You are on page 1of 5

Introduction to Business Glossary

The Purpose of a Business Activity

Need: A good or service that is essential for living.
Want: A good or service that people would like to have, which gives
them a better standard of living, but is not essential for living.
Land: All natural resources (raw materials).
Labour: The physical and mental efforts of people needed for
production (Manpower).
Capital: The finance, machinery, trucks and equipment needed to make
a product.
Enterprise: The skills and risk-taking ability of a person who combines
all the factors of production together to produce goods and services.
The Economic Problem: A problem which arises due to people having
unlimited wants but limited resources and services to satisfy them. This
creates scarcity.
Scarcity: The lack of sufficient products to fulfill the total wants of the
Opportunity Cost: The next best alternative that is forgone
(abandoned) by choosing another item.
Division of Labour (Specialisation): It is splitting the production
process into different tasks and each worker performs each of these
Stakeholders: Groups in society that have a direct interest in the
activities of business.

Types of Business Activities
Primary Sector: It involves the extraction and use of natural
Secondary Sector: It involves transforming the raw materials into
finished or semi-finished goods.
Tertiary Sector: It involves providing services: either directly to
consumers or indirectly to business firms.
Free Market Economy: A market economy based on supply and
demand with little or no government control. Buyers and sellers are
allowed to transact freely based on a mutual agreement on price without
state intervention in the form of taxes, subsidies or regulation.
Command Economy: an economy in which production, investment,
prices and incomes are determined centrally by the government.
Free Market Economy: an economic system combining both private
and public businesses.
Public Sector: Businesses are owned and controlled by the
Private Sector: Businesses are owned and controlled by private
Privatisation: Sell publically owned businesses to the private sector.
Internal Growth: Occurs when a business expands its existing
External Growth (Integration): Occurs when two or more firms join
together. It can happen either through a Merger or a Take-over.
Take-over (Acquisition): A corporate action in which a company buys
most, if not all, of the target company's ownership stakes in order to
assume control of the target firm.
Merger: When the owners of two businesses agree to join their firms
together making one business.
Labour Intensive Industries: These are businesses that use many
workers and a little capital to produce a low output level.
Capital Intensive Industries: These are business that use many capital
equipment and a few workers to produce a high output level.
Niche Market: a small segment in the market that is very specialised.
Forms of Business Organisations
Sole Trader: A business that is owned, financed and controlled by
only one person.
Partnership: A business that is owned, financed and controlled by
the partners.
Private Limited Company (Ltd.): A company that is owned by
shareholders, financed by issuing shares to family members and
friends, and controlled by the (B.O.D), which is usually the majority of
the shareholders.
Public Limited Company (Plc.): A company that is owned by
shareholders from the general public, controlled by the (B.O.D) whom
were elected in the AGM, and financed by issuing shares that are sold
to general public in the stock exchange market.
Unlimited Liability: The owner/s is/are held legally responsible for
paying the business debts.
Limited Liability: Shareholders are not legally responsible for paying
the companys debts; they are only liable to the investments they made
by buying shares in the company and may lose these shares if the
company goes bankrupt.
No separate legal identity: The owner/s and the business are one legal
Dividends: Payments made to shareholders, from the profits made by
the company (after taxed are paid), as a return to their investment in the
Annual General Meeting (AGM): It is a legal requirement for limited
companies. All shareholders may attend it to elect the Board of Directors
(B.O.D). They may also find it an opportunity to express their concerns
over matters in the business.
Multinational Companies: These are companies that produce and sell
in more than one country.
Joint Ventures: Two or more businesses, which agree on starting a
new project together in order to share costs, profits, responsibilities
and the risk of failure.
Franchise: A business selling a product to retail shops to sell it to
Municipal Enterprises: Local government authorities that offer free or
low priced services to the public.
Government and Economic Influence on Business
Inflation: is a sustained increase in the general price level of goods and
services in an economy over a period of time.
Unemployment: Happens when people who are willing and able to
work cant find a job.
Gross Domestic Product (GDP): The total value of goods and services
produced in a country annually.
Balance of Payments: The difference between a countrys imports and
Income Tax: Tax on peoples income.
Profit/Corporation Tax: Tax on profits made by a business.
Value Added Tax (VAT): Tax added to the prices of products and
Import Duties and Tariffs: Tax added on imports from a country.
Government Expenditure: Spending tax revenue on national projects,
encouraging investment, and providing social goods and services.
Monopoly: A business that controls the whole marker for a product or a
Other External Influence on Business Activities
Cost-Benefit Analysis: A process by which business decisions
are analyzed. The benefits of a given situation or business-related action
are summed and then the costs associated with taking that action are
subtracted. A project with higher social benefits than costs will be
accepted and vice versa.
Private/Internal Costs: Are financial costs of a business decision,
which are paid for by the business.
Private/Internal Benefits: Are the financial gains by a business as a
result of its decision.
Social/External Costs: Are the costs paid by the society as a result of a
business decision.
Social/External Benefits: Are the gains to a society resulting from a
business decision.
Home Working: Working from home using computers to link into
Pressure Groups: Are groups of people who seek to influence
consumers, public opinion, business actions and government policy to
achieve their interest.
Boom: A period of time during which sales of a product
or business activity increases very rapidly.
Recession: Period of general economic decline, defined usually as a
decrease in the GDP.
Economic Growth: A rise in the real level of GDP as a result of an
increase in the physical output of the goods and services in an economy.