AS LEVEL BUSINESS IMPORTANT KEY TERMS

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.