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Added Value
The difference between the cost of purchasing raw materials and the price the finished goods are sold for.
Break-even Level of Output
The level of output at which total revenue equals total cost.
Capital Employed
The total value of capital used in the business.
Cash Flow
The sum of cash inflows minus cash outflows over a period of time.
Corporate Social Responsibility (CSR)
Businesses that consider the interests of society by taking responsibility for their impact on stakeholders.
Cost-plus Pricing
Adding a fixed mark-up for profit to the unit price of a product.
Current Assets
Assets that are likely to be turned into cash within one year.
Current Liabilities
Debts that must be repaid within one year.
Demand
The quantity of a product that consumers are willing and able to buy at a given price in a time period.
Depreciation
The decline in the estimated value of a non-current asset over time.
Economies of Scale
The reduction in unit costs as a business increases in size.
Elasticity of Demand
The responsiveness of demand to changes in price.
Fixed Costs
Costs that do not vary with the level of output.
Franchise
A business model where one firm (franchisor) allows another business (franchisee) to use its name and sell its products.
Gross Profit
Sales revenue minus the cost of goods sold.
Income Elasticity of Demand
The responsiveness of demand to changes in consumer income.
Inventory Turnover
The number of times inventory is sold and replaced over a period of time.
Job Production
Producing one-off, customized products.
Joint Venture
Two or more companies agreeing to work together on a particular project.
Liquidity
The ability of a business to meet its short-term debts.
Margin of Safety
The difference between current output and break-even output.
Market Capitalisation
The total value of a company's issued shares (Share price × Total number of shares issued).
Market Segmentation
The process of dividing a market into distinct groups of consumers.
Marketing Mix (4Ps)
Product, Price, Place, Promotion.
Net Profit
Gross profit minus all expenses and taxes.
Niche Market
A smaller, specific segment of a larger market.
Opportunity Cost
The next best alternative foregone when a choice is made.
Outsourcing
The use of external businesses to perform non-core functions of a company.
Price Skimming
Setting a high initial price for a new product to maximize revenue.
Product Life Cycle
The stages a product goes through from introduction to decline.
Profit Margin
(Profit / Revenue) × 100.
Retained Profit
Profit reinvested back into the business after dividends have been paid.
Revenue
The total value of sales made during a period (Selling price × Quantity sold).
SWOT Analysis
A tool used to assess a company’s Strengths, Weaknesses, Opportunities, and Threats.
Variable Costs
Costs that change in direct proportion to output.
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