INS - Business key terms

Revision tool for the Criteria A INS assessment

Business

A business is an organization or individual that produces, buys, or sells goods and services to satisfy customer needs in exchange for money.

For-Profit Business

The goal of the businesses is to make a profit

Non-Profit Business

Is a business that does not seek profit as its primary motive, but instead raises funds for a specific goal.

Manufacturing

These businesses generate profit by taking raw materials and turning them into finished products.

Retail

Generates a profit by selling things. Retail stores usually buy from a producer and sell those products to consumers.

Services

These businesses generate profit by doing something for other businesses or customers.

Sole Proprietorship

businesses that are owned by just one person. These people are referred to as the proprietor.

Partnership

s a business that is operated by two or more partners.

General partnership

all partners have unlimited liability for each other's debts.

limited partnership

artners have limited liability. Each partner is only responsible for paying back the amount that they invested in the partnership.

Corporations

They are generally very large and are the dominant business entity in the world today. They are not owned by one or two people but rather by hundreds if not thousands of shareholders.

private corporation

a corporation owned by just one or a few people who are closely involved in managing the business. Stocks are not sold to public.

public corporation

A corporation in which stock is sold to anyone who has the means to buy it. It shares are traded on the stock market.

crown corporation

A type of business owned by the government

municipal corporations

an incorporated town or city organized to provide services for citizens rather than to make a profit

Co-operatives

businesses owned jointly by their members, who share the profits equally

Franchises

One business, the franchiser, licenses the rights to its name, operating procedure, designs and business expertise, to another business, the franchisee.

ENTREPRENEURIAL CHARACTERISTICS

Qualities or traits demonstrated by an individual starting up and running a business

Entrepreneur

Is a person who starts his/her own business.

need

something like air, food, or shelter that is necessary for survival

want

an item that we desire but that is not essential to survival

invention

the creation of something new

innovation

an improvement on something.

idea-driven venture

Business that begins with a new, original, or creative idea

market-driven idea

Idea that you create as a result of trying to cater to an unsatisfied need/want of a certain group

Accountants

Use a company's financial information to make business decisions.

Accounting

The process of recording, analyzing, and interpreting the economic activities of a business.

Assets

Resources that are owned by a business (cash, receivables, equipment)

Liabilities

debts or amounts that are owed to others

Owner's equity

The net worth for a business

THE FUNDAMENTAL ACCOUNTING EQUATION

Assets = Liabilities + Owner's Equity. They must always be in balance!

Balance Sheet

used to record financial information about assets, liabilities and owner's equity.

Income Statements

financial statements that help a business calculate and report its profit or loss on business operations

Revenue

Money received from the sale of goods and services

Expenses

Money spent on things to help generate revenue (e.g., salaries, advertising, utilities) is known as

Profit Formula

Profit = Total Revenue - Total Expenses

Profit

If total revenue exceeds total expenses

loss

If total expenses exceeds total revenue

Net Income

The difference between total revenue and total expenses when total revenue is greater

Net Loss

The difference between total revenue and total expenses when total expenses are greater

Marketing

Includes research, development, sales, distribution, advertising and promotion

THE PRODUCT LIFE CYCLE

The stages through which goods and services move from the time they are introduced on the market until they are taken off the market.

PRICE

The price of a product must reflect the value customers place on it.

Cost Plus Pricing

The business calculates how much it costs to make each product. They add a set amount for profit (a "markup").

Competitive Pricing

Price is based on what other businesses charge.

Promotional Pricing

Short‑term discounts or special offers.

Channels of Distribution

Paths, or routes, that goods or services take from the producer to the ultimate consumer or industrial user

Direct channels

Direct channels connect buyers directly to the businesses providing those goods or services.

Indirect channels

Occurs when there are one or more intermediaries

Retailers

businesses that sell directly to final consumers

Wholesalers

buy goods in large quantities from producers or importers and resells them to retailers

Promotion

Promotion is the communication between businesses and customers or potential customers.

Market Segments

a part of the overall market that has several characteristics.

Demographics

Demographics is the study of obvious characteristics that categorize human beings.