agreement setting out the rights and responsibilities of each partner in a partnership.

Limited Company

A business that is a separate legal entity from its owners and offers limited liability.

Limited Partnership

A partnership where some partners have limited liability and do not take part in daily operations.

Memorandum of Association

A document outlining a company’s structure and external details at the time of formation.

Mutual Organisations

Organisations owned by members (customers or employees) rather than shareholders.

Primary Sector

The part of the economy that extracts natural resources, such as mining or farming.

Secondary Sector

The sector involved in manufacturing and processing raw materials into finished goods.

Sleeping Partner

A partner who invests capital and shares profits but is not involved in daily operations.

Tertiary Sector

The economic sector that provides services rather than goods.

Quality

Features of a product that meet customer needs and expectations.

Quality Assurance

A method of ensuring quality by checking standards throughout the production process.

Quality Chains

Links formed between suppliers and employees to ensure quality across all stages.

Quality Circles

Groups of workers who meet regularly to discuss and solve production issues.

Quality Control

Inspecting products to ensure they meet quality standards.

Statistical Process Control

Using data to monitor and control the quality of production processes.

Total Quality Management (TQM)

A business philosophy focusing on continuous quality improvement across all areas.

Buffer Stocks

Stock kept as a precaution against unexpected demand.

Kanban

A visual system (e.g., cards) used to manage production flow in factories.

Lead Time

The time taken from placing an order to its delivery.

Re-order Level

The stock level at which a new order is placed.

Re-order Quantity

The amount of stock ordered when the reorder level is reached.

Stock Rotation

The flow of stock into and out of storage, ensuring older stock is used first.

Work-in-Progress

Partly finished goods that are still in production.

Undercapitalised

A business that lacks sufficient capital to operate effectively or fund growth.

Capital

Money invested into the business by its owners to start or grow operations.

Capital Expenditure

Spending on assets that will be used repeatedly over time, such as equipment or property.

Internal Finance

Funds raised from within the business, such as retained profits or owner investment.

Revenue Expenditure

Spending on short-term resources that are consumed quickly, like stock or wages.

Sale and Leaseback

Selling an asset and leasing it back to free up capital while retaining use.

Authorised Share Capital

The maximum value of shares a company can legally issue.

Bank Overdraft

An agreement that allows a business to withdraw more than it has in its account, within an agreed limit.

Capital Gain

Profit made when a share or asset is sold for more than its purchase price.

Debenture

A long-term loan to a business, often secured against assets.

Equities

Ordinary shares representing ownership in a company.

External Finance

Funds raised from outside the business, such as loans or share capital.

Issued Share Capital

The value of shares actually sold by the business to shareholders.

Lease

A contract that allows use of property or equipment in exchange for regular payments.

Peer-to-Peer Lending

Individuals lending to other individuals or businesses online, without a bank.

Permanent Capital

Share capital that remains in the business and is not expected to be repaid.

Secured Loans

Loans backed by collateral such as property, giving the lender security.

Unsecured Loans

Loans not backed by specific assets, carrying more risk for lenders.

Venture Capitalists

Firms or individuals that invest in small or risky businesses in return for equity.

Barriers to Entry

Factors that make it difficult for new firms to enter a market, such as high costs or regulation.

Private Equity Company

A company funded by private investors to buy and restructure businesses.

Public Limited Company

A company whose shares can be publicly traded on the stock market.

Stock Market

A marketplace where shares of public companies are bought and sold.

Stock Market Flotation

The process of offering shares to the public for the first time.

Collateral

An asset pledged to secure a loan that may be sold if the borrower fails to repay.

Incorporated Business

A business with a separate legal identity from its owners, offering limited liability.

Long-term Finance

Money borrowed or invested for more than one year.

Rights Issue

New shares offered to existing shareholders at a discount.

Short-term Borrowing

Money borrowed for 12 months or less to cover immediate needs.

Unincorporated Business

A business where the owner and the business are legally the same.

Average Cost

The cost of producing one unit, calculated by dividing total cost by total output.

Fixed Cost

A cost that stays the same regardless of output, such as rent.

Long Run

A period in which all factors of production can be varied.

Profit

The financial gain made when total revenue exceeds total costs.

Sales Revenue

The total value of sales, calculated by price times quantity sold.

Sales Volume

The quantity of goods or services sold in a specific period.

Semi-variable Costs

Costs that have both fixed and variable components.

Short Run

A period in which at least one factor of production is fixed.

Total Cost

The sum of fixed and variable costs for a given level of output.

Total Revenue

The total income from selling goods or services.

Variable Costs

Costs that change directly with the level of output.

Online Businesses

Businesses that operate primarily through digital platforms.

Sole Trader or Sole Proprietor

A business owned and run by one person with unlimited liability.

Acid Test Ratio

A stricter measure of liquidity excluding inventory, calculated as (current assets - inventory) / current liabilities.

Actions of Competitors

Strategies or decisions by rival firms that affect market conditions and business performance.

Assets

Resources owned by a business that have economic value, such as equipment or cash.

Average Costs

Total costs divided by the number of units produced.

Banks

Financial institutions that lend money and offer financial services to businesses.

Batch Production

Producing a set quantity of identical items before switching to a new batch.

Behaviour of Competitors

How rival firms act in the market, including pricing, advertising, and product launches.