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Glossary

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									Ch.    Economics Keyword                                   Economics Definition
 1          Income                Total money received from a person's wages/salary, interest and dividends
1            Borrowing           Getting money from a lender that must be repaid in the future (eg a mortgage)
1             Savings                                  Putting money aside for later use.
1        Needs and Wants         Needs are essential to our lives but wants are things we could survive without.
         Leaving school,
1                                When a person ceases to be in full-time education and looks for employment
        college/university.
1      Gaining employment                           Being offered and accepting a paid job
1           Promotion                  A new higher-paid job role involving greater responsibility and skill
1              Debt                              The amount still owing from funds borrowed.
1         Unemployment           When an individual without a job is seeking paid employment or is able to work
1           Retirement                               When we cease to do paid employment
1            Benefits                  Regular payments from a government to support people in need
                                  A state benefit paid to employees through the tax system, which acts like a
1           Tax Credit
                                                                   negative tax.
                                 A benefit paid to those of retirement age who have paid the minimum National
1            Pensions
                                                             Insurance contributions.
1              Taxes                     A fee levied by a government on a product, income or activity
1         Tax Allowances              Sums deducted from total income before income tax is calculated.
1            Scarcity                    Resources are limited compared with our 'needs' and 'wants'.
1             Choice                 Deciding between different options because our resources are limited
          Basic Economic
1                                           Resources are limited but 'needs' and 'wants' are infinite
             Problem
1           Resources             The land, labour, capital and enterprise used to produce goods and services
1        Opportunity Cost                        Something given up when we make a choice
1           Benefits                                 The advantages of a particular choice
1            Costs                           The expenses and drawbacks of a particular choice
                                    The quantity of a good or service that consumers are willing and able to
1            Demand
                                                         purchase at a particular price
         Factors Affecting
1                                Things that cause consumers to buy more or less of a product at a given price
             Demand
                                    The quantity of a good or service that businesses will offer for sale at a
1             Supply
                                                                particular price
                                   Things that cause suppliers to offer more or less of a good or service at a
1     Factors Affecting Supply
                                                                particular price
1            Markets                     A market exists whenever buyers and sellers come together
1          Market Price           The price that buyers and sellers agree on for a particular good or service
1          Competition              The process of trying to beat others (eg trying to gain more customers)
       Bank/Building Society      An account for which the main objective is to gain interest and keep money
1
         Savings Account                                              safe
         Post Office Card
1                                                Savings account offered by the Post Office
             Account
1               ISA                       Individual Savings Account on which interest is tax free
1         Interest Rates              An annual rate which is charged to borrowers or paid to savers
      Annual Equivalent Rate A figure quoted in savings advertisements to help people compare one savings
1
               (AER)                                        product with another
1             Reward                                 The return received for taking risks
1               Risk                The chance that something may not succeed and its consequence
1          Stock Market                    The place where stocks, shares and bonds are traded
1             Shares                     Certificate representing a unit of ownership in a company
1           Unit Trusts               A pooled investment fund usually in shares-based investments
1     Government Securities Stocks, bonds and bills of exchange issued by a government to raise the funds.

1      Borrowing/Debt/Credit     Getting money from a lender that must be repaid in the future (eg a mortgage)
1             Loan                                        Amount of money borrowed
1         Term of a loan                      The length of time over which the loan can be repaid
                                                                                                                   1
    Annual Percentage Rate
1                                   The interest rate published on loans to help compare their true costs
              (APR)
1      Financial Planning                     A process for ensuring that financial goals are met
1            Budget                             A financial plan of future income and spending
1      Financial Adviser                            A professional offering financial advice
1      Debt Management                       Taking the help of an expert to solve a debt problem
1   Debt Management Plan                                 A structured repayment plan
     Social, Moral or Ethical
1                                             A problem with no absolute right or wrong solution
            Dilemma
                          A statement that loans will only be made to businesses that act in a socially
1    Ethical Lending Policy
                                                         responsible manner
1            Ethics                             The 'rights' and 'wrongs' of an issue
                          A worker who works the maximum number of hours required in the normal
2           Full-time
                                                 working week for a particular job.
2          Motivation                      The reason that somebody does something
                         This refers to a worker who only works a fraction of the working week of a full-
2          Part-time
                                                            time employee
                         Work that will only last for a specific period of time (usually a number of weeks
2   Temporary employment
                                                              or months)
                            Work that is only required during a particular period of a year (eg some
2    Seasonal employment
                                                          agricultural work)
                            Where each worker concentrates on only one small aspect of the entire
2        Specialisation
                                                         production process.
          Information
2       Communication                    The use of electronic and computer technology.
       Technology (ICT)
                             Workers who are more adaptable in time, location or manner of work
2      Flexible working
                                                   completed (eg home working)
2            Salary                                  Pay stated as a yearly total
2            Wage               Pay calculated on an hourly rate, multiplied by the hours worked
2        Commission        Payment made to workers for achieving a certain target (eg sales levels)
2     Overtime Payment           Higher rate of pay for work in excess of normal working hours
2          Shift Work               Work patterns that do not follow standard working hours
      Bankers' Automated            Automatic transfer of funds between bank accounts (eg employer's to
2
    Clearing Service (BACS)                                      employee's)
                                 Payments given to workers to compensate for any expenditure necessary to
2          Expenses
                                                              complete their work.
2          Gross Pay                           A worker's pay before any deductions are made
2           Net Pay                                Pay after all deductions have been made
2         Income Tax                        A tax calculated as a percentage of a worker's income
                                 Workers have different tax codes which relate to the different amount of tax-
2          Tax Code
                                                       free allowance each worker has.
      National Insurance        A tax paid by workers which entitles the payee to qualify for benefits when and
2
      Contribution (NIC)                                           if necessary
                                    A deduction from a worker's pay that is meant to contribute to a future
2    Pension Contributions
                                                              retirement pension.
2             P45               A document provided by an employer when a worker leaves the organisation
                                A document provided by an employer on a yearly basis showing total pay and
2             P60
                                                            deductions for the year.
2       Minimum Wage                               Lowest legal hourly rate that can be paid
3           Exports                              Goods and services sold to another country
3           Imports                            Goods and services bought from another country
                                A record of the value of a country's exports, imports and financial transactions
3    Balance of Payments
                                                    with the rest of the world over the year.
                                Services which are used and supplied by businesses eg banking, training and
3    Commercial Services
                                                                    transport
                                The process of increasing international trade and economic interdependence
3        Globalisation
                                                               between countries

                                                                                                                   2
    Gross Domestic Product
3                                Total value of goods and services produced by an economy in one year.
            (GDP)
                              The total greenhouse gas (CO2 equivalent) emissions caused by an individual,
3      Carbon Footprint
                                          event, organisation or product or good traded by the UK.
3      Exchange Rates                      The rate at which one currency exchanges for another.
    Factors Affecting Sales
3                                Things that influence consumers to buy imports/exports, other than price
    of Exports and Imports
                               To stop buying or using a product as a protest, to force a company to do, or
3          Boycott
                                                     stop doing, a particular action.
         Consumer               Consumers demonstrating their needs, wants and demands through their
3
        Empowerment                              purchase decisions in the marketplace.
3          MNC                                          Multinational corporation
                               Costs of employing workers (eg wages, salaries, taxes on labour) and also
3       Labour Costs
                                                     training and recruitment costs.
        Foreign Direct
3                                     When a business from one country builds a factory in another.
          Investment
3      Open Economy                                 One that trades with other countries
3           Migrate                  The movement of people from one country or region to another
3      Mobility of labour                      The ability of workers to change between jobs
3        Immigration                                       Migration into a country
3         Emigration                    Leaving one's native country or region to settle in another
4    Economic Objectives          Economic goals / aims, made by governments for the whole economy.
                              The percentage change in national income measured over time. Looks at how
4      Economic Growth
                                             fast national income grows over a period of time.
4      Full Employment                       Where all those seeking work are in employment
                              A record of the value of a country's exports, imports and financial transactions
4    Balance of Payments
                                                   with the rest of the world over the year.
                               Where incomes are distributed more equally. This often means redistributing
4          Equality
                                some income from those earning large amounts to those less fortunate.
4      Absolute Poverty               Those with incomes lower than the level needed for necessities
4      Relative Poverty                    Those on low incomes relative to the country's average.
                                 Financial or practical help for those who need the most support. Refers to
4       Welfare State           various forms of benefit payments and services, designed to care for those
                                                              who need support.
                                A system where all economic decisions are taken by private individuals and
4   Free-Market Economy         businesses. Businesses exist to make a profit for their owners and they will
                                                     produce whatever maximises profits.
                                  A system that is partly a free-market economy but also has government
                                involvement in economic decisions. Governments provide certain services
4      Mixed Economy           seen as vital for the economy, such as health and education. If these serves
                               were left to the free market, people may not be able to afford them and could
                                                          miss out on vital services.
                                A failure of the market to allocate resouces efficiently. This means that the
                               prices of goods and quantities produced are not at the level that ensures that
4       Market Failure
                                economic welfare is kept as high as possible - some goods may be under-
                                                    produced or not even produced at all.
                               Goods that are under-consumed by society - largely because the benefits of
4        Merit Goods           the good are not fully appreciated by society. They would not be produced in
                                    sufficient quantities in a free market - ie: education and healthcare.
4       Private Benefit                      The benefit to private businesses or individuals.
                              Goods that are over-consumed by society. Negative externalities are generated
                                 by consumption of these goods. Generally over-provided by the market.
4       Demerit Goods
                                Demand for these is high because individuals are not good at seeing the
                                negative consequences of the consumption. ie: illegal drugs and tobacco.

                                Goods that display the following two characteristics: consumption of them
4       Public Goods          doesn't prevent others consuming them; once they are provided, people cannot
                               be prevented from consuming them. Ie: street lighting and the armed forces.

                                                                                                                 3
                          The additional costs or benefits beyond private ones imposed on society that
                          arise out of a production or consumption decision. IE: the pollution produced
4      Externalities       from a factory - the factory only pays the costs of production and will not pay
                         directly for the pollution it creates - this is a cost the rest of society has to pay in
                                                  term of dirty air and poisoned rivers.
4      Private Cost                         The cost to private businesses or individuals
4      Social Cost        The cost to society of an action consisting of private costs and external costs.
4     Social Benefit        The benefit to society consisting of private benefits and external benefits.
4        Taxation                Money collected by the government to finance its expenditure.
4     Indirect Taxes                             Taxes on expenditure (ie: VAT)
4      Direct Taxes                            Taxes on incomes (ie: Income Tax)
4    Corporation Tax                         Tax on the profits of limited companies
       Government
4                                Money spent by the government on public services and welfare.
       Expenditure
4      Fiscal Policy      Decisions made by the government on government expenditure and taxation.
                         The UK's central bank and is responsible for issuing and controlling the money
4    Bank of England
                                                           in the economy.
4    Monetary Policy                       Policy to control the supply or cost of money.
4     Interest Rates                 The cost of borrowing and the reward for saving money.
                         Government policies to encourage the economy to increase its potential growth
4   Supply-side Policy    rate. Policies to raise the rate of growth of output without boosting spending.
                                They allow economies to grow faster with fewer risks of inflation.
4   Competition Policy                 Policies designed to increase competition in a market
4   Common Currency                   Where two or more countries share the same currency.
4       Eurozone                        The countries that have the euro as their currency.
4    EU Enlargement                         Bringing new member countries into the EU
                         Countries geographically located towards the East of Europe, several of which
4    Eastern Europe
                                   are recent members of the EU or are in negotiations to join.




