IGCSE Business Studies Definitions

Added value - Difference between price of a finished product and the cost of the
inputs involved in making it.

Autocratic leadership style - Managers expect to be in charge of business and

expect their orders to be followed.

Average costs - Total cost of production divided by total output.

Balance sheet - Shows the value of a business’s assets and liabilities at a

particular time.

Batch production - The production of goods whereby each batch of products

passes through one stage of production at the same time before moving on to
the next stage.

Brand - Name, feature or design / logo or image of a product or business that

distinguishes it from other products or businesses.

Brand image - Unique name of a product that distinguishes it from other

products or brands.

Brand name - Unique name of a product / business that distinguishes it from

other businesses or products.

Break even output - Level of sales/output at which total costs are the same as
total revenue.

Break even - When total costs is the same as total revenue.

Business cycle - Fluctuations in economic activity that an economy experiences

over time.

Business objective - A statement of a specific target that a business works

towards.

Business plan - A document containing the business aims/objectives and

important details about the operations, finance and owners of a business.

Capital employed - Total value of capital used in the business.

Cash flow forecast - An estimate of cash inflows and outflows of a business,

usually on a month by month basis.
Chain of command - The structure in an organisation which allows instructions to
be passed down from senior management to lower levels of management.

Competitive pricing - Setting a price similar to that of competitors products

which are already established in the market.

Cost of sales - Cost of producing or buying in the goods sold by the business
during a period of time.

Cost-plus pricing - The price is based on the cost of making a product and the
addition of a fixed percentage for profit.

Crowd-funding - Asking a large number of people each for a small amount of

money to raise finance for a project.

Current liabilities - Debts of a business which it expects to pay before the date of
the next statement of financial position.

Customer loyalty - Likelihood of previous customers returning to buy goods or

services from a business.

Delegation - Giving a subordinate the authority to perform particular tasks.

Depreciation of exchange rate - The value of the currency goes down with respect
to another currency.

Dismissal - Termination by the employer because the employee has broken

company rules or is not performing work to the required standard.

Economic boom - Period of time when GDP is rising rapidly.

Economic growth - When a country’s GDP increases / more goods and services
are produced than in the previous year.

Economies of scale - Factors that lead to lower average costs as a business

increases in size.

Entrepreneur - An individual who takes the financial risk of starting and

managing a new business.

Ethical business - An organisation that takes decisions based on a moral code.

Exchange rate - The rate at which one country’s currency can be exchanged for
that of another.
External cost - The negative impact of a business decision on society.

Externalities - Third party effects arising from production or consumption of

goods and services for which no appropriate compensation is paid.

Financial bonus - Extra money for performance that reaches or is in excess of

target over and above basic pay.

Fixed costs - Costs that do not change with the level of output/sales.

Flow production - The production of very large quantities of identical goods

using a continuously moving process.

Focus group - Customers/people who have similar characteristics to the target

market who give their opinions on a product / service.

Franchise - A business based upon the use of the brand names, promotional
logos and trading methods of an existing successful business. The franchisee
buys the licence to operate this business from the franchisor.

Globalisation - Increase in worldwide trade and movement of people and capital

between countries.

Gross Domestic Product -The total value of output of goods and services in a
country in one year.

Import quota - Limit on the number of goods into a country.

Import tariff - Tax on goods brought into a country.

Income statement - A financial document that records the revenue, costs and
profit for a given period of time.

Induction training - Introduction given to a new employee explaining the

businesses activities and processes and allow them to meet other employees.

Internal communication - Messages between people working in the same

organisation.

Inventory - The amount of raw materials, work in progress, and finished goods
held by a business intended for sale.

Job enrichment - Involves looking at jobs and adding tasks that require higher
skill or more responsibility.

Job production - Where a single product is made at a time.

Job rotation - Employees swapping around and doing each specific task for only
a limited time.

Joint venture - When two or more businesses agree to start a (new) project
together so share risks capital/ profits/resources.

Level of hierarchy - Managers/supervisors/other employees who are given a

similar level of responsibility in an organisation.

Limited company - A business which has a separate legal identity to its owners.

Limited liability - The liability of shareholders / owners in a company is limited to

only the amount they invested.

Liquidity - Ability of a business to pay back its short-term debts.

Margin of safety - Difference between current level of output and break-even

output.

Market oriented - A business that carries out market research before developing
a product.

Market research - Process of gathering, analysing and interpreting information

about the market.

Market segment - An identifiable sub-group of a whole market in which

consumers have similar characteristics or preferences.

