IB Business Management SL Revision Flashcards

Vocabulary practice flashcards covering Unit 1 (Business Organization & Environment), Unit 3 (Finance & Accounts), and Unit 4 (Marketing) from IB Business Management SL notes.

Business

An organization that combines inputs (land, labour, capital, enterprise) to produce goods/services to satisfy needs and wants.

Added Value

The difference between the cost of purchasing raw materials/inputs and the price the final good is sold for, calculated as $\text{Added Value} = \text{Selling Price} - \text{Cost of Bought-in Materials/Components}$.

Factors of Production

The four inputs used to produce goods and services: Land (natural resources), Labour (human effort), Capital (man-made resources, machinery, finance), and Enterprise (risk-taking, organizing the other three).

Primary Sector

Business sector focused on the extraction of raw materials (e.g., farming, mining, fishing).

Secondary Sector

Business sector focused on manufacturing or construction (turning raw materials into products).

Tertiary Sector

Business sector focused on providing services (e.g., retail, banking, education).

Quaternary Sector

Business sector focused on knowledge- and information-based services (e.g., R&D, IT consulting).

Sole Trader

A business entity owned by one person, who has unlimited liability and full control, which is easy to set up but faces limited capital and high workload burden.

Partnership

A business entity owned by 2 or more individuals who share decision-making and capital, but where disagreements are possible and owners usually face unlimited liability.

Private Limited Company (Ltd)

A business entity where shares are sold privately with limited liability for owners, though it is harder to raise large capital compared to public companies.

Public Limited Company (Plc)

A business entity whose shares are sold on the stock exchange to the public; it can raise large capital, but risks takeover and must publish accounts.

For-profit Social Enterprise

A business that trades for a social or environmental mission while also generating profit.

Non-governmental Organization (NGO) / Public Corporation

A government-owned entity or non-governmental organization that aims to provide a public service rather than pure profit.

Limited Liability

A legal condition where owners are only liable to lose the amount they invested and are not personally responsible for business debts.

Unlimited Liability

A legal condition where owners are personally responsible for all business debts beyond their initial investment.

Vision Statement

A statement outlining a business's long-term aspiration, describing where it wants to be in the future.

Mission Statement

A statement defining the core purpose and values of a business, guiding overall decision-making.

SMART Objectives

Goals that are Specific, Measurable, Achievable, Realistic, and Time-bound.

Corporate Social Responsibility (CSR)

Voluntary actions a business takes to be ethically and environmentally responsible beyond legal requirements.

Internal Stakeholders

Individuals or groups within the business (e.g., employees, managers, shareholders).

External Stakeholders

Individuals or groups outside the business who are affected by its activities (e.g., customers, suppliers, government, local community, pressure groups).

STEEPLE Analysis

A framework for analyzing external factors affecting a business: Social, Technological, Economic, Environmental, Political, Legal, and Ethical.

Internal (Organic) Growth

Business expansion using the firm's own internal resources (e.g., opening new stores, developing new products); it is slower but lower risk.

External Growth

Business growth achieved via mergers or acquisitions/takeovers; it is faster but carries higher risk.

Horizontal Integration

A merger with or acquisition of a business at the same stage of production in the same industry.

Forward Vertical Integration

A merger with or acquisition of a business closer to the customer (e.g., a manufacturer buying a retailer).

Backward Vertical Integration

A merger with or acquisition of a business closer to the supply source (e.g., a manufacturer buying a raw material supplier).

Conglomerate Integration

A merger with or acquisition of a business in a completely different industry to achieve diversification and spread risk.

Economies of Scale

The reduction in average costs that occurs as a business increases its output.

Diseconomies of Scale

The increase in average costs that occurs when a business grows too large, leading to communication or coordination problems.

Business Plan

A formal document outlining a business's objectives, strategy, and financial forecasts, often used to secure funding.

Fishbone (Ishikawa) Diagram

A visual tool used to identify the root causes of a problem by grouping them into categories such as people, process, and materials.

