Business terms

What is profit?

Revenue minus total costs. Used to measure business success.

Break-even point

The level of output where total revenue = total costs (no profit, no loss).

Contribution per unit?

Price − variable cost per unit

Why is break-even analysis useful?

Helps businesses set sales targets and understand minimum output needed to avoid losses.

Leadership

influencing, and inspiring others to achieve organizational goals.

Liquidity

ability to pay short-term debts

Working capital

the time difference between the firm paying cash for its costs of production and receiving cash from sales to customers

Cash flow

is a financial document that shows unexpected movement of cash in and out of a business over a period of time

Privately held company

owned by individuals or a small group. Pros: control, privacy

cons: harder to raise money

Publicly held company

owned by shareholders, pros: easy to raise money cons: less control, pressure from shareholders

Market oriented

A business that starts with customers needs and develop products for customers needs.

Unique Selling Point

what makes a product different from competitors, ex: lower price, better quality, faster delivery, strong brand image

A company has

• Fixed costs = $20,000

• Price per unit = $50

• Variable cost per unit = $30

• Actual sales = 1,500 unites

• Calculate the break even output and calculate margin of safety

• explain what the margin of safety means for the business

Fixed profit

costs that do not change with the level of output, meaning the businesses must pay them if it produces nothing

Target market

A specific group of customers a business aims to sell to

Market share

The percentage of total market sales a business has

Elastic demand

Demand that changes a lot when price changes

Human Resources motivation

The internal and external factors that drive employees to work hard

Financial rewards

Motivation using money (wages,bonuses

Non-financial rewards

Motivation without money (recognition, promotion, job enrichment)

Leadership styles (autocratic)

- boss makes decisions alone

Leadership styles (democratic)

Employees are involved in decisions

Leadership styles (Laissez-faire)

Employees have a lot of freedom

Swot analysis

A tool that identifies strengths, weaknesses, opportunities, threats. It is used for decision making

Stakeholders

Anyone interested in the business

Diversification

a strategy where a company expands into new products, services, or markets to reduce risk and create new opportunities for growth.

Sole trader

a type of business owned and run by one person.

Primary sector

refers to the business involved in the extraction of natural resources

Job enrichment

is a management strategy where a job is redesigned to make it more interesting by giving the employee more responsibility and control.

Corporate social responsibility (CSR)

ethical responsibility of a business toward society