Business Key Terms

These need to be learnt so well that you know them better than the back of your hand.

Goods

Physical items like books or furniture (they are tangible)

Services

Actions performed by other people to aid the customer, e.g. barbers and plumbers provide services (they are not tangible)

Primary Sector

Produces raw materials - any natural resources which are used to make goods or services.

Secondary Sector

Manufactures goods

Tertiary Sector

Provides services

Enterprise

can mean either a business or organisation, or the personal qualities that mean you can see and take advantage of new business opportunities.

Entrepreneur

someone who takes on the risks of enterprise activity.

Land (factor of production)

As well as actual 'territory', includes all the Earth's natural resources.

Labour (factor of production)

the work done by the people who contribute to the production process 

Capital (factor of production)

the money, equipment, and man-made assets used by a business to set up, run, and produce goods or services 

Opportunity cost

the benefit that's given up in order to do something else

Sole traders

have just one owner (though the owner may employ other people to work for them)

Incorporated

a business with a legal identity completely separated from its owner(s)

Unincorporated

a business that does not have a separate legal identity from its owner(s)

Unlimited liability

the business owner is personally responsible for all debts if the business fails

Limited liability

business owners can only lose the money they invested if the business fails

Limited by guarantee

some members of a not-for-profit organization guarantee that they'll pay a fixed amount of money on behalf of a business if the organization closes with debts

Resources

the inputs that businesses use to provide their goods or services 

Interest

the money paid by banks as a reward to attract people to save with them

Interest rates

refer to the cost of borrowing money or the reward for saving money, expressed as a percentage.

Inflation

refers to the rate at which prices are increasing.

Gross Domestic Product (GDP)

measures all the income earned in a country’s economy in a year.

exchange rate

the price of one currency expressed in terms of another.

Imports

goods and services purchased from overseas customers in the domestic market.

Adding Value

Create something of higher value than its inputs (costs)

Deed of Partnership

A legally binding agreement between partners

Stock Exchange

a market for buying and selling shares of public limited companies. Large numbers of shares are being bought and sold all the time.

Flotation

occurs when a private limited company decides to become a public limited company.

Stakeholders

individuals and organisations that are affected by, and affect, the activities of a business

Shareholder

a person or an organisation that owns part of a company. Each shareholder owns a ‘share’ of the business

Company

a business that has its own legal identity. It can own items, owe money, sue and be sued.