Fixed Costs

Costs that do not change with the level of output in the short run (e.g., rent, salaries).

Variable Costs

Costs that change directly with the level of output produced (e.g., raw materials, piece-rate wages).

Total Costs

The sum of all fixed and variable costs, calculated as $\text{Total Costs} = \text{Fixed Costs} + \text{Variable Costs}$.

Revenue

The total income generated from selling goods or services, calculated as $\text{Revenue} = \text{Price} \times \text{Quantity Sold}$.

Profit

The net financial gain achieved when total revenue exceeds total costs, calculated as $\text{Profit} = \text{Total Revenue} - \text{Total Costs}$.

Direct Costs

Costs that can be clearly and directly attributed to producing a specific product or output.

Indirect Costs (Overheads)

Costs that cannot be attributed directly to one single product (e.g., admin costs, utility bills).

Break-Even Quantity (Qbe)

The output level where total revenue equals total cost, calculated as $\text{Break-Even Quantity} = \frac{\text{Fixed Costs}}{\text{Price} - \text{Variable Cost per unit}}$.

Contribution per unit

The amount each unit sold contributes towards covering fixed costs, calculated as $\text{Contribution per unit} = \text{Selling Price} - \text{Variable Cost per unit}$.

Margin of Safety

The difference between actual output and the break-even level of output, calculated as $\text{Margin of Safety} = \text{Actual Output} - \text{Break-Even Output}$.

Income Statement (Profit & Loss Account)

A financial account showing a business's revenue, costs, and resulting profit over a specific trading period.

Gross Profit

The profit made from trading operations before expenses, calculated as $\text{Gross Profit} = \text{Sales Revenue} - \text{Cost of Goods Sold (COGS)}$.

Profit for the year (Net Profit)

The final profit remaining after deducting all expenses, calculated as $\text{Profit for the year} = \text{Gross Profit} - \text{Total Expenses}$.

Statement of Financial Position (Balance Sheet)

A financial snapshot of a business's assets, liabilities, and equity at a specific point in time.

Non-current (Fixed) Assets

Long-term assets retained and used repeatedly by the business for more than a year (e.g., property, equipment, vehicles).

Current Assets

Short-term assets that are intended to be converted into cash within a year (e.g., cash, inventory, trade receivables).

Current Liabilities

Short-term debts due to be settled within a year (e.g., trade payables, overdraft).

Non-current Liabilities

Long-term debts due after more than one year (e.g., long-term loans, debentures).

Equity

The total value representing the owners' stake in the business, calculated as share capital plus retained earnings.

Accounting Equation

The fundamental accounting rule stating that $\text{Assets} = \text{Liabilities} + \text{Equity}$.

Depreciation

The reduction in value of a non-current asset over time, allocated as an expense across its useful life.

Gross Profit Margin

A ratio measuring profitability from trading, calculated as $\text{Gross Profit Margin} = \left(\frac{\text{Gross Profit}}{\text{Sales Revenue}}\right) \times 100$.

Net (Profit) Margin

A ratio measuring overall profitability, calculated as $\text{Net Profit Margin} = \left(\frac{\text{Net Profit}}{\text{Sales Revenue}}\right) \times 100$.

ROCE (Return on Capital Employed)

A ratio measuring returns earned on capital invested, calculated as $\text{ROCE} = \left(\frac{\text{Net Profit before Interest \& Tax}}{\text{Capital Employed}}\right) \times 100$.

Current Ratio

A short-term liquidity ratio calculated as $\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$.

Acid Test (Quick) Ratio

A liquidity ratio excluding inventory, calculated as $\text{Acid Test Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}$.

Inventory (Stock) Turnover

An efficiency ratio measuring stock management, calculated as $\text{Inventory Turnover} = \frac{\text{COGS}}{\text{Average Inventory}}$.

