Studied by 12 people
0 Level Channel
Involves the direct sale of a product from a manufacturer to the consumer with no intermediaries.
1 Level Channel
Involves one intermediary between the producer and the consumer. An example is a producer selling to a retailer who then sells to the consumer.
2 Level Channel
Involves two intermediaries between the producer and the consumer. For instance, a producer sells to a wholesaler, who then sells to a retailer, and finally to the consumer.
3 Level Channel
Includes three intermediaries between the producer and the consumer. An example is a producer selling to an agent, who then sells to a wholesaler, followed by a retailer, and finally to the consumer.
E-Commerce
The buying and selling of goods and services over the internet. It encompasses a variety of online business activities, including online retailing, electronic payments, online auctions, and internet marketing.
B2B
Transactions that occur between two businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. These transactions involve the sale of products or services from one business to another.
B2C
Transactions in which businesses sell products or services directly to consumers. This is the type of transaction that most people are familiar with, such as when a consumer purchases a product from a retail store or an online retailer.
C2C
Transactions that occur when consumers sell products or services directly to other consumers. This often takes place through online platforms or marketplaces where individuals can buy and sell items to each other.
Capital Expenditure
Money spent to acquire fixed assets in a business.
Eg. Machinery, land, buildings, equipment, etc.
Revenue Expenditure
Money used in the day-to-day running of a business.
Eg. Rent, wages, fuel, insurance, etc.
Personal Funds
A source of finance for sole traders that comes mostly from their own personal savings.
Retained Profit
Profit that remains after a business has paid out dividends to shareholders.
Sale of Assets
When a business sells off unwanted or unused assets to raise funds.
Share Capital
Money raised by a company by selling shares to investors. Shareholders then become partial owners of the company.
Shares
A percentage of a company.
Loan Capital
Funds borrowed by a business, typically with a fixed repayment schedule and interest. it's a form of debt financing
Overdraft
A short-term borrowing arrangement with a bank that allows a company to spend more money than it has in its account, up to a set limit.
Trade Credit
The practice of buying goods or services on credit and paying for them later. → It's like a "buy now, pay later" arrangement between businesses.
Crowdfunding
Raising funds from a large number of people, often online, for a specific project, business, or cause.
Eg. Go fund me
Leasing
A contractual arrangement where one party (the lessee) agrees to pay the owner (the lessor) for the use of an asset over a specific period, typically in return for regular rental payments.
Microfinance Providers
Organizations that offer financial services, such as small loans and banking, to individuals in low-income communities or developing countries.
Debt Factoring
Selling accounts receivable (unpaid invoices) to a third party (factor) at a discount in exchange for immediate cash. It helps businesses manage cash flow.
Business Angels/Angel Investors
Affluents individuals who invest in businesses during the beginning stages.
Eg. Shark Tank, Dragon’s Den
Fixed Costs
Costs that don’t change or vary with the amount of output or activity.
Variable Costs
Costs that change with the number of items produced → They are in direct proportion to the business activity.
Direct Costs
Costs that can be clearly identified with the production of specific goods or services.
Eg. Flour used in baking bread.
Indirect Cost
Costs that are not clearly identified with the production of specific goods or services. They are difficult to trace to a particular cost centre such as product, activity or departments.
Eg. Rent, insurance, advertising, etc.
Revenue
The income that a business earns from selling goods and services.
Total Revenue
Total Revenue = Price per Unit x Quantity Sold → TR = P x Q
Profit and Loss Account
A statement that records sales revenues and costs of a business to determine the net profit and distribution of profit; also known as the income statement.
Cost of Sales
The cost of goods actually sold by a business over a period of time.
Gross Profit
The sales revenue of a business minus the cost of sales.
Profit Before Interest and Tax
A company's earnings before deducting interest and taxes.
Profit Before Tax
A company's earnings before it is taxed.
Net Profit
The amount by which the total revenue of a company exceeds its total expenses over a specific period.
Dividends
A portion of a business’s profits distributed to the owners/shareholders.
Retained Profit
Money that a company has left at the end of the trading year after paying all costs, expenses, dividends and taxes.