                                                                                                                    4
    The Rising Levels of Employment and Incomes during the last decade
    Level of        Concerns the number of people in the population who are able
  Employment                  and willing to work, who are actually working.
    Income           Concerns the money individual consumers earn from working,
                     investment (ie: interest on savings accounts, dividends on any
                    shares held), or other sources. Disposable Income - money left
                   over after compulsory deductions; Discretionary Income - money
                        left over after people's basic necessities (ie: food, drink,
                              mortgage, clothes, travel, etc) have been paid

 How might businesses in general be affected by rising levels of employment
                            and / or income?




How might Lathom's Dairy have been affected by rising levels of employment
               and incomes in the East Moorshire region?




    The Growth in the Population arising from Workers from Eastern Europe
                     moving to the area in the last decade
    Population     The number of people living in a particular geographical area - in
                               this case, the East Moorshire region
    How might
  businesses be
affected by growth
in the population?




                                  Lathom's Dairy - Extract 1                            5
   How might the
      growth in
  population have
   impacted local
   education and
 health services?
     How might
  Lathom's Dairy
     have been
affected by growth
 in the population
from workers from
 Eastern Europe?


                         The World Wide CREDIT CRUNCH
 What was the        A term used to describe a situation that arose in 2008 where the
Credit Crunch?       banks swung from being too liberal and risky with their lending to
                     being ultra conservative. It originated from a crisis in the banking
                          system of the USA, which soon engulfed the rest of the
                     developed world, including the UK. In a sense, it was a 'strike by
                                    creditors' - a refusal to grant credit

                     The credit crunch produced the following consequences, which
                                  plunged the economy into a recession:
                   * a decline in the availability of mortgages - which produced a
                   slowdown in the housing market
                   * a reduction in consumer spending on "big tickt items" (items that
                   have a high selling price in relation to other items sold in a store),
How did the credit
                   for which credit is required
  crunch affect
                   * a reduction in the amount of investment in the economy, thus
  businesses?
                   impacting on capital goods industries (industries involved in
                   making machinery and tools used to produce consumer
                   goods/services)
                   * cash flow problems for businesses unable to obtain credit to
                   finance working capital (ie: to pay for day to day expenses / bills
                   as they fell due)
   How might
 Lathom's Dairy
   have been
 affected by the
 credit crunch?


                                   Lathom's Dairy - Extract 1                               6
  The Recession from 2008-2010 - a period of Falling Production and Rising
                                  Unemployment
   What is a        Defined in official statistics, a recession is two consecutive
  recession?    quarters of negative economic growth. In a recession, the real
                 value of total output of al goods and services produced will have
                   fallen over a six month period. Along with this period of falling,
                  there will be rising unemployment as the Case Study suggests.

   What is         The number of people in the working population who are unable
unemployment?      to find work. It is measured by subtracting the number of people
                   actually in employment from the total number of people able and
                                               willing to work.
                  * Demand for goods or services (especially luxuries) falls as
                  incomes fall
                  * Customers become more price sensitive - often switching to
                  cheaper alternatives or brands
                  * Savings rise, possibly because expenditure on certain items is
                  postponed.
   How does a     * Firms suffer deteriorating cash flow as customers take longer to
 recession affect pay for goods, and with less revenue coming in, first take longer
   business in    to pay suppliers
    general?      * Profits fall due to lack of demand
                  * Output is reduced
                  * Unemployment rises as businesses make redundancies in an
                  attempt to cut costs
                  * Investment is postponed due to higher borrowing costs and lack
                  of demand for the end product
                  * Business failure increases due to sustained losses
How did the recession affect businesses in East Moorshire, including Latham's Dairy
                         and other local cheese producers?




                                 Lathom's Dairy - Extract 1                             7
        The Decisions to Cut Costs in order to Survive the Recession
What are Costs? Costs are the monies paid by a business to obtain the resources
                  it requires in order to produce and market its products and / or
                            services. These can be classified as follows:

Start-up Costs     A one-off payment needed to get a business idea off the group
                     (ie: purchase of building, machinery, equipment, vehicles,
                      introductory advertising, intial employee training, first raw
  Fixed Costs                                materials . .
                  Costs that stay the same (at least in.the short-term) even if output
                  (the number of products, in this case, cheese) made increases or
                      decreases. (ie: rent, business rates, salaries of managers,
                                     insurance, interest on loans)
Variable Costs        Costs that change according to level of output (number of
                  cheeses produced). (These includethe costs of materials used to
                   make a business' product - in this case, ingredients such as the
                  milk used to make the cheese, as well as direct labour costs, and
                                              enery costs)
  Total Costs        The total cost of producing all output over a period of time
                     calculated by adding together the total fixed costs and total
                                           variable costs.
Average Costs      The average cost per unit of output. Calculated by dividing total
(or Unit Costs)       costs by the number of items produced. (For example: If
                   FC=£250,000; VC=£350,000; Output=200,000units; Unit Cost =
                                                  ?




                    Redundancies are where the employer dismisses an employee
                           due to one of the following conditions occuring:
                  1. The employer ceases to trade / the business closes
                  2. The employer ceases to trade in the place where the employee
                  is employed
 Redundancies     3. The employer no longer requires any employees or as many
                  employees to carry out a particular job / type of work.
                  Which one applies to Latham's Dairy?




                                Lathom's Dairy - Extract 1                               8
 What effect would redundancies have had on costs and other aspects of the
                                business?




         What other measures might have been taken to cut costs?




Competitors     Other businesses operating in the same market and providing a
                                   similar product or service.
              Why is competition good for industries in general?




                             Lathom's Dairy - Extract 1                         9
                 Why does the government support competition?




How might the closure of these three competitors have affect Lathom's Dairy and the
 other three remining cheese makers? Why was the closure of these three cheese-
                    makers "not all good news for the industry?"




    Inward        Inward investment is the injecton of money into a particular region
  Investment       (in this case East Moorshire) from an external source (business
                      or other organisation) located outside region, who wants to
                  establish or develop a presence in the region - perhaps due to the
                           opportunities provided by growth in the population.

                    Inward investment creates jobs and generates wealth in the
                                            local economy.
   What can be the effect of rising demand and increased business confidence in
 general? Are there signs of rising demand and increased business confidence with
                                   Lathom's Dairy?




                                Lathom's Dairy - Extract 1                              10
Lathom's Dairy - Extract 1   11
 Lathom's Dairy is the biggest of the four local producers in East Moorshire,
                       which is famous for its cheeses.
  How might the fact that East Moorshire is famous for its cheeses benefit
           Lathom's Dairy and the other three local producers?




  What is the significance of four local producers remaining in the market?

   Oligopoly


Direct Influence


   Collusion


Intense Rivalry


Barriers to Entry

     How might Latham's Dairy benefit from being the biggest of the four
                               producers?
                Purchasing -
  Economies of
                  Technical -
   Scale - the
 average cost of
                  Specialisation -
producing an item
becomes cheaper
                  Marketing -
 when more are
    produced
                  Financial -




                                 Lathom's Dairy - Extract 2                     12
                        Latham's Dairy is a PARTNERSHIP
   Partnership        A business that is owned and controlled by two or more people.
                                       Owners have unlimited liability.
Unlimited Liability When the owners of a business are personally responsibly for the
                    debts of the business. (The personal assets of the partners are at
                     risk if debts are called in and the business assets cannot pay off
                                                  these debts)
             Advantages                                        Disadvantages




       Latham's Dairy has won awards for the QUALITY of its cheese
                     The STANDARD of a product or service that meets the
     Quality    customer's requirements and expectations on a consistent basis.

Why is achieving quality and awards for quality important for Latham's Dairy?




                                  Lathom's Dairy - Extract 2                              13
                       Sales Figures Analysis 2007 and 2010
  The bar chart tells us that in 2010, Lathom's Dairy made (at least) four types of
Moorshire Cheese - Creamy, Tasty, Crumbly and soft. It shows the total sales value
                               of these cheeses for 2010.
 Sales Figures Crumbly = £250,000               Creamy = £200,000              Tasty
      2010:                         = £150,000            Soft = £50,000
                   Crumbly: £250,000 / £650,000 x 100 = 38.5%
What percentage
  of sales does Creamy:
  each cheese
variety generate? Tasty:
 (Total Sales =
    £650,000)      Soft:

  Calculate the        The Case Study informs us that total sales revenue in pre-
 change in total      recession 2007 was £900,000 and in 2010 it was £650,000.
 sales revenue            £900,000 - £650,000 = a DECREASE of £250,000
  between 2007
                             £250,000 / £900,000 = a decrease of 27.8%
    and 2010
 How much revenue was generated from each type of customer in 2007 and 2010?




 What was the
change in Sales
 Revenue from
   Exports?
  Reasons?
 What was the
change in Sales
 Revenue from
 Restaurants?
  Reasons?



                                 Lathom's Dairy - Extract 2                            14
  What was the
 change in Sales
  Revenue from
Supermarkets?
   Reasons?
  What was the
 change in Sales
  Revenue from
Small Retailers?
   Reasons?

          EXCHANGE RATES - How will they affect Lathom's Dairy?
Exchange Rate:        How much of one currency you can buy for another.
Example: £ to $                    What does this mean?
exchange rate is
   £1 = $1.61
Which countries /
currencies affect
Lathom's Dairy?
How will Lathom's
Diary be affected
if the Pound gets
weaker against a
foreign currency?




How will Lathom's
Diary be affected
if the Pound gets
stronger against
      a foreign
     currency?




                             Lathom's Dairy - Extract 2                   15
Lathom's Dairy - Extract 2   16
Lathom's Dairy - Extract 2   17
Lathom's Dairy - Extract 2   18
Lathom's Dairy - Extract 2   19
Lathom's Dairy - Extract 2   20
                           2007                            2010
                         £900,000 x 0.15 =
Exports           15%                                5%
                            £135,000
                         £900,000 x 0.25 =
Restaurants       25%                                15%
                            £225,000
                         £900,000 x 0.30 =
Supermarkets      30%                                35%
                            £270,000
                         £900,000 x 0.30 =
Small Retailers   30%                                45%
                            £270,000




                        Lathom's Dairy - Extract 2                21
Lathom's Dairy - Extract 2   22
Lathom's Dairy - Extract 2   23
Lathom's Dairy - Extract 2   24
Lathom's Dairy - Extract 2   25
  2010
£650,000 x 0.05 =
    £32,500
£650,000 x 0.15 =
    £97,500
£650,000 x 0.35 =
   £227,500
£650,000 x 0.45 =
   £292,500




                    Lathom's Dairy - Extract 2   26
                                Organisational Chart
                   * the division of roles and responsibilities
                   * lines of communication
                   * the order of levels of management or supervision within a
                   business, from the lowest to the highest (HIERARCHY)
                   * Span of Control - the number of people reporting directly to a
 Organisational particular manager or supervisor (the number of people for whom
Chart - a diagram a manger or supervisor is directly responsible for)
 which shows the
                         Narrow Span of Control      vs      Wide Span of Control
internal structure
of an organisation




With only 3 levels in total, Lathom Dairy's organsational chart is FLAT (as opposed
                                       to tall)
      Flat Organisational Chart           vs         Tall Organisational Chart




  Lathom's Dairy is a small business in terms of number of employees. The total
  number of people employed in the business, including the owners (partners) is
                                 currently ____.
  Advantages of being a small business           Disadvantages of being a small business




                                     Lathom's Dairy - Extract 3                            27
 How does the CURRENT organisational chart of Lathom's Dairy differ to their
                 organisational chart at the start of 2008?
* number of people
employed
* used to be 12
production workers
* used to be 2
drivers
* used to be 3
accounts clerks
    What are the benefits or drawbacks of these changes for Lathom's Dairy,
     particularly with regard to production efficiency and production costs?




