MATSEC SEC Business Studies flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Opportunity cost
- The value of the next best alternative that is given up when a choice is made. Businesses face it whenever scarce resources are allocated to one use rather than another.
- Primary sector
- Part of the economy that extracts raw materials from nature, including farming, fishing, mining and forestry. Its output usually feeds the secondary sector for processing.
- Unlimited liability
- A legal position where the owner of a business is personally responsible for all business debts. Sole traders and ordinary partners can lose personal assets if the firm fails.
- Limited liability
- A legal position where owners' financial responsibility is limited to the capital they invested. Shareholders of limited companies cannot be pursued for company debts beyond their shares.
- Stakeholder
- Any individual or group affected by, or with an interest in, the activities of a business. Examples include owners, employees, customers, suppliers, lenders and the local community.
- PEST analysis
- A framework examining Political, Economic, Social and Technological influences on a business. It helps firms identify external opportunities and threats beyond their direct control.
- Public sector
- The part of the economy owned and controlled by government, such as state schools, hospitals and public transport. Its main aim is providing services rather than earning profit.
- Market segmentation
- Dividing a market into groups of buyers with similar characteristics or needs. Firms then target the segments that best match their resources and objectives.
- Marketing mix
- The combination of Product, Price, Place and Promotion used to meet the needs of a target market. Each element is adjusted to suit the chosen segment.
- Price elasticity of demand
- The percentage change in quantity demanded divided by the percentage change in price. Values above one indicate elastic, price-sensitive demand; below one indicates inelastic demand.
- Market share
- A firm's sales expressed as a percentage of total sales in its market. It is calculated as firm sales divided by total market sales, multiplied by 100.
- Product life cycle
- The stages a product passes through: introduction, growth, maturity and decline. Sales and profits change at each stage, so marketing strategies must adapt.
- Primary research
- Collecting new data directly for a specific purpose, for example through surveys, interviews or observation. It is tailored but often costly and time-consuming.
- Secondary research
- Using data that already exists, such as government statistics, trade reports or company records. It is usually cheaper and quicker but may not fully suit the firm's needs.
- Penetration pricing
- Setting a low initial price to attract customers quickly and gain market share. Once established, the firm may raise the price.
- Accounting equation
- Assets equal liabilities plus capital. Every business transaction affects at least two items so that this balance is always maintained.
- Gross profit
- Sales revenue minus the cost of goods sold. It measures profit before expenses such as rent, wages and advertising are deducted.
- Net profit
- Gross profit minus all operating expenses. It shows the actual profit earned after all costs of running the business are accounted for.
- Cost of goods sold
- Opening stock plus purchases minus closing stock. It represents the direct cost of the goods actually sold during the period.
- Break-even output
- The number of units a business must sell for total revenue to equal total costs. It equals fixed costs divided by contribution per unit.
- Contribution per unit
- Selling price per unit minus variable cost per unit. It shows how much each sale contributes towards covering fixed costs and then generating profit.
- Cash flow forecast
- A month-by-month prediction of expected cash inflows and outflows. It helps a business anticipate shortages and arrange finance before problems arise.
- Current assets
- Resources expected to be converted into cash within one year, such as stock, debtors and cash balances. They are used to assess short-term liquidity.
- Depreciation
- The gradual reduction in the value of a non-current asset over its useful life. It is treated as an expense in the income statement.
- Motivation
- The internal and external factors that drive employees to work hard and achieve goals. Pay, recognition, responsibility and working conditions all influence it.
- Herzberg's two-factor theory
- Hygiene factors such as pay and conditions prevent dissatisfaction, while motivators such as achievement and responsibility create genuine satisfaction and effort.
- Job production
- Producing one unique item at a time to meet a specific customer order, such as a tailored suit or a bridge. It is flexible but often costly per unit.
- Batch production
- Producing a group of identical items in one run, then switching to another batch. It balances flexibility and cost, and is common in bakeries and furniture making.
- Just-in-time (JIT)
- A stock control method where materials arrive just as they are needed in production. It reduces storage costs but requires reliable suppliers and accurate planning.
- Economies of scale
- The fall in average cost per unit as a business grows larger. Sources include bulk purchasing, specialist machinery, managerial expertise and improved finance terms.
- Horizontal integration
- A merger or takeover between two firms at the same stage of production in the same industry. It increases market share and reduces competition.
- Business plan
- A written document setting out objectives, market analysis, marketing and operations plans, and financial forecasts. It is used to raise finance and guide the owner.