JC Business Studies flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Budget surplus

The amount by which planned or actual income exceeds planned or actual expenditure in a given period. The opposite, a budget deficit, occurs when expenditure is greater than income.

Compound interest

Interest calculated on both the original principal and previously accumulated interest, so the balance grows at an accelerating rate over time. Formula: A = P(1 + r)^n.

Rule of 72

A quick estimate of how long an investment takes to double: divide 72 by the annual percentage interest rate. At 6 percent, doubling takes roughly 12 years.

Net worth

Total assets minus total liabilities at a point in time. It measures accumulated wealth rather than income earned during a period.

Real interest rate

The nominal interest rate minus the inflation rate. A negative real rate means savings lose purchasing power even though the nominal balance rises.

Gross and net pay

Gross pay is total earnings before deductions. Net pay is gross pay minus statutory deductions such as income tax and social insurance, plus voluntary deductions.

Diversification

Spreading money across different investments so that poor performance in one does not devastate the portfolio. It reduces specific risk but not general market risk.

Merchantable quality

A statutory standard requiring goods sold to be of acceptable quality, fit for their normal purpose, and free from significant defects, considering price and description.

Contract of sale

A legally enforceable agreement between buyer and seller requiring offer, acceptance, consideration, and intention to create legal relations. A receipt is only evidence of it.

Redress escalation

The sequence a consumer follows when dissatisfied: complain to the seller, then the manufacturer, then a consumer agency or ombudsman, then a court or tribunal.

Cooling-off period

A set number of days after a distance or doorstep contract during which the consumer may cancel and receive a refund without giving a reason.

Warranty versus statutory rights

A warranty is a voluntary promise by seller or manufacturer. Statutory rights are set by law, apply regardless of any warranty, and cannot be excluded by contract terms.

Unfair commercial practice

Advertising or selling behaviour that misleads consumers about price, quality, or origin, or applies undue pressure. Such practices attract regulatory sanctions.

Factors of production

The four resources used to produce goods and services: land, labour, capital, and enterprise. Enterprise organises the other three and bears the business risk.

Opportunity cost

The value of the next best alternative given up when a resource is used for one purpose rather than another. It applies to individuals, firms, and governments.

Break-even output

The quantity at which total revenue equals total cost and profit is zero. Calculated as fixed costs divided by contribution per unit (price minus variable cost per unit).

Margin of safety

The difference between current or planned output and break-even output. It shows how far sales can fall before the business makes a loss.

Value added

Sales revenue minus the cost of bought-in materials and components. It is the fund from which wages, overheads, and profit are paid.

Cash flow forecast

A table of expected cash inflows and outflows by period. Positive profit does not guarantee positive cash flow, because credit sales deliver cash later.

Unlimited liability

A position where the owner is personally responsible for all business debts, so personal assets can be seized. It applies to sole traders and ordinary partnerships.

Span of control

The number of subordinates directly reporting to one manager. A narrow span allows closer supervision but creates a taller hierarchy with more levels.

Delayering

Removing one or more levels of management from a hierarchy. It widens spans of control, cuts overhead cost, and often increases delegation to remaining staff.

Herzberg two-factor theory

Hygiene factors such as pay and working conditions prevent dissatisfaction but do not motivate. Motivators such as achievement, responsibility, and recognition produce genuine job satisfaction.

Limited liability

A position where owners lose only the capital they invested if the business fails. It requires a separate legal personality, as with limited companies.

Accounting equation

Assets equal liabilities plus owner's equity. Every transaction changes at least two elements and keeps this balance intact.

Trial balance

A list of ledger balances used to check that total debits equal total credits. It cannot reveal errors of principle, complete omission, or compensating errors.

Straight-line depreciation

An equal annual charge spreading the depreciable amount over an asset's useful life. Calculated as cost minus residual value, divided by the number of years.

Gross profit margin

Gross profit divided by revenue, expressed as a percentage. It shows the proportion of sales revenue retained after deducting the direct cost of sales.

Return on capital employed

Operating profit divided by capital employed, expressed as a percentage. It measures how efficiently the capital invested in the business generates profit.

Real GDP

Gross domestic product adjusted to remove the effect of price inflation. It measures changes in the actual volume of output over time.

Demand-pull inflation

Inflation caused by aggregate demand growing faster than the economy's capacity to supply. It is often described as too much money chasing too few goods.

Monetary policy

Central bank action, chiefly changing the policy interest rate, to influence borrowing, saving, spending, and ultimately inflation and employment.

Budget deficit

A shortfall in a single year when government spending exceeds tax revenue. It differs from national debt, which is the accumulated stock of past borrowing.