BS

Section 1 definitions

What is a business?

A business is an organization that combines factors of production to make products which satisfy peoples wants.

What are goods?

Goods are tangible products made by businesses to be sold to customers, such as cars and clothes

What are services?

Services are intangible products, such as banking or transport, that are provided by businesses to customers

What are the factors of production

The factors of production are the resources needed to produce goods or services. There are four of them and they are limited in supply.

What is capital?

Capital is the money invested into a business by the owners.

What is added value?

Added value is the difference between the selling price of the product and the cost of bought-in materials and resources needed to produce it.

What is opportunity cost?

Opportunity cost is the value of the next best alternative given up when choosing one option after another

What is the primary sector?

The primary sector of industry extracts and uses the natural resources from the earth to produce raw materials used by other businesses

What is the secondary sector?

The secondary sector of industry manufactures goods using the raw materials provided by the primary sector

What is the tertiary sector?

The tertiary sector of industry provides goods and services to consumers and the other economic sectors

What is the private sector?

The private sector is the part of the economy owned and operated by the individuals and companies, usually for profit, and is not state/government controlled

What is the public sector?

The public sector is made up of organizations in the economy that are owned and controlled by the government

What is an entrepreneur?

An entrepreneur is a person who has an idea for a new business, starts it up and accepts the risks of the new business venture.

What is a business plan?

A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts

What does “Capital employed” mean?

Capital employed is the total amount of capital invested in a business for the purpose of generating profits

What is internal growth?

Internal growth occurs when a business expands its existing operations.

What is External growth?

External growth is when a business takes over or merges with another business. It is often called integration, as one business is integrated into another one.

What is a takeover?

A takeover is when one business buys out the owners of another business, which then becomes part of the “predator” business—the business which has taken it over/become the new owner.

What is a merger?

A merger is when the owners of two businesses agree to join their businesses together to make one business.

What is a Horizontal integration

Horizontal integration is when one business merges with or takes over another one in the same industry at the same stage of production

What is Vertical Integration?

Vertical integration is when one business merges with or takes over another one in the same industry at a different stage of production. Vertical integration can be forward or backward.

What is a sole trader?

A sole trader is a business owned and controlled by one person

What is a partnership?

A partnership is formed when two or more people agree to jointly own a business.

What is a partnership agreement?

A partnership agreement is the written and legal agreement between business partners. It is not essential for partners to have such an agreement, but it is always recommended.

What is an unincorporated business?

An unincorporated business is one that does not have a separate legal identity from the owners of the business.

What is unlimited liability?

Unlimited liability means that the owners of a business can be held responsible for the debts of the business they own. Their liability is not limited to the investment they made in the business.

What is limited liability?

Limited liability means that the liability of shareholders in a company is limited to only the amount of money they invested.

What is an incorporated business?

Incorporated businesses are companies that have separate legal identity from their owners.

What are shareholders?

Shareholders are the owners of a limited company. They buy shares which represent part-ownership of the company.

What are private limited companies?

Private limited companies are businesses owned by shareholders but they cannot sell shares to the public – only to family, friends or specialist business investors.

What is an annual general meeting?

An annual general meeting (AGM) is a legal requirement for all public limited companies, Shareholders may attend and vote on who they want to be on the Board of Directors for the coming year

What are dividends?

Dividends are payments made to shareholders from the profits (after tax) of a company. They are the return to shareholders for investing in a company

What is a franchise?

A franchise is a business based upon the use of the brand name, promotional logo and product ideas of an existing successful business.

What is a franchisor?

A franchisor is the original business that sells the right to a franchisee to use its name and idea. The franchisor sells the right to open stores and sell products or services using its brand name.

What is a franchisee?

A franchisee buys the license to operate an outlet of an existing business from the franchisor.

What is a joint venture?

A joint venture is where two or more businesses start a new project together, sharing capital, risks and profits

What is a social enterprise?

A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business

What are business objectives?

Business objectives are the aims or targets that a business works towards

What is profit?

Profit is the surplus after total costs have been subtracted from revenue

What is market share?

Market share is the percentage of total market sales held by one brand or business

What is a stakeholder?

A stakeholder is any person or group with a direct interest in the performance and activities of a business.

What are internal stakeholders?

Internal stakeholders are individuals or groups who work within or own the business. They have a direct interest in the performance and activities of the business.

What are external stakeholders?

External stakeholders are individuals or groups who are separate from the business but have a direct interest in the performance and activities of the business.