 Lathom's production workers are "all skilled, specialist cheese-makers who
have been trained by Lathom's Diary" How can training increase the efficiency
                of production and improve competitiveness?




     The case study informs us that the production workers are highly paid.
         Positives of high pay                            Negatives of high pay




                                  Lathom's Dairy - Extract 3                      28
Lathom's Dairy - Extract 3   29
 The significance of "Hand-Made" cheeses: what does this mean in terms of
            production costs, efficiency, and/or competitiveness?
The fact that all the cheese Lathom's Dairy makes are "hand-made" makes Lathom's
  production process labour intensive (where a high proportion of labour is used
 compared to capital). This means that labour costs represent a high proportion
                                   of total cost.
     * It is common to use JOB or BATCH production methods, as opposed to
             MASS/FLOW production methods for these types of products.
Job Production           Where a single item is made, from start to finish, usually
                      according to the customer's specifications. It usually involves
                                        "one-off", unique orders.
    Batch              Where a large or small quantity (batch) of the same item is
  Production          produced at the same time. It does not involve the continuous
                     production of these items - as with flow production. It is suitable
                      when a limited number of the same product is required at one
                       particular moment in time. This is the case with Lathom's
                       Dairy - the weekly work schedule shows that Lathom's
                     produces different batches of cheeses at different times of
                                                the week.
 Mass (or Flow)         When large quanitities of identical products are produced
  Production                   continuously, often on an assembly line.
  Benefits of labour intensive production       Drawbacks of labour intensive production




                                   Lathom's Dairy - Extract 4                              30
                   The Importance of New Product Development
The case study tells us that development work takes place on a Friday afternoon and
that Eric and Jed have been working together to "develop new varieties of cheeses".
 We are later told of the new exclusive cheese they have developed called "Bowton
                                        Blue"
                Why is the development of new products important?




 Why might the development of new varieties of cheese be particularly important for
                                Lathom's Dairy?




                                 Lathom's Dairy - Extract 4                           31
Lathom's Dairy - Extract 4   32
Lathom's Dairy - Extract 4   33
Lathom's Dairy - Extract 4   34
Lathom's Dairy - Extract 4   35
Lathom's Dairy - Extract 4   36
Lathom's Dairy - Extract 4   37
       Green Production - the use of organically, locally produced milk

The case study informs us that Lathom's dairy uses "organically produced milk" to
 produce its cheese, which is sourced from "local farms", the furthest is "only 15
 miles away" . These are two examples of how Lathom's Dairy is responding to
      pressure from the public for greater environmental responsibility.
    What is
                        Milk produced without the use of synthetic chemicals,
   organically
                                      hormones or antibiotics
 produced milk?
 Benefits of using organically produced milk      Costs of using organically produced milk




  Benefits of using milk from local farms              Costs of using milk from local farms




       Eric and Alice's commitment to making Lathom's Dairy a "Green,
               Environmentally Friendly and Ethical Producer"
                   Attempting to minimise the impact of the production process
What is meant by on the environment. Businesses can damage the environment
  "green" and                                  through:
"environmentally * Air pollution
    friendly"     * Water pollution
  production?     * Noise pollution
                  * Destruction of the environment



                                   Lathom's Dairy - Extract 5                                 38
     Benefits of Green Production                             Costs of Green Production




                 * Deciding to do the right/good/fair/just thing EVEN IF it costs you
                                              more money
What is meant if
                 Examples of how Lathom's Dairy is ethical:
 you are an
                 * using organic, locally produced milk
   "ethical"
                 * possible installation of the wind turbine
  producer?
                 * "Although the production workers are highly paid, Eric did his
                 best to avoild making more redundant"
          The Installation of a Wind Turbine to Generate Electricity
 Benefits of Wind Turbine for Lathom's         Costs of Wind Turbine for Lathom's




                  * the case study tells us that Lathom's can get a grant from the
                  government to help pay for some of the wind turbine cost, but
                  they will have to pay the rest
                  Possible sources of finance:
                  * Retained Profit

How will Lathom's * Sale of Assets
 Dairy FINANCE
  the cost of the
 Wind Turbine? * Bank Loan

                  * Personal Savings +/or Loans from family/friend


                  * Leasing




                                 Lathom's Dairy - Extract 5                               39
Lathom's Dairy - Extract 5   40
Lathom's Dairy - Extract 5   41
Lathom's Dairy - Extract 5   42
Lathom's Dairy - Extract 5   43
Lathom's Dairy - Extract 5   44
       Goat's Milk Cheese - the decision to increase their Product Range
                    * Lathom's Dairy had 4 types of cheese in their product range -
                  Crumbly, Creamy, Tasty and Soft. The purchase of Wright's Farm
                   has added Goat's Milk cheese to this range and the development
                      of "Bowton Blue" cheese has also added blue cheese to this
                                                 range.
Product Range - a
                  Benefits / Drawbacks to increasing product range:
 group of similar
                   - increases the complexity involved in running the business
products made by
                   - can make effective co-ordination and control more difficult
   a business
                   + allows Lathom's to cater for a greater variety of tastes and to
                  target different segments of the market which helps to
                  maximise sales and market share
                   + makes Lathom's less vulnerable to changes in one particular
                  market segment
                         The TAKEOVER of Wright's Farm
                  Taking over Wrights Farm would have provided Lathom's with:
                  * instant growth with an overnight increase in the size of the
                  business

                  * entry into the market for goat's milk cheese
Takeover - where
  one business
                   * reduced threat from competition
buys a controlling
 stake (51%) of
    another.
                   * greater scope to benefit from economies of scale


                  * increased sales and profits and greater share of the cheese
                  market

   Benefits / Drawbacks to operating Wright's Farm as a separate business only
                    producing Moorshire Goat's Milk cheese:




                                      Lathom's Dairy - Extract 6                       45
             Analysis of the Cash Flow Forecast for Wright's Farm
   Cash Flow      A month by month statement which outlines the planned flows of
    Forecast                      cash into and out of a business

  Opening Bank
                        The amount of cash a firm stats each period with (brought
Balance (Balance
                               forward from the end of the last period)
 brought forward)

                Cash coming into the business - may be from sales made during
  Cash Inflows   the period, or payments from previous credit sales, loans from
    (Income)         banks, interest on any investments, or grants from the
                                            government
                Cash going out of the business - this may be for purchases of raw
                    materials paid for in cash, or payments made for previous
 Cash Outflows
                   purchases made on credit, or expenses incurred during the
  (Expenditure)
                 period such as wages, rent, interest on loans, telephone, new
                                          machinery, taxes
 Net Cash Flow      The difference between Cash Inflows and Cash Outflows
  Closing Bank
                  The amount of cash left at the end of the period (carried forward
Balance (Balance
                               to the beginning of the next period)
 carried forward)
                    * show how much cash will be held in a business at a given point
                    in time in the future
                    * to assess whether or not the business will be able to meet debts
                    as they fall due
      Why do
businesses need
                   * to identify any cash-flow problems and seek ways, well in
 to forecast their
                   advance, of overcoming a potential cash shortage
   Cash Flow?

                    * help in decision making


            What does Wright's Farm's Cash Flow Forecast Show?




                                       Lathom's Dairy - Extract 6                        46
Lathom's Dairy - Extract 6   47
Lathom's Dairy - Extract 6   48
Lathom's Dairy - Extract 6   49
          The Development of the New Exclusive Bowton Blue Cheese
* this "blue veined" cheese is different to the type of cheese Lathom's currently
sells, and might enable Lathom's to target new segments of the cheese market.

* this may not only increase sales and market share, but also helps to spread risk,
as it means that Lathom's is less vulnerable to negative changes in one
particular segment, such as a fall in demand arising from the arrival of a new
competitor in the market for "Cremy" cheese, or the development of a new "Creamy"
cheese by an existing competitor.
* the fact it is not just described as "new", but as "exclusive" might mean that a high
price can be charged, which potentially means higher profit margins
* the fact that market research shows it is well-liked in the United States and
Canada might help to restore export sales (which fell during the recession) and
also help to improve Lathom's sales
* the fact that the cheese has been named after the nearest largest town in the
area might also help to boost sales - as Moorshire cheeses are "world famous"

* Lathom's Dairy operates in a competitive market - one way of staying ahead of the
competition and increasing market share is to develop a new cheese that customers
value
* if Bowton Blue does prove popular, Lathom's may need to recruit additional
production +/or delivery staff - could have training implications
                         Mass Production & Bowton Blue
                When large quantities of identical products are made to the same
                 standard, thus bringing down the unit cost. It is usually capital
                intensive with specialist equipment being purchased in order to
Mass Production   produce a standardised product time after time. Workers are
                 generally not very skilled, often specialising in one particular
                               task, which requires little training.
     Benefits of Mass Production                            Costs of Mass Production




                                       Lathom's Dairy - Extract 7                         50
                     * It is called "Contribution" because it is the amount per item
                        which goes towards paying off a business' Fixed Costs
                 * If we know the Contribution per Unit, we can calculate the
  Calculating    BREAK EVEN POINT - the number of products which need to
Contribution per be sold to cover all the costs (no profit and no loss)
      Unit
                 * Contribution per Unit = Selling Price - Cost of Sales
                 *Hand-made Contribution = £30 - £15 = £15
                 * Mass Production Contribution = £18 - £8 = £10
                              Break Even Calculations:




 Calculating the Net Profit which Bowton Blue is likely to make in its first year

The case study says that before being able to calculate the net profit which Bowton
Blue Cheese is likely to make in its first year, Eric knows that he must also consider
                other costs . . . What might these "other costs" be?




    Revenue        The amount of money earned by a business, mainly from selling
                     their goods and services. (Also called Sales, Income, Money
                                                coming in)
 Cost of Sales      Costs directly involved in making a good or providing a service
                   (ie: ingredients, materials, packaging, direct labour, energy used
                                        to power the machinery)
  Gross Profit     Revenue minus Cost of Sales. It is the profit made before fixed
                                           costs are deducted.
   Net Profit       Revenue minus Total Costs. It is the profit made after Cost of
                   Sales and Fixed Costs and any other costs have been deducted.




                                      Lathom's Dairy - Extract 7                         51
               Estimated Gross Profit of Bowton Blue in its first year:




       Sources of Finance for the Production of the Bowton Blue Cheese
 The case study says that if Eric decides to mass produce the Bowton Blue cheese,
 Lathom's will have to pay for an extension to its factory (£90,000), as well as, new
cheese-making machinery (£60,000). It also states that, regardless of which method
of production is chosen, Eric knows that Lathom's will "need to finance the purchase
               of extra milk, as well as spending on other ingredients".
 What sources of finance might Lathom's Dairy consider using to fund these
                                  Costs?




