NCEA L1 Commerce key terms

Money a business receives from selling its goods or services, before any costs are subtracted. It is calculated as price per unit multiplied by the number of units sold.

The amount left over when total expenses are subtracted from total revenue. A positive result means the business made a gain; a negative result is a loss.

Costs a business incurs in running its operations, such as rent, wages, power and advertising. They reduce profit and are recorded separately from the cost of goods sold.

Costs that stay the same in total no matter how much a business produces or sells, such as rent, insurance or loan repayments. They must be paid even at zero output.

Costs that change in total in direct proportion to output or sales, such as raw materials or packaging. More units produced means higher total variable cost.

The level of sales at which total revenue equals total costs, so the business makes neither profit nor loss. It can be expressed in units sold or in sales dollars.

The movement of money into and out of a business over a period. Positive cash flow means more money came in than went out; timing matters even when a business is profitable.

Any person or group affected by or interested in how a business operates, such as owners, employees, customers, suppliers, the local community or the government. Different stakeholders often want different things.

A person or organisation that owns part of a company by holding shares in it. Shareholders expect a return through dividends or a rise in the share price.

A share of a company's profit paid out to shareholders, usually as cash per share. Companies may keep some profit instead to reinvest in the business.

Profit a business keeps inside the company rather than distributing to owners. It is used to fund growth, repay debt or build a reserve for future needs.

Money or other resources invested into a business to start it or help it grow. Capital can come from owners' savings, loans, or investors buying shares.

Resources a business owns or controls that have value, such as cash, stock, equipment, vehicles and money owed by customers. They are listed on the balance sheet.

Debts and obligations a business owes to others, such as bank loans, unpaid supplier invoices and taxes due. They are settled over time through payments or services.

The owner's claim on a business, equal to total assets minus total liabilities. It represents what would be left for the owners if all debts were paid.

A financial statement showing a business's assets, liabilities and equity at one point in time. Assets always equal liabilities plus equity, which is why it balances.

A financial statement that shows revenue, expenses and profit or loss over a period such as a month or year. It explains whether the business traded at a gain or loss.

The direct cost of the stock a business sold during a period, including purchase price and freight in. Revenue minus this figure gives gross profit.

Revenue minus the cost of goods sold. It shows the money available to cover other operating expenses and contribute to profit before interest and tax.

The gradual reduction in the recorded value of a long-term asset as it wears out or becomes outdated. It spreads the asset's cost over the years it is used.

A plan of expected income and spending for a future period. Comparing actual figures with the budget helps people and businesses see where they are over or under target.

Money received regularly, such as wages, salary, interest, rent or benefit payments. It is the main source of money people use to cover spending and saving.

Money set aside rather than spent, usually kept in a bank account or investment for future use. Savings provide a buffer for emergencies and help fund goals.

A charge for borrowing money, or a payment received for lending or depositing money, expressed as a percentage over time. Lenders earn it; borrowers pay it.

Interest calculated on both the original amount and on interest already added, so the balance grows faster over time. It works for savers and against borrowers.

The original amount of money borrowed or invested, separate from any interest charged or earned on it. Loan repayments usually reduce the principal over time.

Money owed to another person or organisation, such as a loan, credit card balance or hire purchase. Debt usually carries interest, which increases the total amount repaid.

The basic economic problem that resources are limited while people's wants are unlimited. Scarcity forces individuals and societies to make choices about what to produce and consume.

The value of the next best alternative given up when a choice is made. Because resources are scarce, every decision to use them one way means forgoing another option.

The quantity of a good or service consumers are willing and able to buy at a given price. Usually, as price falls, quantity demanded rises, other things being equal.

The quantity of a good or service producers are willing and able to offer for sale at a given price. Usually, as price rises, quantity supplied increases, other things being equal.

The price at which the quantity demanded by buyers equals the quantity supplied by sellers, so there is no shortage or surplus. Market forces tend to push prices toward this point.

A situation where quantity demanded exceeds quantity supplied at the current price. It usually puts upward pressure on price until buyers and sellers reach equilibrium.

A sustained rise in the general level of prices over time, which reduces the purchasing power of money. It is often measured by changes in a consumer price index.

The giving up of one benefit or option in order to gain another. People, businesses and governments face trade-offs whenever they must choose between competing uses of limited resources.

Operating in a way that meets present needs without harming the ability of future generations to meet theirs. It covers environmental, social and economic impacts of business activity.

Choosing actions that are fair, honest and consistent with accepted values, even when the law does not force it. Businesses weigh effects on customers, workers, communities and the environment.

The money a business has available for day-to-day operations, calculated as current assets minus current liabilities. Adequate working capital lets it pay bills as they fall due.