OCR GCSE Business Studies Paper 2 Flashcards

Flashcards of key vocabulary and definitions related to business studies, operations, finance, and influences on business.

Job production

Is the process of production where products are made individually

Batch production

Is the process of production where one type of product is made and then production is switched to make a different product

Flow production

Is production of one product that takes place continuously using a production or assembly line; sometimes called mass production

Automation

Is a production process involving machinery controlled by a computer, not a person

Robotics

Is the use of robots in the process of production

Quality

Quality is when a product is suitable for its intended purpose

Quality assurance

Is when the whole business focuses on quality, aiming to prevent quality problems arising.

Quality control

Is a system for inspecting the quality of the goods or services produced and they are of a good standard

Returns

Are goods which customers take back to the shop because there are problems with the quality of them.

Recalls

Are when a fault occurs with a product and the business asks for the product to be brought back so it can be repaired or replaced.

E-commerce

Is the bringing together of buying and selling electronically.

Customer service

Is the area of business that deals with customer enquiries.

Customer engagement

Is the contact between the business and customer.

Face to face selling

Is usually completed in a shop where there is direct contact between buyer and seller.

Telesales

Is sales completed over the telephone.

After-sales service

Is advice and help given to a customer after they bought a product or service

Product knowledge

Is the detailed knowledge of a product or service that staff have to help persuade a customer to buy.

Fit for purpose

Means that goods must do what they are meant to do.

As described

Means that goods must be as the business described them.

Consumer law

Is the area of law that protects the customers of a business, mainly through the Consumer Rights Act 2015.

Satisfactory quality of goods

Means that how the goods are made will reflect the price; a high-priced product must be of high quality.

Reputation

Of a business is what customers say and feel about a business.

Location

Refers to the place where a business is sited.

Proximity

Means 'nearness to' or how close something is

Procurement

The management of purchasing within a business

Logistics

The process of organising the transport of goods from the seller to the buyer

Supply chain

The chain of businesses involved in the production of a product and its delivery to the user

Finance

Money raised and used by a business

Finance function

The finance department, usually found in larger businesses. Small businesses usually employ accountants.

Forecast

An estimate or prediction of what is to come

Financial information

Details of profit, loss, cash flow, break-even, profit margin and average rate of return used in business decision making

Retained profit - money
not given out as profit and
kept within the business
Sale of assets - goods
etc. owned are sold to
raise money
Overdraft - bank makes
available more money than
they have in their account
Trade credit - business
sells goods after agreeing
to pay for them at a later
date
Taking on a new partner

• the new partner invests
  their own money into the
  business
  Loan - set amount of
  money borrowed for a set
  period of time
  Share issue - new shares Long term, limited companies only
  are sold to raise more
  money
  Crowdfunding - money
  raised through an appeal
  to the public who are
  supporters of the businessMedium or long term
  All businesses
  Advantages
  No need to repay the money
  No interest has to be paid
  No cost to raise the finance
  No interest has to be paid
  ANALYSIS
  No need to repay money
  No cost to raise the finance
  Can raise large amounts of capital
  depending how much the asset is worth
  Good if asset is no longer used
  Can meet short-term cash flow problems
  Can continue trading in the short term
  Allows the business buying the goods to sell
  them on to a customer before payment is
  made to the supplier
  Period of credit is usually interest free
  May bring new skills/ ideas to the business
  No cost to raise the finance
  Repayment is spread over a period of time
  Paying in instalments can help with budgeting
  A lot of finance can be raised from many
  investors
  Money does not have to be paid back
  No interest has to be paid
  A lot of money can be raised from a lot of
  contributors
  Used for start-up or expansion
  Disadvantages
  Limited to amount of savings they have
  Only available to businesses that have made a
  profit
  Can take time to sell the asset
  May not be possible to find a buyer
  Interest is charged - it can be expensive
  Interest is charged if the credit is not
  repaid within the time limit
  The new partner will have a say in the
  unning of the business
  The new partner will be entitled to a share
  of any profits
  Interest has to be paid
  Business may need to risk an asset as
  security
  Dividends may have to be paid
  Shareholders are entitled to have a say in
  the running of the business
  The business may be taken over (PLCs)
  Interest will need to be paid on loans
  Profits may need to be shared if equities
  are soldOwners capital - owners
  savings invested

Money not given out as profit and kept within the business

Revenue

The money received from sales; Total Revenue = Quantity (Q) x Price (P)

Fixed Costs

Costs that stay the same regardless of a change in output e.g. rent, salaries, business tax, insurance and advertising etc.

Variable Costs

Costs that change as output changes e.g. wages, raw material costs, energy used in production, advertising etc.