                                      Lathom's Dairy - Extract 7                        52
Lathom's Dairy - Extract 7   53
Lathom's Dairy - Extract 7   54
Lathom's Dairy - Extract 7   55
Lathom's Dairy - Extract 7   56
   Business           Business Studies Keyword
                                                              Notes/Examples
Studies Keyword              Definition
                    The various production stages
    Chain of
                   through which a product passes
   Production
                   before being sold to a consumer.
                     The sector of industry where
  Primary Sector businesses mine, grow, collect or cut
                         down raw materials.
    Secondary      The sector of industry where raw
 (Manufacturing)    materials are transformed into
      Sector             manufactured goods.
    Tertiary (or The sector of industry where services
 Service) Sector             are created.
                   Where economies, businesses,
                  consumers and workers are linked
Interdependence together through specialisation and
                trade and are reliant upon each other
                         in order to survive.
                      Where people or businesses
                    concentrate on a narrow range of
 Specialisation
                   activities, and by doing so become
                           expert in those tasks.
                   The amount by which the value of a
                    product has risen as a result of a
  Added Value
                       person's or business' part in
                      producing a good or service.
                    States the goals that a company
   Objectives
                    wishes to achieve in a given time.
                      Statement that sums up the
    Mission
                  objectives of an organisation. Catchy
   Statement
                     phrase to reflect the business.
                    When a business makes enough
                   profit to enable it to meet its needs,
   Satisficing
                     and not make as much profit as
                                 possible.
                   A share of the profits of a company
    Dividend      received by those who own shares in
                                      it.




                                      OCR GCSE Part 2 Vocab                    57
   Business           Business Studies Keyword
                                                              Notes/Examples
Studies Keyword              Definition

                  The proportion of the totals sales of a
 Market Share      product gained by one company or
                                 brand.
                  All businesses and organisations that
 Private Sector
                    are not owned or run by the state.
                  Commercial activities carried out by
  Public Sector    local and central government e.g.
                           education, health.
    Public        An organisation owned by national
  Corporation                 government
                    Person or organisation that has a
                   direct interest in the behaviour of a
  Stakeholder
                    business. Usually a stakeholder
                  benefits if the business is successful.
                        The process that gives an
  Incorporation       organisation a separate legal
                          existence of its own.
                     A type of business organisation
 Unincoporated
                       which has unlimited liability

                       An organisation, owned by its
                   members and each member shares
                  its profits and has a say in the way it
                  is run. A Consumer Co-op is set up
                      to provide members with good,
                     honest products at a fair price; a
                       Producer Co-op is a group of
  Co-operative
                      producers who join together to
                   market, promote and distribute their
                  products for their mutual benefit; and
                       a Worker Co-op is a group of
                     workers who set up or buy into a
                  business and share in its ownership,
                         management and control.




                                      OCR GCSE Part 2 Vocab                    58
   Business              Business Studies Keyword
                                                                 Notes/Examples
Studies Keyword                 Definition

     Sole
                     A business owned by a single person
 Proprietorship
                          who has unlimited liability.
 (Sole Trader)
                     Enterprise consisting of more than
                     one owner, larger than sole trader,
  Partnership
                            unlimited liability, share
                           responsibilities and risks.
                    A legal obligation on the owners of a
Unlimited Liability business to pay off all debts of the
                                     business.
                     When an individual or a business
                      that is not incorporated has more
                       liabilities than assets. That is, if
    Bankrupt
                       everything owned was sold they
                   would not raise enough money to pay
                                    their debts.
                      A company whose shares are not
 Private Limited
                     openly traded on a stock exchange.
 Company (Ltd)
                        Owners have limited liability.

                     A company whose shares are openly
 Public Limited
                     traded on a stock exchange. Owners
 Company (plc)
                             have limited liability.
                         Owners (shareholders) are not
                      personally responsible for debts of
 Limited Liability
                      business. Company can be sued in
                                   its own right.
                      A limited liability company is said to
   Insolvency           be insolvent when liabilities are
                               greater than assets
                     Person who starts a business, comes
  Entrepreneur       up with a commercial idea, takes the
                                         risk.
                      When two companies agree to join
     Merger
                      together to form a new company.
                       When one business gains control
    Takeover          over another business by buying a
                            majority of its shares.
                       Where a business merges with or
   Horizontal
                      takes over another business in the
   Integration
                            same line of business.


                                         OCR GCSE Part 2 Vocab                    59
   Business            Business Studies Keyword
                                                               Notes/Examples
Studies Keyword               Definition

                   Where a business joins with another
     Vertical
                   that operates at a different stages in
   Integration
                          the chain of production.
                   When a business expands by moving
                   into new markets. The new markets
                     will be in goods that are different
 Diversification
                    from those dealt in before. It often
                   means moving into a completely new
                                  industry.

                       A company that operates in a
                     number of different, unconnected
                    industries. It will probably be made
 Conglomerate
                        up of a number of subsidiary
                     companies. The main strength of
                      conglomerates is diversification.
                     Payment of money for a specific
      Grant          purpose, which does not usually
                          have to be paid back.
                     The network of essential public
                    services that support a community
  Infrastructure
                     and business. It includes roads,
                      factories, schools + hospitals.
                    The funds invested in a business to
                   enable it to buy the assets it needs to
     Capital         carry on business. It is everything
                    used by the owners for the purpose
                          of running the business.

                    A factor that allows the production
                    cost of each item to be lowered as
 Economies of
                   greater numbers are made, e.g. cost
    Scale
                    benefits from buying in bulk, more
                       efficient use of fixed assets.
                      A member of a partnership who
Sleeping Partner    invests money in the firm but plays
                           no part in its running.
                     The legal contract which governs
   Deed of
                   how a partnership will be owned and
  Partnership
                                organised.



                                       OCR GCSE Part 2 Vocab                    60
   Business            Business Studies Keyword
                                                               Notes/Examples
Studies Keyword               Definition

                      A committee elected by the
                   shareholders of a limited company.
Board of Directors   They decide policy and make
                     important decisions about the
                        running of the company

                      The official meeting of ordinary
                   shareholders held by a public limited
                       company. At the meeting the
 Annual General
                      shareholders have the right to
 Meeting (AGM)
                    propose + vote on issues, approve
                    accounts, approve dividends, and
                        appoint + dismiss directors.
                         The business which gives
                      franchisees the right to sell its
   Franchisor
                    product in return for a fixed sum of
                        money or royalty payment.
                    An organisation which allows other
                      businesses to trade using their
   Franchise
                     corporate identity, in return for a
                             royalty payment.
                     The name given to a business or
   Franchisee
                        person buying a franchise
                     Payment for the use of someone
     Royalty
                             else's copyright.
                    When firms see the scope of their
                    business as being carried out on a
  Globalisation    worldwide scale - they see the world
                   as one large market rather than as a
                       number of separate markets.
                   A company that has its head office in
                      one country but has branches or
  Multinational
                        factories in a number of other
                                    countries.
                   The management of people so as to
    Human
                    make the most of their abilities and
   Resources
                                      skills.
                            A list of the duties and
 Job Description       responsibilities that make up a
                                 particular job.
                   A list of the experience, qualifications
    Person
                    and personal qualities needed for a
  Specification
                                       job.

                                       OCR GCSE Part 2 Vocab                    61
   Business           Business Studies Keyword
                                                             Notes/Examples
Studies Keyword              Definition

                      The recruitment of people for a
    Internal
                         specific job fro within an
  Recruitment
                       organisation's existing staff.
                    The recruitment of employees to a
   External
                    business from people outside the
  Recruitment
                                 business.
                     The process involved in deciding
                  there is a job vacancy through to the
  Recruitment
                  appointment of a new employee to fill
                               the vacancy.
                     The goods and services that are
    Needs          essential to human survival. (Food,
                             clothing, shelter)
                  The factors that make a person want
   Motivation
                             to do something.
                  The quantity of goods produced by a
  Productivity
                          worker in a given time.
                      A form of training given to new
   Induction       workers when they first start work at
                              an organisation.
                  Gaining skills by actually undertaking
                   the work. Trained at the workplace.
  On-the-Job
                  The trainee can be supervised by an
   Training
                    experienced colleague or watches
                           and copies another.
                    Where training is carried out away
  Off-the-Job
                  from the workplace, for example at a
   Training
                                 college.
                       A system for evaluating the
   Appraisal         performance of workers against
                             agreed targets.
                        An extra payment made to
 Performance-     employees when agreed targets have
  related Pay      been met. It is very like a bonus and
                     is usually paid to salary earners.
                   A legal document that sets out the
   Contract of        rights and duties of both the
  Employment        employer and an employee with
                             regard to a job.




                                     OCR GCSE Part 2 Vocab                    62
   Business               Business Studies Keyword
                                                                   Notes/Examples
Studies Keyword                  Definition

                     The dismissal of an employee
                     because their job is no longer
  Redundancy       needed by their employer. Those
                  made redundant usually receive a
                                payment.
                 An association of workers formed to
                 promote, protect and represent the
  Trade Union          interests of its members to
                   employers, the government and
                                  others.
                     An organisation which exists to
                    influence public opinion about a
 Pressure Group   particular issue and hopes that the
                government will change its policy e.g.
                       Greenpeace, Trade Unions
                      When a group of workers decides to
Industrial Action     take action against their employer as
                       a result of a dispute or a grievance.

                         A hearing of a complaint by an
                       employee against an employer on
Industrial Tribunal
                        grounds of unfair or constructive
                       dismissal, or due to discrimination.
                      The passing of information between
 Communication          one person or organisation and
                                   another.
                       Communications between different
    Internal
                      parts of an organisaion and between
 Communication
                      people within the same organisation.

                        The use of the official system of
    Formal                  communication within an
 Communication        organisation; or official letters written
                          on behalf of an organisation.

   Informal           Any communication that is not part of
 Communication        the official system of communication.
 Organisational        A diagram that shows the internal
     Chart                structure of an organisation.




                                           OCR GCSE Part 2 Vocab                    63
   Business            Business Studies Keyword
                                                               Notes/Examples
Studies Keyword               Definition

                   An organisation where responsibility
                   is built up in layers. The upper levels
   Hierarchy
                     always have more power than the
                                 levels below.
                   The route through which instructions
                     are issued by managers. It is the
                        communications route in an
    Chain of
                   organisation. The length of the chain
   Command
                      of command will depend on the
                    number of levels there are within a
                                   firm.
                    A measure of the number of people
 Span of Control     over whom a manager has direct
                                   control.
                       Passing on responsibility and
   Delegation      authority to someone at a lower level
                             in an organisation.




