Cambridge Business Studies Year 11 Stage 6 Fifth Edition - Definitions

Business

An organisation that attempts to satisfy the needs and wants of the community by providing goods and/or services.

Good

An item that businesses produce that can be seen and touched.

Service

An intangible product that is performed for someone by another person. An example is a consultation provided by a dentist.

Profit

The difference between revenue earned and total expenses for the period.

Inputs

The resources (such as labour, finance, raw materials and equipment) that a firm uses to create outputs.

Finance

The process of providing and managing the funds that are needed so that goods can be produced and services provided.

Outputs

The goods and/or services produced using various inputs.

Product

A good, service or idea that can be exchanged in the market. It includes all tangible and intangible features, such as size, colour, image and warranty.

Management

The people responsible for running the organisation.

Accountability

The process whereby managers are answerable to particular groups affected by the activities of the business.

Ethics

Standards of behaviour and moral position, which influence the choices and decisions the person makes; what is seen as right or wrong for a business based on the values of management, employees and the community.

Expenses

All the costs incurred in earning revenue; this could include wages, the cost of marketing and the purchase of materials and stock.

Wage

An hourly rate of pay; may include

overtime payments for work done outside

normal hours.

Small business

A business that

employs fewer than 20 people (Australian

Bureau of Statistics classification).

Net profit

The final amount of revenue

remaining after all expenses have

been paid.

Entrepreneur

An individual who has

developed certain ideas and is willing to

take a risk to implement them through a

business.

Economy

A system where governments,

businesses, consumers and other

relevant organisations interact to satisfy

the needs of society.

Global business

A business that often

sells its products across many countries.

Downsize

To decrease the scale of

operations - for example, through

a reduction in the number of staff

employed.

Redundancy

Workers are made

redundant when their labour is no

longer needed. This may be a result of

the business downsizing, restructuring

or introducing technology to perform the

workers' role. The business may ask

workers to volunteer to leave (voluntary

redundancy) or their employment may be

terminated (involuntary redundancy).

Brand

A name, design or symbol that distinguishes a particular product from the product of another business.

Price

The money value or cost to the

consumer of buying a good or service.

Quality

The extent to which employees

are working to the best of their ability

within the business and the extent to

which outputs are free from errors.

Innovation

The process of introducing a

new product or improving an existing one

through new ideas, methods, systems

and procedures.

Marketing

The process of developing

a product and implementing a series of

strategies aimed at correctly promoting

and pricing the product and distributing

it to a core group of customers.

Strategy

A plan designed to achieve a

goal or objective.

Competitive advantage

Those

features of a product or business that

provide it with an advantage over its

competitors.

Goals

Targets to work towards

in the longer term; the overall

accomplishments that an

organisation plans to achieve.

Goals are realistic, achievable

and measurable.

Shareholders

Owners of a

company; they provide the capital

that allows the company to

operate.

Dividend

The income earned

from owning shares in a company.

It is usually paid every three or

six months, and is based on the

profits the company makes.

Large business

A business that

employs 200 or more people (ABS

classification).

Small business

A business that employs

fewer than 20 people (ABS classification).

Revenue

All funds flowing into the

business; may include sales receipts

and fees for services, rent, interest from

investments and dividends from shares

in other businesses.

Micro business

A business that

employs fewer than five people (ABS

classification).

Medium-sized business

A business

that employs between 20 and 199 people

(ABS classification).

Local business

A business that

operates within a local area.

National business

A business that

operates across an entire country.

Global business

A business that often

sells its products across many countries.

Transnational business

A business

that operates in many countries. Its

goods and services are produced and

sold in a number of different countries.

Primary industry

Businesses involved

in the acquisition of raw materials,

including natural resources.

Secondary industry

Businesses that

use raw materials as well as labour and

capital equipment to create finished

products.

Tertiary industry

Businesses whose

prime function is related to providing

a service.

Quaternary sector

Tertiary sector

businesses that provide information

services to their customers and

businesses, which enable the transfer

of information.

Quinary sector

Tertiary sector

businesses that provide services

traditionally performed in the home.

Legal structure

How the ownership of

the business is registered.

Sole trader

An unincorporated business

with one owner.

Unincorporated businesses

Sole

traders and partnerships. These are

businesses that are not companies

because they have not gone through the

legal steps for incorporation.

Owner's equity

The owner's financial

claim on the assets of a business. It

is the original investment the owner

made into the business by contributing

capital or buying shares, plus any

profit the business makes. Also called

proprietorship or proprietor's funds.

Financial institutions

Organisations

such as banks and finance companies

that collect funds from savers to lend to

businesses and other borrowers.

Unlimited liability

If a business

has unlimited liability, the owner of

the business is personally responsible

(liable) for debt incurred by the business.

Assets

All the resources owned by and

under the direct control of a business or

individual.

Partnership

An unincorporated

business with more than one owner.

Private company

A business that

has limited liability and between one

and 50 owners.

Shareholders

Owners of a company;

they provide the capital that allows the

company to operate.

Limited liability

If a business

has limited liability, the owners

(shareholders) are not personally

responsible for the debt incurred by

the business.