Balance Sheet
A statement that records a business's assets, liabilities and equity; also known as the statement of financial position.
Assets
An item of property that has value and is owned by a person or business.
Liabilities
The financial obligations or debts of a business that arise from past transactions or events.
Net Assets
The total assets of a business minus the total liabilities.
Equity
The ownership interest in a company, representing the residual interest in the assets of the entity after deducting liabilities.
Liquidation
The ability of a business to convert its current assets into cash by selling them.
Intangible Assets
Non-physical items of value owned by a company that have a lifespan of more than a year.
Patents
A licence or grant that gives an inventor the exclusive right to make, use or sell a product for a specific period of time.
Goodwill
The intangible value a company possesses beyond its physical and intellectual assets. It encompasses aspects such as brand reputation, customer relationships, and the company's standing within the community.
Copyright Laws
Legal protection that gives an author or creator the exclusive right to reproduce work for a specific period of time.
Trademark
A form of intellectual property that refers to a word, symbol or phrase that identifies a specific product and distinguishes it from other products.
Depreciation
A reduction in value of an asset over time due to wear and tear.
Straight-Line Depreciation
A method used in accounting to calculate the fall in value of an asset evenly over its useful life.
Formula: original cost - residual value / number of expected years of use
Units of Production Depreciation
A method used in accounting to calculate the loss in value of an asset by estimating the units produced annually.
Residual Value
The estimated value of a fixed asset at the end of its lease term or useful life.
Gross Profit Margin
A profitability ratio that shows the gross profit as a percentage of sales revenue.
Profit Margin
A profitability ratio that shows the profit before interest and tax as a percentage of sales revenue.
Return on Capital Employed
A profitability ratio that shows the profit before interest and tax as a percentage of capital employed.
Current Ratio
A liquidity ratio that measures the value of current assets relative to current liabilities, calculated by dividing current assets by current liabilities.
Acid Test Ratio
A liquidity ratio that measures the value of current assets without stock included, relative to current liabilities.
Stock Turnover Days
A financial metric that measures the average duration of time for which each net input dollar of inventory is held before being sold. → A lower DSI value is generally preferred as it indicates that the company is selling its inventory more quickly.
Formula: average value of inventory / the cost of goods sold (COGS) x 365.
Debtor Days Ratio
A measure of the average number of days that it takes a business to collect its debts.
Formula: debtors / sales revenue x 365.
Creditor Days Ratio
A measure of the average number of days it takes a business to pay its debts.
Formula: creditors / cost of sales × 365
Gearing Ratio
A measure of how much of a business’s capital employed is financed by long-term debt.
Bankruptcy
A situation where an insolvent business has to follow a legal process to settle its debts.
Profit
Total revenue minus total costs.
Investment
Spending by a business on non-current (fixed) assets; also known as capital expenditure.
Investment Appraisal
A process of quantitative and qualitative evaluation of an investment decision.
Payback Period
A calculation of the length of time that it takes for a capital investment to pay for itself, by estimating future cash flow each year and working out the month and year in which the cash flow will finally cover the investment cost.
Average Rate of Return (ARR)
An investment appraisal technique that expresses the annual forecast returns as a percentage of the initial capital cost.
Net Present Value (NPV)
A method of making investment appraisals more accurate by using a discount rate to adjust the value of future returns.
Cashflow
Payments received by a business (inflows) and payments made by a business (outflows).
Discounted Cashflow
A valuation method used to estimate the value of an investment based on its expected future cash flows.
Budget
A plan that outlines a business’ revenue and expenditure over a period of time.
Budget Holder
An individual who is given the responsibility for managing and allocating a firm's budget within a specific area of the business.
Cost Centre
A department in a business that generates costs, but no revenue.
Profit Centre
A department in a business that generates both revenues and expenditures, so that its contribution to the profit of the business can be determined.
Variance
The difference between planned or budgeted sales revenue and costs and the actual sales revenue and costs.
Favourable Variance
A situation whereby actual income and expenditure figures are better for the business than expected.
Adverse Variance
A situation where actual income and expenditure figures are worse for the business than expected.
Decision Making
Choosing the best course of action among various alternatives to achieve organizational goals.
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