                                       OCR GCSE Part 2 Vocab                    64
     Keyword                               Business Studies Keyword Definition
                       The various production stages through which a product passes before
Chain of Production
                                                  being sold to a consumer.
                      The sector of industry where businesses mine, grow, collect or cut down
   Primary Sector
                                                          raw materials.
     Secondary
                           The sector of industry where raw materials are transformed into
  (Manufacturing)
                                                    manufactured goods.
        Sector
Tertiary (or Service)
                                    The sector of industry where services are created.
        Sector
                          Where economies, businesses, consumers and workers are linked
 Interdependence         together through specialisation and trade and are reliant upon each
                                                   other in order to survive.
                            Where people or businesses concentrate on a narrow range of
   Specialisation
                                 activities, and by doing so become expert in those tasks.
                        The amount by which the value of a product has risen as a result of a
    Added Value
                                person's or business' part in producing a good or service.
                         States the goals that a company wishes to achieve in a given time.
      Objectives
                       They must be SMART (Specific, Measurable, Agreed, Realistic, Time-
                                                               scaled)
                          Statement that sums up the objectives of an organisation. Catchy
Mission Statement
                                                phrase to reflect the business.
                         Person or organisation that has a direct interest in the behaviour of a
     Stakeholder
                        business. Usually a stakeholder benefits if the business is successful.
Sole Proprietorship
                           A business owned by a single person who has unlimited liability.
    (Sole Trader)
                        Enterprise consisting of more than one owner, larger than sole trader,
     Partnership
                                     unlimited liability, share responsibilities and risks.
                      A legal obligation on the owners of a business to pay off all debts of the
 Unlimited Liability
                                                            business.
                          When an individual or a business that is not incorporated has more
      Bankrupt         liabilities than assets. That is, if everything owned was sold they would
                                         not raise enough money to pay their debts.
   Private Limited     A company whose shares are not openly traded on a stock exchange.
   Company (Ltd)                                 Owners have limited liability.
   Public Limited         A company whose shares are openly traded on a stock exchange.
   Company (plc)                                 Owners have limited liability.
                          Owners (shareholders) are not personally responsible for debts of
  Limited Liability
                                     business. Company can be sued in its own right.
                      Person who starts a business, comes up with a commercial idea, takes
    Entrepreneur
                                                              the risk.
       Deed of         The legal contract which governs how a partnership will be owned and
     Partnership                                            organised.
                         A committee elected by the shareholders of a limited company. They
 Board of Directors      decide policy and make important decisions about the running of the
                                                             company


                                     OCR GCSE Part 3 Vocab                                     65
    Keyword                            Business Studies Keyword Definition
                       The official meeting of ordinary shareholders held by a public limited
 Annual General      company. At the meeting the shareholders have the right to propose +
 Meeting (AGM)         vote on issues, approve accounts, approve dividends, and appoint +
                                                     dismiss directors.
                        The business which gives franchisees the right to sell its product in
    Franchisor
                                 return for a fixed sum of money or royalty payment.
                        An organisation which allows other businesses to trade using their
     Franchise
                                   corporate identity, in return for a royalty payment.
    Franchisee              The name given to a business or person buying a franchise
      Royalty                     Payment for the use of someone else's copyright.
      Merger          When two companies agree to join together to form a new company.
                       When one business gains control over another business by buying a
     Takeover
                                                   majority of its shares.
    Horizontal        Where a business merges with or takes over another business in the
    Integration                                   same line of business.
                     Where a business joins with another that operates at a different stages
Vertical Integration
                                                in the chain of production.
                         When a business expands by moving into new markets. The new
  Diversification    markets will be in goods that are different from those dealt in before. It
                                 often means moving into a completely new industry.
 Job Description       A list of the duties and responsibilities that make up a particular job.
      Person         A list of the experience, qualifications and personal qualities needed for
  Specification                                            a job.
      Internal       The recruitment of people for a specific job fro within an organisation's
   Recruitment                                         existing staff.
      External         The recruitment of employees to a business from people outside the
   Recruitment                                           business.
                      The process involved in deciding there is a job vacancy through to the
   Recruitment
                                  appointment of a new employee to fill the vacancy.




                                     OCR GCSE Part 3 Vocab                                    66
Business Studies
                                          Business Studies Keyword Definition
    Keyword
                   The amount of money earned by a business from selling its goods and services. Usually
    Revenue
                                            total revenue equals total sales.
Business Environment
                                        Business Environment Definition
      Keyword
                         The central bank for the UK. It is publicly owned but is technically
   Bank of England
                                         independent of the government.
        Barter             The direct exchange of products without the use of money.
                       A period in the business cycle when business activity is at a very high
        Boom
                       level. Business confidence, investment and employment will be high.
                        An organisation formed to supply goods or services, at the right time
      Business
                              and in the right quantities to satisfy its customers' needs.
                       Over a period of time business goes through a cycle which seems to
   Business Cycle      have 4 phases: Boom, Recession, Slump, Recovery and then back to
                                                      Boom again
                        An economic system where resources are owned and controlled by
     Capitalism          private persons and organisations and allocated by market forces.
                                   The government interferes as little as possible.
                       With limited incomes and resources, customers and businesses have
       Choice
                                      to decide how to allocate those resources.
 Command Economy                        Another name for a Planned Economy.
     Consumer                The person who ultimately uses (or consumes) a product.
     Currency                          The unit of money used within a country.
     Customer               A business or individual who buys products from a business.
      Demand                  How much of a product will be bought at any given price.
  Economic Growth             The increase in a country's wealth over a period of time.
                       The price at which one currency can be bought and sold in exchange
   Exchange Rate
                                                 for another currency.
       Exports                      Goods and services sold to overseas buyers.
     Externalities      The costs or benefits over which a business has little or no control.
                          The government's policy for raising money through taxes and for
    Fiscal Policy
                                            spending money on services.
                       When firms see the scope of their business as being carried out on a
    Globalisation      worldwide scale - they see the world as one large market rather than
                                         as a number of separate markets.
       Imports                   Goods and services bought from another country.
                         A general increase in the level of prices, and a related decrease in
       Inflation
                                                 the value of money.
                        Where economies, businesses, consumers and workers are linked
    Interdependence     together through specialisation and trade and are reliant upon each
                                              other in order to survive.
                        The cost of borrowing money. It is usually stated as a percentage of
       Interest
                                               the amount borrowed.
    Interest Rate           The rate charged for borrowing money over a period of time.
                        Law that is made by parliament. It is contained in Acts of Parliament
     Legislation
                                    and includes regulations made under an Act.
                       An economy in which the allocation of resources is decided by market
   Market Economy
                              forces. The government intervenes as little as possible.
                            One that is made up of both private sector and public sector
   Mixed Economy
                                                     enterprises.
                     The government's policy on the control of inflation and economic
 Monetary Policy
                           growth through control of a country's money supply.
 Money Supply       The total amount of cash, bank deposits and credit in the economy.
                   A company that has its head office in one country but has branches
  Multinational
                              or factories in a number of other countries.
                   The goods and services that are essential to human survival. (Food,
     Needs
                                             clothing, shelter)
Opportunity Cost   The benefit lost from the next best alternative when making a choice.

                   An economy in which the government decides on how resources are
Planned Economy
                     allocated, what will be produced, where, and in what quantities.

     Quota         A limit on the quantity of a product that can be produced or traded in.
                     A period of time when the economy is slowing down or output is
   Recession
                                                   falling.
                      Human wants are almost without limit, however the resources
Scarce Resources
                               available to satisfy those wants are scarce.
                   Payments made by the government to businesses to encourage them
   Subsidies
                                          to take certain actions.
     Supply         How much of a product producers will produce at any given price.
                     The annual forecast of what the government expects to collect in
  THE Budget
                      taxes and to spend on services during the next financial year.
    Marketing
                                                       Marketing Keyword Definition
     Keyword
   Above-the-line
                                                 The use of the media to advertise a product.
    Promotion
                         An aspect of promotion in which one or a range of media are used to communicate with
     Advertising
                                    the public. It can be informative or persuasive or a combination.
    Advertising
                      A planned programme of advertising designed to promote an organisation, its products or
Campaign (or Media
                                      services. The campaign must be carried out within a budget.
    Campaign)
                        The supply of services to customers after a sale is completed. It is an important part of
After Sales Service
                                                     many companies' marketing mix.
   Below-the-line     Media other than advertising which is used to promote a product, such as direct mail or point-of-sale
     Promotion                                                     materials.
                        A product that is given a unique name to distinguish it from other products that may be
       Brand
                                                      similar in their use and purpose.
      Census                   A survey of the population carried out by the government every ten years.
                           The route a product goes through from leaving the manufacturer to arriving at the
Chain of Distribution
                                                                  consumer.
Competition Based
                            Setting a price based on the prices charged by competitors of similar products.
       Pricing
                       An industry in which there are many businesses. No one business dominates. Pricing will
Competitive Market
                                              often be dictated by what others are charging.
    Competitor                   Rival business producing the same product, trying to take customers.
   Copyright (or
                       Legal protection to prevent inventions or new products being copied by other businesses.
      Patent)
                      Fixing a price by adding a percentage profit margin to the cost of production of the good or
 Cost Plus Pricing
                                                                    service.
   Creaming (or
                          Selling a product at a high price, sacrificing high sales in order to earn high profits.
    Skimming)
  Demographics                           The study of the structure and make up of a population.
  Desk Research                      When information is collected from existing, published sources.
      Discount                        An amount of money taken off the selling price of a product.
                        The process of getting goods and services to the final consumer at the right place, at the
     Distribution
                        right time and in the right amounts. It includes storing, transporting and selling products.
   Field Research               The collection of new and original information by going into the "field".
       Goods                 Physical (tangible) products, like a car or a chocolate bar that you can touch.
                       A promise by a company to repair or replace a product, free of charge, if it should fail or go
     Guarantee
                                                     wrong within a stated period.
        Logo           A symbol or badge that enables the public to recognise a product or firm quickly and easily.
                        A product which is sold at a loss to attract customers to buy other full price products sold
    Loss Leader
                                                              by the business.
                       Cards issued by supermarkets and other stores that give customers points when shopping
   Loyalty Cards       at the store. The points can be used against future shopping bills. They give stores a great
                                      deal of information about regular customers' shopping habits.
      Market                         Where buyers and sellers meet to exchange goods and services.
  Market Oriented       A business which develops products which have been researched and designed to meet
     Business                                            the needs of customers.
                       The process of gaining information about customers, competition and market trends by
Market Research
                                                collecting primary and secondary data.
Market Saturation                          When the market for a product is fully satisfied.
    Market              The breaking down of the market for a product into groups or types of consumers that
 Segmentation                                        share similar characteristics.
 Market Share             The proportion of the totals sales of a product gained by one company or brand.
                       The selling of a new product in a limited area to see how well it sells and to highlight any
  Market Testing
                                                           possible problems.
                      A range of activities which ensures that customers get what they want, in the right amounts, at the
    Marketing
                                                        right time and at the right price.
                     The combination of factors which help the business sell a product - usually summarised as
  Marketing Mix
                                                 the 4 Ps (Product, Place, Price, Promotion)
Mark-up (or Profit    The percentage added to the cost of producing or purchasing a product which equals the
      Margin)                                                profit on the product.
                      Pricing a product based on the cost of production plus a standard percentage (the mark-
 Mark-up Pricing
                                                                up) for a profit.
                     The methods used to display and promote goods at or near the point of sale. It is also used
  Merchandising      to describe the spin-off products and activities from, for example, films, football teams and
                                                                    pop stars.
     Monopoly                                  Where a firm is the only producer of a product.
      Needs                              The basic products that people need in order to survive.
   Niche Market                        A small, probably specialised, segment of a larger market.
    Packaging                              The materials used to protect and present a product.
                      Setting an initial low price for a new product so that it is attractive to customers. The price
Penetration Pricing
                                      is likely to be raised later as the product gains market share.
                      The part of the marketing mix that determines where goods are going to be sold and how
       Place
                                                          they are going to get there.
   Point of Sale                  The place where goods and services are finally sold to a consumer.
       Price                         The money paid when goods or services are bought and sold.
Price Discrimination              Charging different customers different prices for the same product.
                       Information which has been gathered for a specific purpose through direct investigation
   Primary Data
                                                     (observation, surveys, experiments)
                      That which is made or supplied at the end of the production process. In marketing it is the
      Product
                                                     goods or services available for sale.
      Product        Making one product different from another, for instance through the quality of a product, its
  Differentiation                                      design, packaging or advertising.
                     The stages through which a product passes, from its development to being withdrawn from
Product Life Cycle
                            sale. The product experiences different levels of consumer demand over time.
                      The combination products that a business sells - ie: Boots' product mix includes various cosmetics,
   Product Mix
                                                      medicines and first aid products.
 Product Oriented     A business which develops products with little or no market research and which it hopes will prove
    Business                                            successful in the market.

