Business Management Comprehensive Review

This set of vocabulary flashcards covers essential business management terminology including financial formulas, market concepts, and organizational theories found in the study guide.

Four sectors of business activity

The classification of business levels: Primary (extraction), Secondary (manufacturing), Tertiary (services), and Quaternary (knowledge/information).

Internal Stakeholders

Individuals or groups within an organization who are affected by its operations, such as employees, shareholders, and managers.

External Stakeholders

Groups outside a business that have an interest in its activities, including customers, suppliers, the government, and the local community.

Intangible Assets

Non-physical assets that appear on a balance sheet, including examples like patents, copyrights, trademarks, and goodwill.

Investment Appraisal Methods

Financial techniques used by businesses to evaluate potential projects, specifically Payback Period ($PBP$), Average Rate of Return ($ARR$), and Net Present Value ($NPV$).

Entrepreneur

An individual who takes the financial risk of starting and managing a new business venture in pursuit of profit.

Economies of Scale

The cost advantages that a business obtains due to its scale of operation, where the average cost per unit falls as output increases.

Brand Loyalty

The tendency of consumers to continue buying the same brand of goods rather than competing products, which is critical for maintaining market share.

Working Capital

The capital of a business used in its day-to-day trading operations, calculated as: $\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$.

Cash Cow (BCG Matrix)

A business unit or product that has a high market share in a low-growth industry, generating more cash than is required to maintain it (e.g., a well-known mature product).

Capital Expenditure

Finance spent on purchasing, maintaining, or improving fixed assets such as land, buildings, and machinery.

Revenue Expenditure

Money spent on the day-to-day running of a business, such as wages, raw materials, rent, and utility bills.

Primary Market Research

The collection of first-hand data directly from original sources, such as through focus groups, surveys, or interviews.

Product Life Cycle Stages

The sequence of stages a product goes through: Research and Development (R&D), Introduction, Growth, Maturity, and Decline.

Window Dressing

The use of creative accounting techniques to manipulate a company's final accounts to make its financial position look more favorable than it actually is.

Franchisor

A person or company (such as Mc Donalds’) that grants a license to third parties (franchisees) to conduct business under their brand name.

Multinational Company (MNC)

A business organization (such as Inditex) that has operations and assets in at least one country other than its home country.

Unit Contribution

The amount of money each unit sold contributes toward covering fixed costs, calculated as: $\text{Selling Price} - \text{Variable Cost}$.

Break-even Quantity (BEQ)

The level of output where total costs equal total revenue, calculated as: $\frac{\text{Fixed Costs}}{\text{Unit Contribution}}$.

Margin of Safety

The difference between the actual or forecasted level of output and the break-even quantity, indicating how much sales can fall before a loss is incurred.

Cost of Sales (COS)

The direct costs attributable to the production of the goods sold by a company, such as raw materials and direct labor.

Gross Profit Margin (GPM)

A profitability ratio that shows the percentage of revenue exceeding the cost of sales, calculated as: $\frac{\text{Gross Profit}}{\text{Sales Revenue}} \times 100$.

Net Profit Margin (NPM)

A profitability ratio that measures how much out of every dollar of sales a company actually keeps in earnings, calculated as: $\frac{\text{Net Profit}}{\text{Sales Revenue}} \times 100$.

Current Ratio

A liquidity ratio that measures a firm's ability to pay off its short-term liabilities with its current assets, calculated as: $\frac{\text{Current Assets}}{\text{Current Liabilities}}$.

Acid Test (Quick) Ratio

A more stringent liquidity ratio that excludes inventory from current assets, calculated as: $\frac{\text{Current Assets} - \text{Stock}}{\text{Current Liabilities}}$.

Payback Period (PBP)

The amount of time it takes for an investment to generate cash flows sufficient to recover its initial cost.

Average Rate of Return (ARR)

A method of investment appraisal that measures the average annual profit of an investment as a percentage of the initial cost.

Cash Flow Forecast

A financial document that predicts the timing and amounts of cash inflows and outflows over a specific period, such as the first quarter of $2027$.

Net Cash Flow

The difference between the total cash inflows and total cash outflows of a business during a specific period.

Closing Balance

The amount of cash remaining in a business at the end of a period, calculated as: $\text{Opening Balance} + \text{Net Cash Flow}$.