Accounting

The process of collecting

and analysing the financial information

of a business and then communicating

the financial results to relevant

stakeholders.

Public company

A business that

is listed on the Australian Securities

Exchange and has ownership open to all

members of the public. Public companies

have limited liability.

Dividend

The income earned from owning shares in a company. It is usually paid every three or six months, and is based on the profits the company makes.

Prospectus

A document that describes

the nature of the business, its financial

performance and possible risks that

the business may face. It is issued to

potential investors.

Packaging

Provides protection for

a product and attracts interest in the

product.

Government enterprise

A business

set up by the government.

Privatisation

A process transferring

the ownership of a government business

to the private sector by issuing a

prospectus and listing the business on

the Australian Securities Exchange as a

public company.

Demutualisation

The process of

offering shares in a business to

members. The organisation becomes a

shareholder-based organisation rather

than an organisation controlled by

members.

Stakeholders

People and/or

organisations that are affected by the

decisions or actions of a business.

Economic cycle

The fluctuation of

consumer and business spending over a

period of time.

Gross domestic product (GDP)

The

measure of the total value of all goods

produced and services provided within a

country's domestic economy in one year.

Economy

A system where governments,

businesses, consumers and other

relevant organisations interact to satisfy

the needs of society.

Unemployment

A person is considered

to be unemployed if they are not currently

employed but are actively seeking work -

either full-time or part-time.

Inflation

The rate at which the cost

of goods and services is rising, which

affects the value of currency: as prices

go up, the same amount of money will

buy less.

Fiscal policy

Government actions,

such as the use of taxation (revenue)

and expenditure, that are intended to

influence the level of economic activity

in Australia. Mainly operates through the

Commonwealth Budget.

Monetary policy

Actions taken by the

Reserve Bank to influence the level of

interest rates in the Australian economy.

Microeconomic reform

Policies

developed by the government to promote

greater competition within a particular

industry.

Reserve Bank of Australia

The federal government's bank and the financial tool it uses to manipulate economic growth.

Deregulation

The government's

removal of or reduction in controls and

regulations on an industry or sector

of the economy or market in order to

achieve greater competition.

Debt finance

Funds borrowed from

a bank, an investor or another firm. It

involves a contractual agreement that

specifies the need to repay the principal

as well as interest, and states the set

period of time over which the debt must

be repaid.

Equity finance

Internal sources of

finance - that is, finance provided by

the owners, who can give the business

start-up capital or can contribute cash

by buying shares. It also refers to any net

profit reinvested in the business.

Demographics

The study of particular

features of the population, such as age,

sex, income and cultural background.

Common law

Based on custom or court

decisions.

Negotiation

A process involving two

or more parties attempting to reach

agreement and/or resolve a problem or

conflict through direct discussion. It may

involve a neutral third person, such as a

negotiator or mediator.

Goods and services tax (GST)

A tax

introduced by the federal government

in 2000. It is a tax of 10 per cent on the

cost of all inputs used in production.

Privatisation

A process transferring

the ownership of a government business

to the private sector by issuing a

prospectus and listing the business on

the Australian Securities Exchange as a

public company.

Proactive

Anticipating changes in the

business environment and, in response,

making adjustments to the business,

ensuring that it can take advantage of

opportunities and minimise threats.

Business plan

A written document

setting out the details of a business

and its products, including its market

and industry, as well as its goals and

objectives and its strategies to achieve

them. It is a complete analysis of the

business.

Opportunities

External environment

factors of which a business could take

advantage.

Trade unions

Organisations that aim

to protect and promote the interests and

working conditions of employees.

Employer associations

Organisations

that aim to promote the interests

of employers within the business

environment.

Communication

The exchange of

information between people; includes

talking, listening and understanding

what is being said.

Training

Any activities that are aimed

at improving an employee's present and

future performance in the workforce.

E-commerce

Electronic commerce; the

use of electronic communications (such

as the internet) to carry out business.

Oligopoly

A market situation whereby

there are only a limited number of

suppliers to the market, meaning there

is less pressure on businesses to offer

low prices.

Monopoly

A situation where there is only one firm in the marketplace.

Tariff

A tax on imported goods that

earns revenue for the government and

increases the price of the import, making

it less attractive to buy when compared

with locally made alternatives.

Quota

A limit on the quantity of

a product that can be imported. It

is a trade barrier that reduces the

competition faced by a domestic

producer.

Free trade agreements

Agreements

that allow the export and import of goods

and services between member countries

to proceed without restrictions.

Importing

The purchase of goods or

services from other countries for use in

the domestic sector. Imported goods or

services are called imports.

Exporting

The sale of goods or services to other countries. Goods must be transported to the country where they will be sold, but services do not need to be transported. Exported goods or services are called exports.

Outsourcing

A firm making a

commercial arrangement for another firm

to perform one of the support services

that it once performed itself - for

example, advertising.

Target market

The focus of the firm's

marketing strategy. It will include

existing as well as potential customers.

Non-core business functions

The activities of a business that are not

directly related to its main activity but

need to be performed, such as security

and IT support.

Recruitment

The stage in the human resource cycle that involves identifying staffing needs, seeking applications and selecting new employees.