Sir Thomas Boughey High School

GCSE Business Studies

GLOSSARY

GLOSSARY

This booklet will give you the keywords for each unit with an explanation for each one.
Use this to help you with your classwork, homework and revision.
Business and the environment in which it operates

Term Concise Definition

Primary Industry The Industry which extracts the natural resources of
the earth.
Secondary Indus- The industry which manufactures goods using the raw
try materials provided by primary industry.
Tertiary Industry The industry which provides services to consumers and
the other sectors of industry.
Corporate Objec- The Long term aim of a company.
tives
Stakeholders Groups in society who have a direct interest in the per-
formance and activities of business.

Public Sector Businesses that are owned and controlled by the govern-
ment.
Private Sector Businesses that are owned and controlled by private indi-
viduals.
Exchange Rates The price of one currency in terms of another, e.g. £1 =
$1.5.
Business Structure, Organisation and Control

Term Concise Definition

Sole Trader A business owned and operated by one person, has unlimited liabil-
ity.
Partnership A group or association of between 2 and 20 people who agree to
own and run a business together.

Private Limited Company A company jointly owned by the people who have invested in it,
they buy shares and become shareholders, have limited liability;
the shares are not available to the general public.

Public Limited Company The largest type of organisation in the private sector, raises fi-
nance by selling shares which can be purchased by the general pub-
lic.
Franchisee A business that pays a Franchise Fee to another company to use
their brand name.
Franchiser A business with a product or service that it does not want to sell
to consumers directly; it appoints franchisees to sell the product.

Joint Venture When two or more companies work together on a business project.

Multi National Company Those with factories, production or service operations in more
than one country. Also known as transnational businesses.

Limited Liability Where the owners of a company cannot be held responsible for the
debts of the company they own.
Unlimited Liability When owners responsible for all of a company’s debt, no matter
how great they are.
Organisation Structure The levels of management and division of responsibilities within an
organisation
Hierarchy The management structure of an organisation, often shown as an
organisation chart, which shows who is accountable to whom.

Span of Control The number of subordinates working directly under a manager.

Internal Source of Finance The generation of cash from within the company’s resources or as-
sets.
External Source of Finance Obtaining capital from outside the business, examples include bank
loans and grants.
Dividend Payments made to shareholders from the profits of a company af-
ter it has paid corporation tax.
Marketing

Term Concise Definition

Primary Market Re- The collection and collation of original data via direct contact with
potential or existing customers. Also called field research.
search
Secondary Market The use of information that has already been collected and is avail-
able for use by others. Also called desk research.
Research
Market Segmenta- The market is divided up into groups of consumers who have similar
tion needs.
Mass Market Selling an undifferentiated products without segmenting the mar-
ket.
Niche Market A small section of a market,
Marketing Mix The four factors that managers can vary to influence sales of a
product – the four Ps: product, price, place, promotion.
Product Life Cycle The stages a product will pass through from its introduction,
through its growth until it is mature and then finally its decline.
Price Elasticity of Responsiveness of demand to a change in price.
Demand
Inelastic Demand Percentage change in price is greater than percentage change in
demand.
Elastic Demand Percentage change in price is less than percentage change in de-
mand.
Penetration Pricing A pricing strategy where price is set lower than the competitors’
prices in order to be able to enter a new market.
Price Skimming A pricing strategy where a high price is set for a new product on
the market.
Competitive Pricing A pricing strategy where the product is priced in line with, or just
below, competitors’ prices to try to capture more of the market.
Promotional Pricing A pricing strategy where the product is sold at a very low price for
a short period of time.
Psychological Pricing Apricing strategy where particular attention is paid to the effect
that the price of a product will have upon consumers’ perceptions
of the product.
Cost-Plus Pricing The cost of manufacturing the product plus a profit mark-up.
Channel of Distri- The means by which a product is passed from the place of produc-
tion to the customer or retailer.
bution
Wholesaler A wholesaler buys in bulk (large quantities) from the manufacturer
and sells on smaller quantities either to retailers or, occasionally,
Finance
Term Concise Definition
Break Even Point The level of sales at which total costs equal total revenue.
Margin of Safety Output minus break even point.
Cash Flow Forecast An estimate of future cash in-flows and out-flows of a business,