  Product Range       A group of similar products made by a business, like a number of different chocolate bars.

                        A mix of methods used to market and sell a product which includes: Advertising, Sales
    Promotion
                          Promotion, Direct Marketing, Sponsorship, Personal Selling, After Sales Service.
                        Promotion of a positive image about a product or business through giving information
 Public Relations
                              about the product to the general public, other businesses or to the press.
  Questionnaire            A list of questions designed to produce answers about a defined set of issues.
   Research &     The technical development of new or existing products. This may need scientific as well as
Development (R&D)                       technical research and will include testing.
                       A special event or other short-term method used to persuade people to buy a product.
 Sales Promotion
                                 Sales promotions, like special offers, all last for a limited time only.
                       Information which already exists, such as accounts and sales records, government statistics,
 Secondary Data
                                         newspaper articles or reports from advertising agencies.
     Services                    Non-physical (intangible) products, like a haircut or a train journey.
                     Setting the price of a new product very high while the goods are scarce. It is lowered later
    Skimming
                                                     after 'skimming the cream'.
                       The support given by businesses to events, teams or individuals by providing finance,
   Sponsorship
                                           goods, publicity and other materials or services.
                      A form of primary research where information is collected directly from a sample of the
      Survey
                                          population either by questionnaire or by interview.
  Target Market                         The parts of a market at which a firm aims its selling.
                      Unique name, logo or other distinguishing feature of a product which is protected in law
    Trademark
                                               from being copied by rival businesses.
     Warranty                                      Another name for a guarantee.
Production Keyword                                  Production Keyword Definition
                          The amount by which the value of a product has risen as a result of a person's or
    Added Value
                                            business' part in producing a good or service.
      Assets                          All the things owned by a business or by and individual.
    Automation                              The replacing of human labour by machines.
                        A method of production where identical goods are made in lots or batches. One batch
  Batch Production
                                            is finished before moving on to the next one.
   Benchmarking                    Comparing the way a firm has performed against a standard.
    Bulk Buying            The purchase of goods in large quantities. Often a trade discount will be given.
                         The funds invested in a business to enable it to buy the assets it needs to carry on
       Capital
                        business. It is everything used by the owners for the purpose of running the business.
   Capital Goods                  Physical goods used in the production of other goods + services.
                         Where workers on a production line do blocks or 'cells' of work instead of just one
   Cell Production
                                                             operation.
                          The route a product goes through from leaving the manufacturer to arriving at the
Chain of Distribution
                                                             consumer.
                        The various production stages through which a product passes before being sold to a
Chain of Production
                                                             consumer.
  Computer-aided
                              Designing a product, or modifying its design, using a computer program.
Manufacturing (CAD
Computer-integrated
                                Using computers to control large parts of the manufacturing process.
Manufacturing (CIM)
Computer-integrated     Using data from a CAD-produced design to program the operation of a machine used
Manufacturing (CIM)                                to manufacture a product.
  Contracting Out
                         When a business sends out some parts of its work to be done by another business.
   (Outsourcing)
                        The splitting up of a job into a number of smaller parts. Each part is then carried out
 Division of Labour
                                                           by a different person.
                            A factor that allows the production cost of each item to be lowered as greater
Economies of Scale      numbers are made, e.g. cost benefits from buying in bulk, more efficient use of fixed
                                                                   assets.
     Enterprise               The ability to identify business opportunities and to take risks in business.
Factors of Production        Land, labour, capital + enterprise which are used in the production process.
                            A method of production where a single product is produced in response to an
   Job Production
                                 individual order. It is a "one off" made to a customer's specification.
                        A system in which raw materials and components are delivered just before they are
  Just-in-time (JIT)     going to be used. It is a way of keeping stocks of materials and finished goods to a
                                                                  minimum.
       Kaizen                  A system for the continuous improvement of all aspects of a business.
       Labour                                   The human resources used in business.
                          When a business relies on the use of labour as a factor of production more than
  Labour Intensive
                                                                   capital.
                         The factor of production that includes natural resources (eg soil, minerals, fish) as
        Land
                                                          well as the land surface.
     Lead time                                    Time between ordering and delivery.
                           The process of manufacturing a standard product in a large number of different
Mass Customisation
                                       variations to cater for the individual needs of customers.
  Mass Production         The production of large quantities of identical products often on an assembly line.
    Overheads                                   The general costs of running a business.
                            The sector of industry where businesses mine, grow, collect or cut down raw
   Primary Sector
                                                                  materials.
                               The creation of goods and services to satisfy human wants. It includes all the stages
        Production
                                          involved in getting those goods and services to the consumer.
       Productivity                        The quantity of goods produced by a worker in a given time.
                                A standard for a product or service or production process which meets customers'
          Quality
                                                                      needs.
                                A system set up by the company to make sure that the quality standard it sets for its
    Quality Assurance          products is met in all aspects of its work. It aims to ensure that faults do not happen –
                                  in others words, stop the mistakes from happening before they actually happen.
                                  Method of checking products/services to ensure that they are up to the required
      Quality Control          standard. May be a separate department within a business, or employees check their
                                                                    own work.
      Raw Materials                  Natural resources, like copper or coffee beans, used to make products.
          Retailer             Shop/store, place where goods are sold, final stage before customers, tertiary sector.
Secondary (Manufacturing)
                          The sector of industry where raw materials are transformed into manufactured goods.
         Sector
                            Where people or businesses concentrate on a narrow range of activities, and by
     Specialisation
                                                 doing so become expert in those tasks.
                            Materials that a business holds, waiting to be used in the production process, or
         Stock
                                      finished goods waiting to be sold/delivered to its customers.
Tertiary (or Service) Sector                     The sector of industry where services are created.
Total Quality Management        A method for a business to focus on quality by making it an important aim of every
         (TQM)                                               department and worker.
       Wholesaler                  An intermediary who provides a link between manufacturers and retailers.
 Human Resources
                                                 Human Resources Keyword Definition
    Keyword
                            The department within a business that provides the clerical and other services
     Administration        needed to run a business. It provides and controls services like telephones, ICT,
                                                    accounting, cleaning and security.
                          A list of the items of business and the order in which they are to be discussed at a
       Agenda
                                                                meeting.
      Appraisal               A system for evaluating the performance of workers against agreed targets.
      Arbitration                    Where an independent person is asked to help settle a dispute.
                          The amount paid to a person for working an agreed minimum period of time. The
      Basic Pay
                                 pay earned for working a basic week, before any overtime or bonuses.
                          An extra payment over and above the normal rate of earnings. It is usually paid as
        Bonus
                                  an addition to wages and salaries and is often used as an incentive.
                                 The route through which instructions are issued by managers. It is the
  Chain of Command        communications route in an organisation. The length of the chain of command will
                                          depend on the number of levels there are within a firm.
                          When trade unions negotiate with an employer or group of employers on behalf of all their
 Collective Bargaining   members. They may negotiate on wages, holidays, hours of work or other working conditions.

                         A method of payment usually based on the value of sales achieved. It is usually paid
     Commission
                                                      as a percentage of sales.
    Communication           The passing of information between one person or organisation and another.
                          Where the two sides to a dispute try to understand each other's point of view and
     Conciliation
                               come to an agreement. Usually both sides get some of what they want.
                         The resignation of an employee from a job due to some action by the employer that
Constructive Dismissal
                                         makes it hard to carry on working for that employer.
                         A legal document that sets out the rights and duties of both the employer and an employee with
Contract of Employment
                                                                  regard to a job.
   Contracting Out
                         When a business sends out some parts of its work to be done by another business.
    (Outsourcing)
 Curriculum Vitae (CV)   It is a summary of an individual's personal details, qualifications and job experience.
                         Money taken out of a person's gross pay, mainly income tax and National Insurance
      Deductions
                                                contributions. The amount left is net pay.
      De-layering            Cutting down the number of levels of management within an organisation.
                              Passing on responsibility and authority to someone at a lower level in an
      Delegation
                                                               organisation.
                          People elected to the board of a company by the shareholders to represent the
       Directors
                                                          shareholders' interest.
                            Treating people differently because of their colour, race, religion, gender or
    Discrimination
                                                                 disability.
                           When an employer ends a person's contract of employment after giving proper
      Dismissal
                                     notice. It is the proper word for 'sacking' or 'firing' a worker.
     E-Commerce                     The buying and selling of goods and services via the Internet.
                         A method of sending and receiving messages and documents via a modem, using
        E-mail
                                                  computers linked through a network.
      Employee                   Somebody who works for a business in return for a wage or salary.
                          A person or organisation that engages someone to work in return for an agreed
      Employer
                                                             wage or salary.
                         The rights of people not to be discriminated against on the grounds of race, colour,
 Equal Opportunities
                                                           gender or disability.
 External Recruitment      The recruitment of employees to a business from people outside the business.
                            Employment practices that change to suit changes in demand or employees'
   Flexible working
                                                               circumstances.
                          The use of the official system of communication within an organisation; or official
Formal Communication
                                               letters written on behalf of an organisation.
                         Parts of an employee's reward, in addition to their salaries, given in the form of, for
    Fringe Benefits
                                    example, a company car, life assurance or discounted goods.
      Gross Pay                     The total pay earned before any deductions have been made.
                          An organisation where responsibility is built up in layers. The upper levels always
      Hierarchy
                                                 have more power than the levels below.
  Human Resources          The management of people so as to make the most of their abilities and skills.
                         The tax collected on an individual by the government on all income, above a certain
     Income Tax
                                     figure. It is based on gross income earned from all sources.
      Induction          A form of training given to new workers when they first start work at an organisation.
                         When a group of workers decides to take action against their employer as a result of
   Industrial Action
                                                      a dispute or a grievance.
                         A hearing of a complaint by an employee against an employer on grounds of unfair
  Industrial Tribunal
                                         or constructive dismissal, or due to discrimination.
Informal Communication      Any communication that is not part of the official system of communication.
     Information and
                            The collecting, recording, storing, retrieval and distribution of information using
    Communications
                                                  computers and telecommunications.
    Technology (ICT)
                           Communications between different parts of an organisaion and between people
Internal Communication
                                                within the same organisation.
 Internal Recruitment    The recruitment of people for a specific job fro within an organisation's existing staff.
                          Asking a person questions, in a face-to-face situation, to decide whether they are
       Interview
                                                            suitable for a job.
                         Breaking down a job into its various parts to see how many people are needed to do
     Job Analysis              the work. It may also be used to draw up a job description and a person
                                                              specification.
   Job Description               A list of the duties and responsibilities that make up a particular job.
   Job Satisfaction                The extent to which an employee enjoys an is fulfilled by their job.
       Labour                   All the human resources that are available for use in economic activity.
   Labour Turnover            The rate at which people enter and leave employment of an organisation.
                          Workers who are responsible for the day to day running of the company. They are
      Managers
                                                       answerable to the directors.
                         The official record of a meeting. They give the date, time, place and those attending.
       Minutes
                            They record any decisions made and possibly the main points of discussion.
      Motivation                        The factors that make a person want to do something.
                          Money deducted from workers' gross pay, used to pay for the system of welfare
  National Insurance
                         benefits provided by the government. Part is paid by individuals and part is paid by
    Contributions
                                                              employers.
                           The money shown on a person's payslip, stating the amount actually paid after
       Net Pay
                                                   deductions. It is 'take-home pay'.
 Off-the-Job Training     Where training is carried out away from the workplace, for example at a college.
                            Gaining skills by actually undertaking the work. Trained at the workplace. The
 On-the-Job Training       trainee can be supervised by an experienced colleague or watches and copies
                                                                another.
 Organisational Chart              A diagram that shows the internal structure of an organisation.
       Overtime                  A payment made for working more hours than the basic working week.
                          An extra payment made to employees when agreed targets have been met. It is very
Performance-related Pay
                                              like a bonus and is usually paid to salary earners.
  Person Specification       A list of the experience, qualifications and personal qualities needed for a job.
                            An amount paid to workers according to the amount they produce. Workers are
      Piece Rate
                                          usually paid a fixed amount for each item they produce.
                            Local government consent to operate a business in an area or change use of or
  Planning Permission
                                                                extend a building.
   Profit-related Pay                A form of bonus which is linked to the size of a business' profits.
                          The process involved in deciding there is a job vacancy through to the appointment
      Recruitment
                                                     of a new employee to fill the vacancy.
                              The dismissal of an employee because their job is no longer needed by their
     Redundancy
                                       employer. Those made redundant usually receive a payment.
                          Written or verbal reports given by two or three people who know a job applicant and
      References
                                     who can give an opinion about that person's suitability for a job.
      Re-training                 Training a person who is skilled in one job to do another, different job.
                          A method of paying employees for their work. It is calculated on an annual basis and
        Salary
                                                              normally paid monthly.
                          The last stage in the recruitment of new employees, when the successful candidate
       Selection
                                                          is chosen for a job vacancy.
       Shortlist                    The list of applicants for a job that have been chosen for interview.
    Span of Control           A measure of the number of people over whom a manager has direct control.
                          A form of training where staff follow a programme of personal development that also
  Staff Development
                                                     meets the needs of the organisation.
                             Person or organisation that has a direct interest in the behaviour of a business.
      Stakeholder
                                        Usually a stakeholder benefits if the business is successful.
                            Someone who works from home using computer links to keep in touch with their
      Teleworker
                                                                    base office.
                            An amount paid to workers according to the amount of time they work. It may be
      Time Rate
                                                    stated as a rate per hour, day or week.
                          An association of workers formed to promote, protect and represent the interests of
     Trade Union
                                          its members to employers, the government and others.
                            The application of knowledge to work. It involves the teaching of skills in a work-
        Training
                                                                 related situation.
                            A method of paying employees for their work. They are mainly paid to shop-floor
        Wages
                                                           workers on a weekly basis.
                               A form of industrial action where workers follow their employer's rules and
     Work to Rule
                                                             regulations to the letter.
  Working Conditions                         The physical environment in which a person works.
    Location Keyword
      Demographics
External Economies of Scale

