NSSCAS Business Studies (8245) key terms

The process of combining inputs such as labour, capital, land and enterprise to produce goods or services that satisfy human wants, usually in exchange for payment, whether by a private firm, a public body or a non-profit organisation.

The four resources used to make goods and services: land (natural resources), labour (human effort), capital (machinery, tools and money used to buy them) and enterprise (the risk-taking and organising function of the owner or manager).

The difference between the selling price of a product and the cost of the bought-in materials and components used to make it. It measures how much worth a business creates and must cover wages, overheads and profit.

The value of the next best alternative given up when a choice is made. A business that spends savings on a delivery van loses the interest those savings could have earned elsewhere.

The activity of spotting a market need, gathering resources and taking on financial risk to start and run a business, with the aim of making a return while accepting that the venture may fail.

A written document setting out a proposed venture's objectives, target market, marketing and operations arrangements, management team and financial forecasts. It is used to guide the owner and to persuade lenders or investors to provide finance.

A business owned and controlled by one person, who keeps all profits but has unlimited liability, meaning personal assets can be used to pay business debts. It is the simplest and most common small-business form.

A business owned by two or more people who share capital, profits and decision-making under a partnership agreement. Ordinary partners usually have unlimited liability, while a limited partner's liability is capped at the amount invested.

A business registered as a separate legal entity, so shareholders' liability is limited to the amount they invested and their personal assets are protected if the company fails. Ownership is divided into shares and the company continues if owners change.

The legal position in which the owner of a business is personally responsible for all its debts, so personal property may be sold to settle them. It applies to sole traders and ordinary partners.

A business below a defined size threshold, commonly measured by number of employees, turnover or asset value. Such firms are important for job creation and are often supported by government finance and advisory schemes.

The money needed to establish a new business before it earns enough revenue to fund itself, covering premises, equipment, licences and initial working capital. Sources include owners' savings, family loans, bank loans and government or donor schemes.

A short public statement of the overall purpose and values of an organisation, explaining why it exists and what it aims to achieve for customers and other stakeholders. It guides strategy but is not usually expressed in measurable terms.

A target that is Specific, Measurable, Achievable, Relevant and Time-bound, so progress can be checked. For example, raising sales by 10 per cent within twelve months is SMART, while 'doing better' is not.

A goal set for the whole organisation, such as growth, profitability, survival or market share, which departments then translate into their own targets. Objectives give direction and a basis for measuring performance.

Any individual or group affected by, or with an interest in, a business's activities, including owners, employees, customers, suppliers, lenders, local communities and government. Different stakeholders often want conflicting things from the same decision.

A person or institution that owns shares in a limited company, giving a claim on part of its profits and usually voting rights at general meetings. Shareholders typically seek rising dividends and share value.

The view that a business should voluntarily consider the interests of society and the environment, not just profit, by such actions as reducing pollution, treating workers fairly and supporting community projects. It can raise costs but also build reputation.

An organised group that campaigns to change the behaviour or policies of businesses and governments, for example on pollution, wages or consumer safety. Businesses often respond by adjusting practices or engaging in public consultation.

Dividing a market into groups of buyers with similar needs or characteristics, such as by age, income, location or lifestyle, so that a marketing mix can be designed for each group. It helps a firm target its limited resources more effectively.

The specific group of customers a business aims its product, price, promotion and distribution at. A clear target market helps a firm avoid wasting resources on buyers who are unlikely to purchase.

The set of controllable decisions a business makes to sell its product, traditionally summarised as product, price, place and promotion, with people, process and physical evidence added for services. The elements must be consistent with each other.

The systematic collection and analysis of information about customers, competitors and markets to support marketing decisions. It may use primary data gathered first-hand, such as surveys, or secondary data already published.

Information collected first-hand for a specific research purpose, for example through questionnaires, interviews, observation or test sales. It is up to date and tailored to the firm's needs but is costly and slow to gather.

Information that already exists because someone else collected it, such as government statistics, trade reports, company accounts or press articles. It is cheaper and quicker than primary data but may be out of date or not quite fit the question.

A subset of a population selected for research, on the assumption that its views represent the whole group. A biased or very small sample can make survey findings misleading whatever the size of the questionnaire.

The pattern of sales a product typically follows over time: development, introduction, growth, maturity and decline. The stage affects pricing, promotion and whether a firm needs to update or replace the product.

An action taken to lengthen the maturity stage of a product and delay decline, such as finding new markets, changing packaging, adding features or repositioning the brand. It aims to keep sales and cash flow going without a completely new product.

Output produced per unit of input over a period, for example units per worker-hour. Rising productivity lowers average costs and can fund higher wages, so it is a key measure of operational efficiency.

The fall in average cost per unit that comes as output rises, through spreading fixed costs, bulk buying, specialisation and better technology. Diseconomies of scale occur when a firm becomes too large to manage efficiently.

