MSCE Business Studies key terms

The value of the next best alternative given up when a choice is made. Every business decision that uses scarce resources carries one, whether or not money changes hands.

The condition in which resources such as money, labour, time and raw materials are limited while wants are unlimited. It forces individuals and firms to choose between competing uses.

The inputs used to create goods and services: land, labour, capital and enterprise. The quantity, quality and cost of each shape what a business can produce and how efficiently.

Man-made resources used to produce other goods and services, such as machinery, vehicles, tools and buildings. Distinct from money, which only becomes capital when invested in productive assets.

The quantity of a product consumers are willing and able to buy at a given price over a period. Usually falls as price rises, other things being equal.

The quantity of a product producers are willing and able to offer at a given price over a period. Usually rises as price rises, because higher prices make production more profitable.

The market price at which the quantity demanded equals the quantity supplied, so there is no shortage or surplus. It shifts when demand or supply conditions change.

A measure of how strongly quantity demanded responds to a change in price or income. Demand is elastic when buyers react sharply and inelastic when they barely change their purchases.

A business owned and controlled by one person, who keeps all profits but has unlimited liability for debts. Simple and cheap to start, but limited in capital and continuity.

A business owned by two or more people who share capital, profits, losses and decision-making under a partnership agreement. General partners usually carry unlimited liability unless a limited liability form is used.

A business registered as a separate legal entity from its owners, whose shareholders' liability is limited to the capital they invested. It can raise funds by issuing shares and continues beyond its founders.

A legal protection meaning owners can lose only the money they invested, not their personal assets, if the business fails. It encourages investment but usually requires public registration and disclosure.

A position where the owner is personally responsible for all business debts, so personal assets may be seized to pay creditors. Typical of sole traders and ordinary partnerships.

Money raised by a company through issuing shares to investors, who then own a proportional stake. It is permanent capital, repaid only on liquidation, and shareholders receive dividends from profits.

A payment made to shareholders out of a company's after-tax profits, usually expressed per share. The board decides the amount; retained profit is what remains in the business.

Profit kept in the business rather than distributed to owners, used to fund growth or repay debt. It is an internal source of finance with no interest cost but a limited total.

The money available for day-to-day operations, calculated as current assets minus current liabilities. Positive working capital lets a firm pay wages, suppliers and bills as they fall due.

The movement of money into and out of a business over a period. Profit and cash differ: a profitable firm can still fail if cash arrives too late to pay obligations.

The level of output or sales at which total revenue equals total costs, so the business makes neither profit nor loss. Calculated as fixed costs divided by contribution per unit.

Costs that do not change with the level of output in the short run, such as rent, insurance and salaried management. They must be covered before any profit is earned.

Costs that rise or fall directly with output, such as raw materials, packaging and piece-rate labour. The difference between price and variable cost per unit is contribution.

The fall in value of a fixed asset over time through wear, use or obsolescence, charged as an expense in the accounts. Methods include straight-line and reducing balance.

Long-term resources held for use in the business rather than for resale, such as land, buildings, plant and vehicles. They appear on the balance sheet and are depreciated over their useful lives.

Short-term resources expected to be converted into cash within a year, including stock, trade receivables and cash balances. They support daily trading and determine liquidity.

Dividing a market into groups of buyers with similar needs or characteristics so that products and messages can be tailored. Common bases are demographic, geographic, psychographic and behavioural.

The specific group of customers a business decides to serve with a product or brand. Choosing it guides product design, price, distribution and promotion decisions.

The combination of product, price, place and promotion (the four Ps) a firm uses to meet the needs of its target market. The elements must be consistent with each other and with positioning.

The approach a business takes to setting prices, such as cost-plus, penetration, skimming, competitive or premium pricing. Choice depends on objectives, costs, competition and how price-sensitive buyers are.

Creating a distinct identity, name and image for a product so customers recognise it and attach value to it. Strong brands support higher prices, loyalty and repeat purchase.

Reductions in average cost per unit as output rises, from spreading fixed costs, bulk buying, specialisation or better technology. They give larger firms a cost advantage but can bring diseconomies.

Output produced per unit of input, such as output per worker per hour. Raising productivity lowers unit costs and is a key source of competitiveness and higher wages.

Inspecting output, often at the end of production, to detect and remove defective items before they reach customers. It relies on checking rather than on building quality into each process.

Managing every stage of production so that quality is built in, through standards, training and process checks, rather than inspected at the end. Aims to prevent defects, not just detect them.

An approach that removes waste such as excess stock, waiting time and unnecessary movement while maintaining output. Techniques include just-in-time stock control and continuous improvement.

Ordering materials so they arrive shortly before they are needed, minimising stock held. It cuts storage costs but leaves the firm exposed to supply delays and disruption.

The process of attracting and selecting suitable candidates to fill a vacancy, from identifying the need through job analysis, advertising, shortlisting and appointment. It may be internal or external.

Introductory training given to new employees covering the organisation, policies, safety and job basics. It helps newcomers settle quickly, reduces early mistakes and lowers staff turnover.

The internal and external forces that make employees commit effort to their work. Influenced by pay, recognition, responsibility, working conditions and fairness, and linked to productivity and retention.

A written document setting out a venture's idea, market, operations, owners, financial forecasts and funding needs. It guides the founder and is used to persuade lenders and investors.

Any individual or group affected by or interested in a business's activities, such as owners, employees, customers, suppliers, lenders and the local community. Their interests often conflict.

A business's voluntary commitment to act responsibly towards society and the environment beyond legal minimums. It can build reputation and trust but adds cost and may be seen as image-building.

Moral principles guiding business conduct, such as honesty in advertising, fair treatment of workers and refusal of bribery. Ethical choices may reduce short-term profit but protect long-term trust.

A legally enforceable agreement between parties, requiring offer, acceptance, consideration and intention to create legal relations. Breach can lead to damages or other remedies.

The medium through which a message travels, such as face-to-face speech, email, a report or a notice board. Each channel differs in speed, richness, cost and record-keeping.

The receiver's response that tells the sender whether a message was received and understood as intended. Without it, communication cannot be confirmed and misunderstanding persists.