Total Costs

The addition of total fixed costs and total variable costs; TC = TFC + TVC

Profit

Revenue – total costs

Cost of sales

The cost to the business of producing good to sell e.g. buying materials, buying stock to sell, employing workers to make a product

Expenses

The costs of operating the business e.g. rent or mortgage, wages and salaries, insurance, heating and lighting and advertising

Gross Profit

Sales – costs of sales; Sales refers to sales income which is the same as total revenue

Loss

When the costs of the business are greater than the revenue made

Net Profit

Gross Profit – Expenses

Gross Profit Margin

Gross Profit divided by sales (or total revenue) x 100

Net Profit Margin

Net Profit divided by sales (or total revenue) x100

Break-even quantity

the amount a business must sell to earn enough revenue to just cover its costs so it does not make a profit or loss

Margin of safety

actual sales – breakeven sales. The amount a business’ actual output is greater than its break-even level of output

Fixed costs

Costs that do not change depending on output

Variable costs

Costs that change depending on the level of output

Total costs

total fixed costs + total variable costs

Cash flow forecast

Is a statement showing the expected flow of money into and out of a business over a period of time

Net cash flow

Is total inflow minus total outflow

Opening balance

Is the amount of cash available at the beginning of the month that was closing balance at the end of the previous month

Closing balance

Is the amount of cash left at the end of the month; this becomes the opening balance at the start of the next month

Total inflow

Is the total amount of cash flowing into a business

Total outflow

Is the total amount of cash flowing out of a business

Negative cash flow

Is when during one month, more cash is flowing out of the business than is flowing into it.

Positive cash flow

Is when during one month, more cash is flowing into the business than is flowing out of it.

Income

Is money that the business receives

Expenditure

Is money that the business pays out

Liquidity

Is the ability of a business to pay its short-term debts which must be paid in the near future

Expenses

Are the bills that a business has to pay in the near future, for example electricity

Ethics

Ethics is about what is right and wrong

Child labor

Is the use of young children, below the legal age for employment, in order to achieve low-cost production

Fairtrade

Is a movement that encourages businesses to pay a fair price to suppliers in developing countries and consumers to buy Fairtrade goods

Environmentally friendly

Describes consumers and businesses that act to make production sustainable

Sustainable production

Is when production does not lead to the depletion (using up) of natural resources

Renewable resources

Are resources that can be used more than once, such as wind or water power.

Non-renewable resources

Are resources that can only be used once, such as oil

Recycling

Is when resources are reused to produce something

Global warming

Is the rise in average temperatures that scientists say is taking place

Waste disposal

Is the process of getting rid of unwanted materials

Pollution

Is causing harm to the environment including air, land and water

Climate change

Is the process when average temperatures rise or fall and patterns of weather change

Economic climate

Refers to how well the country is doing in terms of the levels of income and employment

Income

Is the amount of money that people receive from work and assets they own, such as shares and property

Customers

Are buyers why buy goods and services

Consumer income

Is the total amount of income that all customers in the country receive and which they have available to spend

Level of unemployment

Is the numbers of people in work in a country

Level of income

Is the average income of people in a country

Economic growth

Is a period when income and employment is rising

Recession

Is a period when income and employment is falling

Distribution on income

Refers to how the income is shared amongst different people in the community

International economic climate

Refers to what is happening to income and employment in different parts of the world

Globalisation

Is the process of how business activity around the world has become increasingly interconnected

International branding

Is creating an image or values that are communicated in countries around the world

Capital

Is the money or assets such as machines, buildings, vehicles

Free trade

Is the absence of restrictions on trade between countries

Trade

Is the import and export of goods and services

Tariff

Is a tax on a good or service that is imported

Quota

Is a limit in terms of weight or value on the amount of goods that can be imported

Regulations

Are rules about the goods and services that can be sold in a country

Multinational companies

Are businesses that operate I different countries around the world

Unit cost

Is the cost per unit produced. The greater the productivity of workers, the lower the unit cost of production

Productivity

Is a measure of the output of each worker on average

Interdependent nature of business

Refers to the links between different areas of business that affect decision making, the risks and rewards of business activity and the use of financial information to aid business decision making

Financial information

Includes information about revenues, costs, profit, rates of return, break-even and cash flow; these help the business to make decisions

Non-financial rewards

To owners, this includes the satisfaction of running a successful business, being in charge, being independent and having an impact on what consumers buy

Non-financial risk

To business owners this includes their health due to stress and strained relationships with family and friends

Business performance

A measure of how well a business is doing; key measures are sales, profits and rates of return

Financial reward

The profit made by the business