       Infrastructure
   Planning Permission
         Pollution
                           Location Keyword Definition
              The study of the structure and make up of a population.
The benefits that a firm gains from being located in the same area as other, similar
                                     industries.
The network of essential public services that support a community and business. It
                   includes roads, factories, schools + hospitals.
  The approval given by a local council to allow a building to be built or changed.
 Damage caused to the environment by contaminating the air, water or earth with
                             chemicals, fumes or noise.
Business Structure Keyword


Annual General Meeting (AGM)



 Annual Report and Accounts



    Articles of Association



        Centralisation




        Co-operative




       Decentralisation

     Deed of Partnership

          Directors

        Diversification

          Dividend
         Downsizing
        Entrepreneur

          Franchise

         Franchisor

    Horizontal Integration

        Incorporation

       Limited Liability


       Limited Partner


 Memorandum of Association
             Merger
       Mission Statement
           Objectives
          Partnership


        Pressure Group


 Private Limited Company (Ltd)
         Private Sector
 Public Limited Company (plc)

         Public Sector
             Royalty
             Shares

        Sleeping Partner
Sole Proprietorship (Sole Trader)
      Subsidiary Business

           Takeover

       Unlimited Liability

       Vertical Integration
                     Business Structure Keyword Definition

The official meeting of ordinary shareholders held by a public limited company.
 At the meeting the shareholders have the right to propose + vote on issues,
   approve accounts, approve dividends, and appoint + dismiss directors.
A report that limited companies must produce at the end of every financial year.
     It must be approved by the AGM and a copy sent to the Registrar of
                                 Companies.
One of the essential documents that a limited company must have by law. They are the
 internal rules for running a limited company and include things such as the number of
  directors, how long they serve for and their duties, the date of the financial year and
                                         AGM . . .
A type of business organisation where most decisions are made at head office
 and then passed down the chain of command. Strict control is kept over their
                                    branches.
 An organisation, owned by its members and each member shares its profits
  and has a say in the way it is run. A Consumer Co-op is set up to provide
  members with good, honest products at a fair price; a Producer Co-op is a
 group of producers who join together to market, promote and distribute their
 products for their mutual benefit; and a Worker Co-op is a group of workers
who set up or buy into a business and share in its ownership, management and
                                     control.
  A type of business organisation where decision making is passed down to
  branches or divisions of the organisation, and not taken by the head office.
    The legal contract which governs how a partnership will be owned and
                                   organised.
People elected to the board of a company by the shareholders to represent the
                             shareholders' interest.
   A business entering a new market, increasing the number of markets into
                           which it sells its products.
  A share of the profits of a company received by those who own shares in it.
      Reducing the size of a company in order to make it more efficient.
 Person who starts a business, comes up with a commercial idea, takes the
                                       risk.
 An organisation which allows other businesses to trade using their corporate
                   identity, in return for a royalty payment.
The business which gives franchisees the right to sell its product in return for a
                  fixed sum of money or royalty payment.
Where a business merges with or takes over another business in the same line
                                   of business.
 The process that gives an organisation a separate legal existence of its own.
 Owners (shareholders) are not personally responsible for debts of business.
                  Company can be sued in its own right.
 A member of a partnership who has unlimited liability. Such partners invest
money and have a share of the profits, but play no part in running the business.

 A document that must be drawn up when forming a limited company. It states
 briefly the main details of the company that may be need by external bodies.
     When two companies agree to join together to form a new company.
  Statement that sums up the objectives of an organisation. Catchy phrase to
                                reflect the business.
     states of the goals that a company wishes to achieve in a given time.
Enterprise consisting of more than one owner, larger than sole trader, unlimited
                    liability, share responsibilities and risks.
An organisation which exists to influence public opinion about a particular issue
 and hopes that the government will change its policy e.g. Greenpeace, Trade
                                        Unions
A company whose shares are not openly traded on a stock exchange. Owners
                                 have limited liability.
    All businesses and organisations that are not owned or run by the state.
  A company whose shares are openly traded on a stock exchange. Owners
                                 have limited liability.
     Commercial activities carried out by local and central government e.g.
                                  education, health.
                Payment for the use of someone else's copyright.
  The parts into which a company's capital is divided and which belong to the
                               owners of the company.
 A member of a partnership who invests money in the firm but plays no part in
                                     its running.
         A business owned by a single person who has unlimited liability.
A business that trades under its own name but is owned by another business.
When one business gains control over another business by buying a majority of
                                  its shares.
   A legal obligation on the owners of a business to pay off all debts of the
                                   business.
 Where a business joins with another that operates at a different stages in the
                              chain of production.
Finance Keyword                              Finance Keyword Definition
                       Individual records of the transactions that have a financial effect on a
    Accounts
                                                business or organisation.
                        A measure of the money a business has readily available to pay its
                      debts quickly. It is calculated by taking stock away from the total of the
  Acid Test Ratio
                          current assets and dividing the result by the total value of current
                                                         liabilities.
      Assets                   All the things owned by a business or by and individual.
                           An independent check on the truth and accuracy of a business's
       Audit              financial records. It is usually carried out by a firm of professional
                             accountants. It is a legal requirement for limited companies.
                     A fixed sum of money borrowed from a bank for a definite period of time.
    Bank Loan
                                   It can be repaid by installments or in a lump sum.
                      When an individual or a business that is not incorporated has more liabilities
     Bankrupt        than assets. That is, if everything owned was sold they would not raise enough
                                                  money to pay their debts.
                         The recording, in money terms, of the financial transactions of a
   Bookkeeping
                                                     business.
                      The output at which a business' total revenue is equal to its total costs.
   Break-even
                            At this point the business is not making a profit or a loss.
                         A detailed estimate of the future income and financial costs of a
      Budget
                                                     business.
                       A detailed outline of a business's intentions over a period of time. It
  Business Plan       contains financial, sales and other forecasts, and targets for the main
                                               areas of the business.
                     The funds invested in a business to enable it to buy the assets it needs to carry
      Capital        on business. It is everything used by the owners for the purpose of running the
                                                        business.
                      The notes and coins used to settle debts. Cash also includes cheques, credit
      Cash
                                cards and debit cards, standing orders and direct debits.
                      A month-by month statement which outlines the planned flows of cash
Cash Flow Forecast
                                         into, and out of, a business.
Cost of Goods Sold             The cost of making or buying the goods sold by a business.
                      The price at which a trader buys the goods that it then sells at a higher
    Cost Price
                                                      price.
                     Where goods are not paid for at the time they were bought. They buyer is given
      Credit
                               an agreed period of time in which to pay for the goods.
                       A measure of a business' ability to pay its debts. It is calculated by
  Current Ratio        dividing current assets by current liabilities. It is also known as the
                                    liquidity ratio and the working capital ratio.
                     The amount taken off the value of a fixed asset as a result of wear and
   Depreciation
                                            tear and the passage of time.
                     The costs that are directly attributable to the manufacture of a particular
   Direct Costs
                                                       product.
                     A share of the profits of a company received by those who own shares
     Dividend
                                                          in it.
                      The value of a business which belongs to the business owners. In a
      Equity
                                company this would be the value of their shares.
                        The assets of a business that have a long life. Examples include
   Fixed Assets
                             premises, machinery, fixtures and fittings and vehicles.
                           Costs that do not change when the level of output changes, for example
        Fixed Costs
                                                      rent and business rates.
                            The difference between the total income from sales and the cost of the
        Gross Profit
                                                             goods sold.
                             The general costs of running a business that cannot be allocated to a
      Indirect Costs           particular product. They are sometimes called the overheads of a
                                                              business.
                           A financial contract which covers the possibility of financial loss resulting
         Insurance
                                                         from certain risks.
                           The cost of borrowing money. It is usually stated as a percentage of the
           Interest
                                                         amount borrowed.
       Interest Rate             The rate charged for borrowing money over a period of time.
                           Renting assets from a company for an agreed time in return for regular
           Leasing
                                                          payments of rent.
          Liabilities                          The debts that are owed by a business.
                             Assets that can easily be changed into cash. Cash is the most liquid
      Liquid Assets          asset of all, followed by money in the bank, debtors and stock, in that
                                                                order.
         Net Profit                             The gross profit minus all expenses.
                              An agreement with a bank that allows a customer to draw out more
         Overdraft
                                          money than they have in their current account.
                            The difference between the price at which goods and services are sold
            Profit           and the cost of all the materials and services that went into providing
                                                                them.
                           The number of times average stock is sold (turned over) during a period
     Rate of Turnover
                                      of time. It measure the speed at which stock is sold.
                           The part of a firm's profit that is kept in the business and not distributed
      Retained Profit       to the owners. It is the most common way of financing the growth of a
                                                                 firm.
                              The profit made by a firm as a percentage of the capital used in the
Return of Capital Employed
                             business. It measures how much the owner's capital earned from the
          (ROCE)
                                                              business.
                            The amount of money earned by a business from selling its goods and
          Revenue
                                        services. Usually total revenue equals total sales.
                           The value of the goods and raw materials held by a firm. Stocks may be
            Stock            of raw materials and components used to produce goods, of work in
                                        progress, or of finished goods waiting to be sold.
                              A review of an organisation in terms of its Strengths, Weaknesses,
     SWOT Analysis
                                                    Opportunities and Threats.
          Turnover                              The total income gained from sales.
          Unit Cost                     The average cost of producing one unit of output.
                           Those costs which change directly with the output of a business i.e raw
      Variable Costs
                                        material cost, overtime cost, fuel and power cost.
     Working Capital              The funds needed for the day-to-day running of a business.
   Unilever           Business Studies Keyword
                                                            Example
   Keyword                      Definition
                  A company that has its head office in
                    one country but has branches or
  Multinational
                     factories in a number of other
                                countries.
                  The location where most, if not all, of
 Headquarters         the important functions of an
                     organisation are co-ordinated.
                    A company whose shares are
 Public Limited
                  openly traded on a stock exchange.
 Company (plc)
                     Owners have limited liability.

