Business

intensive vocab

Capacity utilisation

The proportion of maximum output capacity currently being achieved

by a company in relation to its production capabilities. It is a key indicator of operational efficiency.

rate of capacity utilisation

current output level/ maximum output level x 100

outsourcing

using another business (a third party) to undertake a part of the production process rather than doing it within the business using the firm’s own employees

Apple giving another bus. a task of making its Iphone parts

Maximum (full) capacity

the highest level of sustained output that can be achieved

excess capacity

this exists when the current levels of output are less than the full-capacity output of a business; also known as spare capacity

rationalisation

reducing capacity by closing factories/ production units

Inventory

materials and goods held by a business and required to allow for the production of products and their supply to the customer

Example retail: items available for sale, clothing, shoes, electronics

break-even point

The level of output at which total costs equal total revenue, when neither a profit nor a loss is made

cost centre

the section of a business, such as a department or a product, that incurs the cost

direct costs

these costs can be clearly identified with each unit of production and can allocated to a cost centre

fixed costs

costs that do not vary with output in the short run

variable costs

costs that vary with output

total cost

variable cost plus fixed cost

indirect costs

costs that cannot be identified with a unit of production or allocated accurately to be a cost centre

profit centre

a section of a business to which both costs and revenues can be allocated, so profit can be calculated

average cost

total cost / by the number of units produced

fall costing

a method of costing in which all indirect and direct costing are allocated to the products, services or divisions of a business

contribution costing

costing method that allocates only direct costs to cost centres and profit centres, mot overhead costs

this solves the problem of deciding on the most appropriate way to allocate or share out overhead costs between products

marginal cost

the additional cost of producing one more unit of output

break-even analysis

uses cost and revenue data to determine the break-even point of production

margin of safety

the amount by which the current output level exceeds the break-even level of output

useful indication of how much sales could fall without the business making a lost

contribution per unit

the price of a product - the direct (variable) costs of producing it

Cash flow

the sum of cash payments to a business - the sum of cash payments from the business

insolvent

when a business cannot meet its short term debts

Cash inflow

cash payments made to the business

cash outflow

cash payments out of the bus.

net cash flow

estimated difference between cash inflow and cash outflow for a period of time. Ex. one month

Opening cash balance

cash held by the business at the start of the month

closing cash balance

cash held by the business at the end of the month, which then becomes next month’s opening balance

overtrading

expanding a business rapidly without obtaining all of the necessary finance, resulting in a cash flow shortage

credit control

monitoring of debts to ensure that credit periods are not exceeded

bad debt

unpaid customers’ bills that are now very unlikely to ever be paid

Inventory management

the process of ordering, storing and using a company’s inventory

economic order quantity

the optimum (best) or least- cost quantity of stock to re-order taking into account delivery costs and stock-holding costs

buffer inventory

minimum inventory level that should be held to ensure that continuous production is possible should delivery delays occurs or outputs increase

re-order level

the level of inventory that triggers a new order to be sent to suppliers

lead time

the time between ordering new supplies and their delivery

re-order quantity

number of units ordered each time

buffer inventory

minimum inventory level that should be held to ensure that continuous production is possible should delivery delays occur or output increase

supply chain

the network of all the business and activities involved in creating a product for sale, starting with the delivery of raw materials and inishing with the delivery of the finished product

supply chain management

handling the entire production flow of a production flow of a product (from raw materials to finished product) to minimize costs but improve customer service

just-in-time (JIT) inventory management

aims to avoid holding inventories by requiring supplies to arrive just as they are needed in production and complete products are produced to order

Just-In-Case (JIC) inventory management

aims to reduce the risk of running out of inventory to the minimum by holding high buffer inventiry levels

entrepreneur

an individual who has the idea for a new business, starts it up and carries most of the risk but benefits from the reward

customer

an individual consumer or organization that purchases goods or services from a business

consumer

an individual who purchases goods and services for personal use

consumer goods

physical and tangible goods sold to consumers that are not intended for resale

EX: washing machines, and non-durable consumer goods, such as food, drinks and sweets, that can be used only once

consumer services

the non-tangible products sold to consumers that are not intended for resale

EX: Hotel accommodations, insurance services and train journeys

Factor of production

The resources needed by business to produce goods or services

Capital goods

the physical goods used by industry to aid in production of other goods and services, EX: machines and commercial vehicles