The proportion of a firm's maximum possible output that is actually being produced, usually expressed as a percentage. Low utilisation means fixed costs are spread over few units, while very high utilisation leaves little room for breakdowns or extra orders.

Managing the quantities of raw materials, work in progress and finished goods held by a business so that production is not interrupted but money is not tied up unnecessarily. Techniques include minimum and maximum levels and just-in-time delivery.

An approach that builds quality into every stage of production by setting standards, training staff and checking processes, rather than inspecting faults only at the end. It aims to prevent defects rather than detect them.

The internal and external forces that make an employee willing to work hard and stay with the organisation. It is influenced by pay, job security, recognition, interesting work and relationships with colleagues and managers.

A reward in money or money's worth, such as a bonus, commission, piece rate or profit share, offered to encourage a particular level of effort or output. It works best when the link between effort and reward is clear and seen as fair.

Redesigning a job to give the holder more responsibility, variety and control, for example by allowing an employee to plan and check their own work. It aims at motivation through the content of the job rather than through pay.

The rate at which employees leave a business and are replaced, usually expressed as leavers in a period as a percentage of average staff numbers. High turnover raises recruitment and training costs and can signal poor motivation.

A projection of the cash a business expects to receive and pay out over future periods, showing opening balance, net cash flow and closing balance. It helps managers plan borrowing and identify months when cash will be short.

The money available for the day-to-day running of a business, calculated as current assets minus current liabilities. Too little causes liquidity problems; too much may mean funds are idle.

The ability of a business to meet its short-term debts as they fall due, using cash or assets that can quickly be turned into cash. It is different from profitability, since a profitable firm can still run out of cash.

The level of output at which total revenue equals total cost, so the business makes neither profit nor loss. It is calculated by dividing fixed costs by the contribution per unit.

A cost that does not change with the level of output in the short run, such as rent, insurance or managers' salaries. Fixed costs per unit fall as output rises, which is the basis of economies of scale.

A cost that rises directly as output increases, such as raw materials, packaging and piece-rate wages. Total variable cost is the variable cost per unit multiplied by the number of units produced.

The amount a product brings in towards covering fixed costs and then making profit, found by subtracting variable cost per unit from selling price per unit. Total contribution equals sales revenue minus total variable costs.

The amount by which current or planned sales exceed the break-even level, expressed in units or as a percentage. It shows how far sales can fall before the business starts making a loss.

Total cost divided by the number of units produced, also called unit cost. Comparing it with the selling price shows the profit per unit, and tracking it over time reveals whether efficiency is improving.

Sales revenue minus the cost of goods sold, before deducting expenses such as rent, administration and interest. The gross profit margin expresses it as a percentage of revenue and shows the return on trading before overheads.

The direct cost of the stock actually sold during a period, calculated as opening stock plus purchases minus closing stock. It excludes overheads such as marketing, administration and depreciation of office equipment.

The profit remaining after all expenses, including overheads, interest and tax, have been deducted from gross profit. It is the figure available to owners or shareholders and is the basis of the net profit margin.

A payment made to shareholders out of a company's profits, usually expressed as an amount per share. The board decides how much to distribute and how much to retain for reinvestment.

A financial plan for a future period setting out expected income and spending for a department, project or the whole business. Budgets allocate resources, set targets and allow actual results to be compared with plans.

The difference between a budgeted figure and the actual figure achieved. A favourable variance increases profit, such as lower-than-budgeted material costs, while an adverse variance reduces it and calls for management action.

Spending on long-term assets such as buildings, machinery, vehicles or information systems that will be used in the business for more than a year. It differs from revenue expenditure, which covers day-to-day running costs.

The process of evaluating a proposed capital project by comparing its expected costs and future returns, using methods such as payback period, average rate of return and net present value. It helps managers choose between competing uses of limited funds.

A structured review of a business's internal strengths and weaknesses and its external opportunities and threats. It is used to summarise the position of a firm before choosing strategy, though it does not by itself rank or select options.

A framework for examining external influences on a business: political, economic, social, technological, legal and environmental factors. It helps managers anticipate changes outside their control that may affect demand, costs or legality.

The long-term plan of action a business adopts to achieve its objectives and gain advantage over rivals, covering which markets to enter, how to compete and how to allocate resources. It links analysis of the environment to decisions on products, costs and growth.

A capability a business performs particularly well and that is difficult for competitors to copy, such as a distinctive brand, technical expertise or efficient distribution. Strategies built on core competences are more likely to be sustainable.

A firm's sales as a percentage of total sales in its market, measured by value or volume. Rising share suggests competitive success, but it may have been bought with heavy promotion or price cuts.

Meeting present needs without using up resources or causing damage that will prevent future generations from meeting theirs. For a business it covers environmental impact, resource use and long-term viability of its operations and supply chain.