                   When two companies agree to join
    Merger
                   together to form a new company.
                    Goods and services bought from
    Imports
                           another country.
                      A company that operates in a
                    number of different, unconnected
                   industries. It will probably be made
 Conglomerate
                      up of a number of subsidiary
                    companies. The main strength of
                     conglomerates is diversification.

                  A business or product that is given a
                       unique name and image to
     Brand        distinguish it from other businesses
                   or products that may be similar in
                         their use and purpose.
  Fast Moving
               Relatively low priced products that
Consumer Goods
                        are sold quickly.
    (FMCG)
                  A committee elected by the
               shareholders of a limited company.
   Board of
                 They decide policy and make
   Directors
                 important decisions about the
                    running of the company
                    The parts into which a company's
    Shares         capital is divided and which belong
                     to the owners of the company.

                                                                      86
  Unilever            Business Studies Keyword
                                                             Example
  Keyword                    Definition
                     A person or organisation that
  Employer        engages someone to work in return
                    for an agreed wage or salary.
                       When a business expands by
                   moving into new markets. The new
                     markets will be in goods that are
Diversification
                  different from those dealt in before. It
                        often means moving into a
                         completely new industry.
                      Where firms decide to site their
  Location
                        businesses geographically.
                  Doing the right (moral) thing, even if
   Ethical
                           it costs more money.
                   A range of activities which ensures
                   that customers get what they want,
  Marketing
                  in the right amounts, at the right time
                           and at the right price.

                   A mix of methods used to market
                   and sell a product which includes:
  Promotion       Advertising, Sales Promotion, Direct
                   Marketing, Sponsorship, Personal
                     Selling, After Sales Service.

                  The support given by businesses to
                    events, teams or individuals by
Sponsorship
                   providing finance, goods, publicity
                    and other materials or services.
                  An aspect of promotion in which one
                     or a range of media are used to
 Advertising      communicate with the public. It can
                    be informative or persuasive or a
                               combination.
                  An association of workers formed to
                   promote, protect and represent the
Trade Union             interests of its members to
                    employers, the government and
                                   others.
                   The replacing of human labour by
 Automation
                                 machines.
                                                                       87
   Unilever           Business Studies Keyword
                                                             Example
   Keyword                     Definition
                   An organisation which allows other
                     businesses to trade using their
   Franchise
                    corporate identity, in return for a
                           royalty payment.
                      A method of production where
                    identical goods are made in lots or
Batch Production
                      batches. One batch is finished
                     before moving on to the next one.
                     Person or organisation that has a
                    direct interest in the behaviour of a
  Stakeholder         business. Usually a stakeholder
                         benefits if the business is
                                 successful.
                     Natural resources, like copper or
 Raw Materials          coffee beans, used to make
                                  products.
                   Using resources as well as possible.
                        It means using labour and
   Efficiency      machinery and other resources of a
                   business in such a way that the firm
                    gets the most benefit from them.
                     The application of knowledge to
    Training         work. It involves the teaching of
                     skills in a work-related situation.
                      Using another company to take
  Outsourcing      responsibility for certain aspects of a
                                  business.
                      How much of a product will be
    Demand
                         bought at any given price.
                       An organisation which exists to
                      influence public opinion about a
Pressure Group      particular issue and hopes that the
                     government will change its policy
                      e.g. Greenpeace, Trade Unions
                   The amount of money earned by a
                   business from selling its goods and
   Revenue
                     services. Usually total revenue
                           equals total sales.

                                                                       88
    Unilever      Business Studies Keyword
                                                              Example
    Keyword                 Definition
                 The unit of money used within a
   Currency
                             country.
               The difference between the price at
                which goods and services are sold
     Profit    and the cost of all the materials and
                 services that went into providing
                               them.
               The price at which one currency can
 Exchange Rate be bought and sold in exchange for
                        another currency.
                    A period of time when the economy
   Recession
                    is slowing down or output is falling.

    Net Profit      The gross profit minus all expenses.
                    The assets of a business that have a
                           long life. Examples include
  Fixed Assets
                      premises, machinery, fixtures and
                               fittings and vehicles.
                     Assets that will change in value for
                         the next twelve months. They
 Current Assets
                     consist of cash (including money in
                         the bank), debtors and stock.
                          The part of an organisation's
                      liabilities that will have to be paid
                     within twelve months of the date of
Current Liabilities    the balance sheet. They usually
                        consist of trade creditors, bank
                     overdrafts, corporation tax due and
                               proposed dividends.
                   The long-term funds used in a
                 business. It consists of the owner(s)
                   funds, reserves built up by the
Capital Employed business, plus money borrowed for
                    more than a year. The capital
                  employed will be equal to the net
                       assets of the business.




                                                                        89
  Unilever         Business Studies Keyword
  Keyword                     Definition
                   A company that has its head
                    office in one country but has
Multinational
                 branches or factories in a number
                          of other countries.

                  The location where most, if not
Headquarters      all, of the important functions of
                 an organisation are co-ordinated.

                  A company whose shares are
Public Limited      openly traded on a stock
Company (plc)    exchange. Owners have limited
                             liability.
                  When two companies agree to
   Merger          join together to form a new
                            company.
                 Goods and services bought from
   Imports
                         another country.

                   A company that operates in a
                 number of different, unconnected
                   industries. It will probably be
Conglomerate          made up of a number of
                 subsidiary companies. The main
                   strength of conglomerates is
                          diversification.

                   A business or product that is
                 given a unique name and image
                    to distinguish it from other
    Brand
                 businesses or products that may
                    be similar in their use and
                              purpose.

                                                       90
  Unilever          Business Studies Keyword
  Keyword                  Definition
 Fast Moving
                   Relatively low priced products
  Consumer
                       that are sold quickly.
Goods (FMCG)

                    A committee elected by the
                      shareholders of a limited
  Board of
                  company. They decide policy and
  Directors
                   make important decisions about
                    the running of the company

                  The parts into which a company's
                     capital is divided and which
   Shares
                     belong to the owners of the
                               company.
                    A person or organisation that
                    engages someone to work in
  Employer
                    return for an agreed wage or
                                 salary.

                    When a business expands by
                    moving into new markets. The
                  new markets will be in goods that
Diversification
                   are different from those dealt in
                    before. It often means moving
                   into a completely new industry.

                   Where firms decide to site their
  Location
                    businesses geographically.
                    Doing the right (moral) thing,
   Ethical
                    even if it costs more money.



                                                       91
 Unilever       Business Studies Keyword
 Keyword                   Definition
                  A range of activities which
              ensures that customers get what
 Marketing     they want, in the right amounts,
               at the right time and at the right
                              price.

              A mix of methods used to market
                  and sell a product which
                includes: Advertising, Sales
 Promotion
                Promotion, Direct Marketing,
               Sponsorship, Personal Selling,
                    After Sales Service.

              The support given by businesses
              to events, teams or individuals by
Sponsorship       providing finance, goods,
                publicity and other materials or
                            services.

               An aspect of promotion in which
              one or a range of media are used
Advertising   to communicate with the public. It
               can be informative or persuasive
                       or a combination.

              An association of workers formed
              to promote, protect and represent
Trade Union     the interests of its members to
               employers, the government and
                            others.
              The replacing of human labour by
Automation
                          machines.


                                                    92
  Unilever        Business Studies Keyword
  Keyword                Definition

                  An organisation which allows
                other businesses to trade using
  Franchise
                their corporate identity, in return
                      for a royalty payment.

                  A method of production where
   Batch         identical goods are made in lots
 Production     or batches. One batch is finished
                before moving on to the next one.

              Person or organisation that has a
              direct interest in the behaviour of
 Stakeholder a business. Usually a stakeholder
                  benefits if the business is
                          successful.
              Natural resources, like copper or
Raw Materials    coffee beans, used to make
                           products.

                   Using resources as well as
                 possible. It means using labour
                    and machinery and other
  Efficiency
                resources of a business in such a
                  way that the firm gets the most
                        benefit from them.

                The application of knowledge to
  Training      work. It involves the teaching of
                skills in a work-related situation.
                 Using another company to take
 Outsourcing    responsibility for certain aspects
                         of a business.
                                                      93
  Unilever       Business Studies Keyword
  Keyword                   Definition
                How much of a product will be
   Demand
                   bought at any given price.
                An organisation which exists to
               influence public opinion about a
                particular issue and hopes that
Pressure Group
                the government will change its
                policy e.g. Greenpeace, Trade
                             Unions

                The amount of money earned by
                a business from selling its goods
   Revenue
                   and services. Usually total
                   revenue equals total sales.

                 The unit of money used within a
   Currency
                             country.

                The difference between the price
                at which goods and services are
     Profit        sold and the cost of all the
                materials and services that went
                      into providing them.

                 The price at which one currency
Exchange Rate      can be bought and sold in
                 exchange for another currency.

                   A period of time when the
  Recession       economy is slowing down or
                       output is falling.
                   The gross profit minus all
   Net Profit
                          expenses.


                                                    94
  Unilever         Business Studies Keyword
  Keyword                 Definition

                   The assets of a business that
                      have a long life. Examples
Fixed Assets
                    include premises, machinery,
                 fixtures and fittings and vehicles.

                  Assets that will change in value
                 for the next twelve months. They
Current Assets
                 consist of cash (including money
                  in the bank), debtors and stock.

                    The part of an organisation's
                 liabilities that will have to be paid
                  within twelve months of the date
   Current
                     of the balance sheet. They
  Liabilities
                 usually consist of trade creditors,
                  bank overdrafts, corporation tax
                    due and proposed dividends.

                  The long-term funds used in a
                    business. It consists of the
                 owner(s) funds, reserves built up
   Capital         by the business, plus money
  Employed        borrowed for more than a year.
                   The capital employed will be
                   equal to the net assets of the
                             business.




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