CSEC Principles of Business key terms

Any organised activity that produces goods or supplies services with the aim of satisfying consumers' wants, usually by combining land, labour, capital and enterprise in exchange for payment.

The factor of production that organises the other inputs and carries the risk of loss; the person doing this is the entrepreneur, who decides what to produce and how to finance it.

The part of the economy owned and run by individuals or companies rather than by government, including sole traders, partnerships and companies that aim to make a profit.

The part of the economy owned and controlled by government, such as state utilities, public hospitals and schools, funded mainly from taxation and existing to provide services rather than profit.

A business owned and controlled by one person, who keeps all profits but has unlimited liability for debts and usually raises capital from personal savings, family or small loans.

A business owned by two to twenty people who share capital, profits and management under a deed of partnership; ordinary partners carry unlimited liability for the firm's debts.

The legal protection that means shareholders can lose only the money they invested in a company, not their personal property, if the business fails and cannot pay its debts.

A legal position in which the owner of a business is personally responsible for all its debts, so personal assets such as a house or savings may be sold to settle them.

A business registered as a separate legal entity from its owners, able to own property, sue and be sued, and whose shareholders normally enjoy limited liability.

A person or institution that owns part of a company by buying shares, receiving dividends from profits and voting at general meetings on matters such as directors and auditors.

A business owned and democratically controlled by its members, who may be producers, consumers or workers, sharing benefits according to agreed rules rather than according to shareholding.

An arrangement in which a franchisor allows a franchisee to trade under its brand and sell its products in return for an initial fee and continuing royalty payments.

A diagram showing the structure of a business, including who reports to whom, the departments that exist and the lines of authority and communication between them.

The number of subordinates who report directly to one manager; a wide span means few management levels and more delegation, while a narrow span means closer supervision.

The line of authority running from the most senior manager down to the lowest employee, showing through whom instructions pass and to whom each worker is accountable.

Passing authority to carry out a task to a subordinate while the manager keeps overall responsibility, which develops staff but can fail if instructions are unclear.

The process of using inputs such as raw materials, labour and machinery to create goods or services that satisfy human wants and have exchange value.

The resources used to produce goods and services: land, labour, capital and enterprise. Each earns a reward in the form of rent, wages, interest or profit respectively.

Man-made resources used to produce other goods and services, such as machinery, tools, vehicles and factories; money used to buy these is also called capital in business finance.

Splitting a production process into separate tasks performed by different workers, which raises output through repetition and specialisation but can make work repetitive.

Concentrating on producing a narrow range of goods or services, or performing one task, so that a person or country becomes more efficient and can trade for the rest.

The amount of output produced from a given quantity of input in a period; rising productivity lowers average costs and helps a business compete on price.

Costs that do not change when output changes in the short run, such as rent, insurance and managers' salaries, so they must be paid even if nothing is produced.

Costs that rise or fall directly as output changes, for example raw materials, packaging and piece-rate wages, so total variable cost is zero when production is zero.

The level of output or sales at which total revenue equals total costs, so the business makes neither profit nor loss; sales beyond it generate profit.

Falls in average cost per unit that come from increasing the size of a business, through bulk buying, specialist machinery or spreading fixed costs over more output.

Any arrangement where buyers and sellers come together to exchange a good or service, whether in a physical place or through contacts, advertising or the internet.

Dividing a whole market into groups of buyers with similar needs, such as by age, income or location, so that products and advertising can be aimed at each group.

The four elements a business controls to sell its product: product, price, place and promotion. Together they must suit the chosen target market and the competition.

The activities used to inform customers about a product and persuade them to buy it, including advertising, personal selling, sales promotions, public relations and publicity.

Giving a product a name, symbol or design that distinguishes it from competitors and builds recognition and loyalty, which can allow a higher price to be charged.

The route a product follows from producer to final consumer, such as direct selling, or producer to wholesaler to retailer to consumer, each stage adding cost.

A trader who buys goods in large quantities from producers and resells them in smaller lots to retailers, often providing storage, transport and credit.

A business that sells goods or services directly to final consumers in small quantities, providing convenience of place, time and choice.

A share of a company's after-tax profit paid to shareholders, usually as an amount per share, decided by the directors and approved at a general meeting.

The movement of money into and out of a business over a period; a firm can be profitable yet fail if cash inflows arrive too late to pay its bills.

The money a business needs for day-to-day running, calculated as current assets minus current liabilities, covering stock, debtors and short-term expenses.

The conditions and forces outside a business that affect its decisions and survival, including economic, social, technological, political, legal and natural factors.

The rivalry between businesses selling similar goods or services to the same buyers, which tends to lower prices, improve quality and encourage innovation and better customer service.

The growing linking of national economies through trade, investment, communication and transport, which opens new markets but exposes local firms to foreign competitors.

The transfer of privately owned businesses or assets into government ownership, often to protect essential services or jobs, usually with compensation paid to former owners.

The sale of government-owned businesses or assets to private investors, intended to raise revenue, reduce state spending and increase efficiency through competition.

Meeting present needs without destroying the resources and environment future generations will depend on, balancing economic growth with social welfare and environmental protection.