Enterprise

The action of showing initiative to take the risk to set up a business

Adding value

increasing the difference between the cost of brought-in inputs (materials) and the selling price of the finished goods

added value

the difference between the cost of purchasing brought-in inputs (materials) and the selling price of the finished goods

branding

the process of differentiating a product by developing a symbol, name, image or trademark for it

opportunity cost

the next most desired option that is given up

intrapreneur

a business employee who takes direct responsibility for turning an idea into a profitable new product or business venture

multinational business

a business organization that has its headquarters in one country, but with operating branches, factories and assembly plants in other countries

private limited company

a business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the general public

initia public offering (ipo)

an offer to the public to buy shares in a public limited company

Human resource management (HRM)

the strategic approach to the effective management of employees so that they help the business gain a competitive advantage

workforce planning

forecasting the numbers of workers and the skills that will be required by the organization to achieve its objectives

workforce audit

a check on the skills and qualifications of all existing workers/ managers

labour turnover

measures the rate at which employees are leaving an organization

job description

a detailed list of the key points about the job to be filled, stating all its key tasks and responsibilities

recruitment

the process of identifying the need for a new employee, defining the job to be filled and the type of person needed to fill it, and attracting suitable candidates for the job

selection

the series of steps by which candidates are interviewed, tested and screened to choose the most suitable person for a vacant post. This process involves evaluating applicants' qualifications and fit for the position and organization.

recruitment agency

a business that offers the service of recruiting applicants for a vacant posts

person specification

a detailed list of the qualities, skills and qualifications hat a successful applicant will need to have

application form

a set of questions answered by a job application to give a potential employer information about the applicant, such as educational background and work experience

curriculum vitae (CV)

a detailed document highlighting all of a person’s professional and academic achievements, work experience and awards

resume

a less detailed document than a cv, which itemizes work experience, educational background and special kills relevant to the job being applied

Reference

comment from a trusted person about an applicant’s character or previous work performance

assessment centre

a place where a range of tests is used to judge job applicants on their potential ability to perform a particular role

internal recruitment

when a business aims to fill a vacancy from within its existing workforce

external recruitment

when a business aims to fill a vacancy with a suitable applicant from outside of the business, such as an employee of another organization

employee contract

a legal document that sets out the terms and conditions governing a worker’s job

redundancy

when a job is no longer required, the employee doing this job becomes unnecessary through no fault of their own

dismissal

being dismissed or fired from a job due to incompetence or breach of discipline

unfair dismissal

ending a workers employment contract for a reason that the law regards as being unfair

employee morale

overall outlook, attitude and level of satisfaction of employees when at work

employee welfare

an employees health, safety and level when at work

equality policy

practices and processes aimed at achieving a fair organization where everyone is treated in the same way without prejudice

diversity policy

practices and processes aimed at creating a mixed workforce and placing a positive value on diversity in the workplace

work-life balance

a situation in which employees are able to allocate the right amount of time and effort to work and to their personal life outside work

induction training

introductory training program to familiarize new recruits with the systems used in the business and the layout of the business site

on-the-job training

Instruction at the place of work on how a job should be carried out

off-the-job training

training undertaken away from the place of work

employee appraisal

the process of assessing the effectiveness of an employee judged against pre-set objectives

start-up capital

the capital needed by an entreprenur to set up a business

working capital

the capital needed to pay for raw material, day-to-day running costs and credit offered to customers

short-term finance

money required for short periods of time of up to one year

loans

helpful to business that experience seasonal demands

retail business

tourist place

long-term finance

money required for more than one year

business that are expanding

they need more equipment

short-term would be inappropriate

profit

the value of goods sold (revenue) - costs

liquidity

the ability of a business to pay its short-term debts

administration

when administrators manage a business that is unable to pay its debts with the intention of selling it as a going concern

business failing because of lack of finance

specialist are put in place to try to keep the business operational

bankruptcy

the legal procedure for liquidating a business (or property owned by a sole trader) which cannot fully pay its debts out of its current assets

if the specailist cannot get the business operational then this is the result

liquidation

when a business ceases trading and its assets are sold for cash to pay suppliers and other creditors

the aim of this is to raise as much finance as possible to pay back those people and companies

current assets

assets that either are cash or likely to be turned into cash within 12 months (inventory and trade receivables or debtors)

current liabilities

debts that usually have to be paid within one year

capital expenditure

the purchase of non-current assets that are expected to last for more than one year, such as buildings and machinery