AS LEVEL BUSINESS IMPORTANT KEY TERMS

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.