Unit 1 Key Terms

Mission

Mission

An organisation's aims or long-term intentions. It is its ultimate purpose

Mission statement

A qualitative statement of an organisation's aims that uses language intended to motivate employees and convince customers, suppliers and those outside the firm of its sincerity and commitment

Business objectives

The results a business aims to achieve to accomplish your longer-term company vision

Corporate objectives

Goals of the whole organisation rather than of different elements of the organisation. They are set to co-ordinate the activities of, give a sense of direction to and guide the actions of the whole organisation. They are dictated by the mission to corporate aims of an organisation

Functional objectives

Goals of each of the functional areas of a business (marketing, finance, HR). They are designed to ensure that the business achieves its corporate objectives and thus its overall aims or mission. Like corporate objectives, functional objectives are set to co-ordinate the activities of, and guide the actions of, a division or department

Strategy

The medium to long term plans through which an organisation intends to achieve its objectives

Cash flow

The amounts of money flowing into and out of a business over a time

Price

The amount paid by a consumer to purchase one unit of a product

Total revenue (or turnover or sales revenue)

The income received from an organisation's activities

Total revenue equation

Total revenue = price per unit x quantity of units sold

Fixed costs

Costs do not vary directly with output in the short run

Variable costs

Costs vary directly with output in the short run

Total costs

The sum of fixed costs and variable costs

Profit

The difference between the income of a business and its total costs

Unincorporated business

There is no distinction in law between the individual owner and the business itself. The identity of the business and the owner is the same. Such businesses tend to be sole traders or partnerships

Incorporated business

This has a legal identity that its separate from the individual owners. As a result, these organisations can own assets, own money and enter into contracts. Such businesses include private limited companies and public limited companies

Unlimited liability

A situation in which the owners of a business are liable for all the debts that the business may incur

Limited liability

A situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital

Sole trader

A business owned by one person. The owner may operate on their own or may employ other people

Private limited company

A small to medium sized business that is usually run by the family or the small group of individuals who own it

Public limited company

A business with limited liability, share capital over £50,000, at least two shareholders, two directors, a qualified company secretary and usually a wide number of shareholders. It has ‘plc’ after the company name

Ordinary share capital

Money given to a company by shareholders in return for a share certificate that gives them part ownership of the company, ordinary share capital is permanent so a business will never be required to repay the value of these shares to their owners

Dividend

A payment made by a company to its shareholders out of profits earned. Dividends are allocated as fixed amounts per share with shareholders receiving a dividend in proportion to their shareholding. When a company earns a profit or surplus it can reinvest it in the business, distribute it to shareholders or allocate a proportion to reinvestment and a proportion as dividends

Market Capitalisation

The value of outstanding shares in a public limited company. Outstanding shares are the total of all ordinary shares issued and fully paid up. Market capitalisation is calculated by multiplying the total outstanding shares by the current market price of an individual share

Shareholder

The owner of a limited company, any person, company or other institution that owns at least one share in a company

Share price

The price of a single share in a company, share prices are usually determined by the supply and demand for shares

Mutual societies

Mutual societies exist to provide mutual benefits for their members. They are owned and democratically controlled by their members. Their purpose is usually to raise funds from their members or customers which are then used to provide common services to their members. They include; building societies, mutual insurance companies, co-operative and community benefit societies and those organisations formerly known as industrial and provident societies

Charity

An organisation that has exclusive charitable purposes. It can't make a profit and all money raised must go toward achieving its stated aims. It can't have owners and shareholders who benefit from it

Demand

The amount of a product that consumers are willing and able to buy at any given price over a period

Market conditions

The relative attractiveness of the external market in which a business operates

Interest rates

The cost of borrowing money and the return for lending money

Demographics

The characteristics of human populations and population groups, it includes analyses of a range of elements including migration trends, birth and death rates, trends in age etc

A good

They are tangible things that are produced, bought or sold, then finally consumed

A service

They are activities that other people or businesses do for you

A product

They are anything that is capable of satisfying customer needs

Aims

The overall target or goal of the business

Objectives

The short-term steps a business needs to take to meet its overall aims

Stakeholder

It is a party that has an interest in a company and can either affect or be affected by the business

Average costs

The total costs incurred to produce a product, divided by the total number of units produced

Privatisation

The transfer of ownership of property or businesses from a public (government) sector to private ownership

Market Conditions

The various factors and influences that affect the state of a specific market at a given point in time

Demand

The amount of a product or service that customers are willing and able to pay for at a given time

Gross Domestic Product

The monetary value of all finished goods and services made within a country during a specific period

Real Incomes

The earnings of individuals or the nation after adjusting to the extent of inflation

Interest Rates

The cost of borrowing money or the amount a saver receives in interest

Fair Trade

It is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade

Sustainable Production

The creation of goods and services using processes and systems that are: Non-polluting. Conserving of energy and natural resources. Economically viable. Safe and healthful for workers, communities, and consumers

Takeover

This occurs when one company makes a successful bid to assume control of or acquire another