Profit and Loss Ac- Account showing how the net profit of a business and the retained
count profit of a company are calculated.
Cost of Sales Another term for direct costs, which appears on the Balance
Sheet.
Gross Profit Profit made when sales revenue is greater than the cost of goods

Expenses Another term for indirect costs, which appears on the Balance
Sheet.
Net Profit Profit made by a business after all costs have been deducted from
sales revenue; it is calculated by subtracting overhead costs from
gross profits.
Balance Sheet Shows the value of a firm’s assets and liabilities at a particular

Current Asset The assets such as cash, stocks and debtors which are held for on-

Fixed Asset The assets which are likely to be kept by the business for more
than one year. Most fixed assets, apart from land, depreciate over
time so the value of these will fall on the balance sheet from one

Current Liability A debt owed by the business, which is due to be repaid within one
year.
Long Term Liability A debt owed by the business, which is due to be repaid after one
year.
Share Capital Money investment by shareholder, a source of finance.
Working Capital Current Assets minus Current Liabilities. The money used to pay
day to day expenses.
Gearing The percentage of the Total Capital Employed that is provided by
long term loans.
People
Term Concise Definition
Financial meth- Using things like piece rate, commission or profit sharing
ods of motivation to motivate employees.
Non-Financial Motivating employees by giving them more responsibility.
Methods of Mo-
tivation
Autocratic Man- Instructions and strategies are issued from above with
agement little opportunity for contributions to decision-making
from less senior employees.
Democratic Man- Senior employees consult with junior ones in policy-
agement making.
Laissez-Faire Employees are left to make many of the decisions rather
Management than receiving clear instructions from their seniors.
Internal Recruit- The vacancy is filled by someone who is an existing em-
ment ployee of the business.
External Re- The vacancy is filled by someone who is not an existing
employee and will be new to the business.
cruitment
On the job Watching a more experienced worker doing the job and
training learning skills under their supervision.
Off the job Being trained away from the workplace, usually by special-
training ist trainers.
Induction Training that is given at the start of employment.
Dismissal When an employee loses their job because they are in-
competent or dishonest. Also referred to a sacked or
fired.
Redundancy When an employee loses their job because they are no
longer needed, rather than due to any aspect of their
work being unsatisfactory. Also called retrenchment.
Trade Union A group of workers join together to ensure their inter-
ests are protected.
External Influences

Term Concise Definition

Ethical Decision A decision taken by a manager or company because of the
moral code observed in that firm.
External Cost The costs paid by the rest of society, rather than the
business, as a result of a business decision, also called a
negative externality.
External Benefit The gains to society resulting from a business decision,
also called a positive externality.
Cost Benefit The valuation by a government agency of all social and pri-
vate costs and benefits resulting from a decision.
Analysis
GDP Gross Domestic Product: The total value of output of
goods and services in a country in one year.
Boom A phase in the Economic Cycle, when GDP increases rapid-
ly. Inflation may become a problem.
Recession A decline in a country’s GDP which results in falling de-
mand for most products.
Slump A lowest point in the Economic Cycle, unemployment will
be very high.
Recovery A period of raising GDP and falling unemployment.
Exchange Rate The price of one currency in terms of another, e.g. £1 :
$1.5.
Interest Rate The cost of borrowing or the reward for saving.
Fiscal Policy The government uses changes in taxation and spending to
control the Economics Cycle.
Production

Term Concise Definition

Job Production A single product is made at a time, usually to the custom-
er’s exact specifications.
Batch Production Products are made in batches of a certain quantity, usual-
ly as orders come in.
Flow production Large quantities of a product are produced in a continu-
ous process. Also called mass production because of the
large quantity of a standardised product that is pro-
duced.
Economies of The factors that lead to a reduction in average costs as a
business increases in size.
Scale
Diseconomies of The factors that lead to an increase in average costs as a
business grows beyond a certain size.
Scale
Lean Production Techniques used by business to cut down on any waste
and therefore increase efficiency, for example, by re-
ducing the time it takes for the product to be devel-
oped and made available for sale.