Debtor Days

An efficiency ratio measuring the average days taken to collect payments from customers, calculated as $\text{Debtor Days} = \left(\frac{\text{Trade Receivables}}{\text{Sales Revenue}}\right) \times 365$.

Creditor Days

An efficiency ratio measuring the average days taken to pay suppliers, calculated as $\text{Creditor Days} = \left(\frac{\text{Trade Payables}}{\text{COGS}}\right) \times 365$.

Gearing Ratio

A capital structure ratio measuring the proportion of long-term debt finance, calculated as $\text{Gearing Ratio} = \left(\frac{\text{Non-Current Liabilities}}{\text{Capital Employed}}\right) \times 100$.

Cash Flow

The movement of cash inflows and outflows into and out of a business.

Cash Flow Forecast

A financial planning tool predicting future cash inflows and outflows over a specific period.

Net Cash Flow

The difference between cash inflows and outflows in a period, calculated as $\text{Net Cash Flow} = \text{Cash Inflows} - \text{Cash Outflows}$.

Closing Balance

The amount of cash a business holds at the end of a period, calculated as $\text{Closing Balance} = \text{Opening Balance} + \text{Net Cash Flow}$.

Payback Period

An investment appraisal technique calculating time needed to recover initial investment, calculated as $\text{Payback Period} = \text{Years before recovery} + \left(\frac{\text{Remaining cost}}{\text{Cash flow in recovery year}}\right)$

Average Rate of Return (ARR)

An investment appraisal metric calculating overall profitability percentage, calculated as $\text{ARR} = \left(\frac{\text{Average Annual Profit}}{\text{Initial Investment}}\right) \times 100$.

Net Present Value (NPV)

An investment appraisal method accounting for the time value of money, calculated as $\text{NPV} = \text{Sum of Discounted Cash Flows} - \text{Initial Investment}$.

Marketing

The management process responsible for identifying, anticipating, and satisfying customer requirements profitably.

Market Orientation

An approach where business decisions are based primarily on consumer wants identified through market research.

Product Orientation

An inward-looking approach where a business focuses on developing high-quality products first, then selling them.

Niche Marketing

Marketing approach targeting a small, specific market segment with specialized or tailored products.

Mass Marketing

Marketing strategy targeting the entire market with a single product and standardized message.

Market Share

A business's sales expressed as a percentage of total industry sales, calculated as $\text{Market Share} = \left(\frac{\text{Business's Sales}}{\text{Total Market Sales}}\right) \times 100$.

Market Leader

The business holding the highest percentage of market share in a given industry.

Market Growth

The percentage change in the overall size or sales volume of a market over time.

Segmentation

Dividing a broad target market into distinct subsets of consumers based on demographics, geography, psychographics, or behaviour.

Targeting

The process of selecting specific market segment(s) to focus marketing strategies and resources on.

Positioning

How a brand or product is perceived in the minds of consumers relative to competing brands.

Unique Selling Point (USP)

A distinctive feature or characteristic that differentiates a product from its direct market competitors.

Primary Research

First-hand data collection gathered directly for a specific, intended research purpose (e.g., surveys, focus groups).

Secondary Research

Second-hand data that already exists having been previously collected for a different primary purpose.

Quantitative Research

Research collecting numerical and statistical data, usually involving large sample sizes.

Qualitative Research

Research gathering in-depth non-numerical insights into human attitudes, perceptions, and opinions.

Product Life Cycle (PLC)

The sequence of stages a product passes through during its life: Introduction, Growth, Maturity, and Decline.

Extension Strategies

Marketing methods (e.g., re-branding, new packaging) designed to prolong the maturity phase and delay product decline.

Boston Consulting Group (BCG) Matrix

A product portfolio management framework categorizing products by market growth and market share into Stars, Cash Cows, Question Marks, and Dogs.

E-commerce

The process of buying and selling goods and services online over the internet.

M-commerce

Commercial transactions and buying/selling activities conducted via mobile devices such as smartphones and tablets.