Market segmentation - Dividing the whole market into segments by consumer

characteristics and then targeting different products to each segment.

Market share - Percentage of the total market sales held by one brand or
business.

Marketing budget - A financial plan for the marketing of a product or product

range for a specified period of time.

Marketing mix - The combination of product, price, promotion and place that
determines how a firm markets itself to its customers and potential customers.

Marketing strategy - Plan to combine the right combination of the 4 elements of

the marketing mix to achieve a particular market objective.

Mass market - Selling the same product to the whole market.

Micro-finance - Provides financial services/small loans to poor people not served
by traditional banks.

Motivation - The reason why employees want to work hard and work efficiently for
the business.

Multinational company - A business with factories, production, or service

operations in more than one country.

Net cash flow - Difference between the cash inflows and cash outflows in each
month.

Niche market - A small, usually specialised, segment of a much larger market.

Non current assets - Resources owned by a business which will be used for a
period longer than one year.

Non current liability - Debts/loan repayable in more than one year’s time.

Off the job training - Training that takes place away from the workplace usually by
a specialist trainer(s).

On the job training - Training at the place of work, watching or following an

experienced employee.

Opening balance - Amount of cash held by a business at the start of the month
or trading period.

Opportunity cost - The benefit that could have been gained from an alternative
use of the same resource.

Organisational structure - The formal, internal framework of a business that

shows how it is managed and organised.

Overdraft - When a bank allows business to borrow more money than is available
in their bank account.

Partnership - Two or more people who agree to own and run a business together

Penetration pricing - Price is set lower than competitor’s prices in order to be

able to enter a new market or launch a new product.

Pressure group - Groups of people who act together to try to force businesses or
governments to adopt certain policies.
Price elastic demand - demand responds more than proportionately to a change
in price.

Primary market research - Collection of new data about potential and existing
customers.

Primary sector - Businesses whoese business activity involves the extraction of

raw materials.

Private limited company - A business owned by shareholders, but they cannot sell
shares to the public.

Private sector - When individuals own business activities.

Productivity - A measure of the output of a business in relation to its inputs.

Profit - Amount of money left after all costs have been subtracted from revenue.

Public corporation - A business that is owned and controlled by the government.

Public limited company - Businesses owned by shareholders, but they can sell
shares to the public and their shares are tradeable on the stock exchange.

Public sector - Government or state-owned businesses/organisations.

Quality assurance - Checking for quality standards throughout the production

process.

Quality control - Checking the standard of goods through inspection at the end
of the production process.

Recession - A sustained (over a period of time) reduction in GDP or national

income or output.

Redundancy - When an employee is no longer needed because the job no longer

exists.

Return on capital employed - How much liquid assets a business has to pay its
day to day costs.

Revenue - Amount of money coming in from selling a product over a given period
of time.

Secondary market research - Uses information that has already been collected
and is available for use by others.
Secondary sector - Firms that process and manufacture goods from natural
resources.

Shareholder - Shareholders are the owners of a limited company.

Shareholders group - Any person or group with a (direct) interest in the

performance/activities of a business.

Shareholder’s equity - Total sum of money invested into the business by the
owners of the company.

Social enterprise - Organisation whose primary objective is social welfare (and

any profit made is reinvested).

Sole trader - Ownership of business in the hands of one individual/person.

Span of control - Number of subordinates working directly under an

individual/manager.

Speclisation - Way in which work is divided so each worker concentrates on a

specific task to become expert at it.

Stakeholder group - Any individual or group which has a direct interest in a

business because they are affected by its activities or decisions.

Statement of financial position - An accounting statement that records assets,

liabilities, and owners' equity/capital of a business at a particular date.

Sustainable development - Ability to meet needs of present population without

compromising ability of future generations to meet their own needs.

Tertiary sector - Business or industry which provides or sells services to

consumers or other sectors of the economy.

Total cost - Fixed costs and variable costs combined.

Trade Union - Organisation that represents the workers and fights for
improvements to pay and conditions.

Trade receivables - Amount of money owed by customers for goods bought on

credit terms.

Unemployment - The proportion or percentage of the population that are

capable of working but are unable to find a job.
Variable costs - Costs which vary directly with the number of items sold or
produced.

Wholesaler - Someone or organisation that buys and stores large quantities of

several producers’ goods and then breaks into bulk deliveries to supply retailers
with smaller quantities.

Working capital - Amount of capital available to a business to pay its day-to-day

expenses/costs.