Business Studies Key Terms and Concepts

Comprehensive vocabulary flashcards covering enterprise, business ownership, objectives, financial concepts, and market dynamics.

Entrepreneur(s)

An individual who creates a new business (startup), bearing most of the risks and enjoying most of the rewards. They have an idea/ see a business opportunity and take action to realise their vision. They are typically innovative problem solvers.

Profit maximisation

The aim of a business to make the largest possible profit.

Profit satisficing

Making just enough profit to satisfy the demands of the business owners, rather than aiming for the maximum possible. This is often linked to non-financial goals.

Social enterprise

A business that has a primary social or environmental mission, reinvesting most of its profits to achieve that mission.

Startup

A common term for a new business - a business that has just "started up"

Delegation

The assignment of authority to another person to carry out specific activities. The person delegating remains accountable for the outcome.

Finance

Money provided to a business for it to start, grow, or operate.

Stakeholder

Any individual or group with an interest in the activities of a business such as owners, employees, and banks.

Shareholder

An individual or institution that legally owns one or more shares in a limited company.

Risk

The possibility of an event happening that will have an adverse impact on the business, such as making a financial loss.

Strategy

The long-term plan that sets out how a business will achieve its objectives.

Cash flow

The movement of money into and out of a business. A key challenge is ensuring that cash inflows are sufficient to meet cash outflows.

Competition

The rivalry between businesses operating in the same market.

Competitiveness

The ability of a business to offer a better product (good or service) than its rivals in the market, in terms of price, quality, or service.

Competitive advantage

A specific feature or condition that allows a business to outperform its competitors over a sustained period.

Reward

The potential financial gain or other benefits that a business can receive from making a particular decision.

Trade-off

The concept that having more of one thing involves having less of another. For a business, the trade-off is that a higher potential reward typically requires taking a higher risk.

Risk averse

An attitude where an entrepreneur or business is reluctant to take risks.

Risk seeking

An attitude where an entrepreneur or business is willing to take significant risks in the pursuit of high rewards.

Objectives

The specific, measurable goals or targets that a business sets for itself.

Risk vs Reward

The balance between the potential for a negative outcome (risk) and the potential for a positive outcome (reward).

Resources

The assets available to a business, including finance, employees, time, and machinery.

Market conditions

The features of the market in which a business operates, such as the level of competition and the state of the economy.

Ethics

The moral principles that guide a business’s decision-making.

Opportunity cost

The value of the next best alternative that is given up when a decision is made.

Ethical dilemma

A situation where a business faces a decision that involves a conflict of moral principles, where to obey one principle would result in transgressing another.

Shareholder concept

The traditional view that the primary responsibility of a business is to maximise profit for its owners (shareholders).

Stakeholder concept

The modern view that a business has a wider responsibility to all of its stakeholders, including employees, suppliers, customers, and the community, not just its owners.

Mission statement

A qualitative statement of a business’s overall purpose and aims. It sets out the ‘why’ of the business.

Business objective

A specific, measurable target that a business aims to achieve to help it realise its overall goals.

Tactic

A short-term, day-to-day action used to help implement a strategy.

Sole trader

A business that is owned and run by just one person. There is no legal distinction between the owner and the business.

Private limited company (Ltd)

A business owned by shareholders, who are often family and friends. Its shares cannot be sold to the general public.

Public limited company (Plc)

A business owned by shareholders that has its shares listed on a public stock exchange, meaning they can be bought and sold by anyone.

Unlimited liability

When the owner of a business is personally responsible for all of its debts. Their personal assets are at risk if the business fails. This is a major financial risk for sole traders and partners.

Limited liability

A legal status where a person's financial liability is limited to a fixed sum, most commonly the value of their investment in a business.

Incorporation

The legal process of creating a limited company, giving it a separate legal identity from its owners.

Stock Exchange

A marketplace where shares in public limited companies are bought and sold (e.g., the London Stock Exchange).

Flotation (IPO)

The process by which a private limited company offers its shares for sale to the general public for the first time, becoming a public limited company.

Market capitalisation

The value of shares in the Plc listed on a stock exchange. Calculated as share price multiplied by the number of shares in issue.

Co-operative

A business or organisation that is owned and run jointly by its members, who share the profits and benefits.

Member

A person who is a part-owner of the co-operative. Depending on the type, this could be a customer, an employee, or a producer.

Consumer co-operative

A co-operative that is owned by its customers.

Worker co-operative

A co-operative that is owned and controlled by its employees.

Producer co-operative

A co-operative where producers (e.g., farmers) group together to process and market their products.

Community Interest Company (CIC)

A type of limited company designed for social enterprises that want to use their profits and assets for the public good.

Not-for-profit

An organisation that uses any surplus revenue to further its social aims rather than distributing it to owners or shareholders.

Triple Bottom Line

A framework that measures success across three areas: people (social), planet (environmental) and profit (financial).

Social Objective

A goal focused on benefiting society, such as reducing poverty, improving health or supporting local communities.

Share

A unit of ownership in a company. Owning shares gives the holder a stake in the business and a right to a share of profits (dividends).

Share price

The price at which a single share in a company can be bought or sold on the stock market at any given time.

Stock market

A marketplace where shares in public limited companies (plcs) are bought and sold, such as the London Stock Exchange.

Speculation

Buying or selling shares based on expectations of future price movements rather than the company's current performance.