Mission statement
Sets out the purpose of an organisation. It usually focuses on: What the business wants to be, the values of the business, the range of it's activities and the importance of different groups such as employees, customers and other stakeholders.
Vision statement
A concise and inspiring statement that describes a business's long-term aspirations. It outlines their ultimate goal and sets a direction for the business.
Corporate objective
Medium to long-term goals established to co-ordinate the business.
Strategic decision
Decisions that determine the long-term direction of the organisation. They involve things like: Choosing the markets and industries the organisation will compete in, how they will compete in these markets.
Shareholder returns
The financial benefits received by shareholders in return for buying shares in said company. They are made up of a combination of increased share price and dividend payments.
Dividends
Are part of the business's profits that are paid to shareholders.
Short-termism
The pressure to deliver quick results. It can sometimes be to the detriment of long-term development of the company.
Culture
The shared values, attitudes and beliefs of those who work for the business. It is "how they do things".
Strategy
The long-term plan to achieve the firm's corporate objectives.
Tactics
Shorter term decisions taken in order to implement the strategy.
Functional decision
A decision made by departmental managers who are responsible for specific activities within the business such as: Finance, marketing, HR or operations.
SWOT analysis
A method of strategic analysis which considers the internal and external environments of the business. It is used to identify the strengths and weakness of the business and any opportunities or threats to which it might be exposed
A balance sheet
A financial statement that record the value of a businesses assets and liabilities at a given point in time.
Assets
Things that a business owns.
Liabilities
Things that a business owes.
Non-current assets
Assets that are owned by a business for longer than a period of one year. They can be tangible (such as property and machinery) or intangible (such at patents and shares held in other organisations).
Current assets
Assets that are owned for less than one year. They are known as liquid assets as they easily be turned into cash. They include: Bank, cash in hand, receivables, inventories held.
Current liabilities
Money owed by the business that must be paid within the next twelve months. It includes: Payables, and corporation tax.
Non-current liabilities
Money owed by the business that is to be paid over a period of longer than a year. It includes longer term loans such as mortgages.
Net Current Assets
The difference between the current assets and the current liabilities. It demonstrates whether or not a business can raise enough cash in the next 12 months to pay what it owes in the next 12 months. It is also known as net current assets
Net assets
The difference between a businesses total assets and total liabilities.
Working capital
The difference between the current assets and the current liabilities. It demonstrates whether or not a business can raise enough cash in the next 12 months to pay what it owes in the next 12 months. It is also known as Working capital
Capital
Money which is/has been invested into the business to purchase assets such as vehicles, machinery and property.
Inventories
The stock held by the firm. It is the total of raw materials, work in progress (WIP) and finished goods.
Mortgages
Are long terms loans repaid over 3o years or so in fixed monthly instalments. They are used to purchase property and are secured against it.
Debentures
Are long term loans from other businesses or institutions. The loan is repaid in full at an agreed date in the future at a pre-determined rate of interest.
Income statement
A financial statement that shows all income and expenditure of a business over a given period of time. It shows how much profit a business has made.
Profit
Is made when a firm has a greater level of income that it does expenditure i.e. it has earned more than it has spent.
A loss
Occurs when a businesses expenditure is greater than its income i.e. it has spent more than it has earned.
Window dressing
When a business prepares its balance sheet and income statement to show the performance of the firm in "its best possible light".
Ratio analysis
A technique used for analysing a businesses financial performance by comparing one piece of financial information, with another.
Profitability
A measure of financial performance that compares a business's profits to some other factors such as capital employed or revenue.
A profit margin
A ratio that that expresses a business's profit as a percentage of it revenue over a given period.
Liquidity
A business's ability to generate cash from it's assets.
Gearing
A ratio that analyses how a firm has raised their long-term capital. It shows what proportion has been raised from borrowings compared to the amount raised by its owners (usually share capital).
Payables
The amount owing by the business, to it's suppliers, for goods/services it has received but has yet to pay for.
Receivables
The amount owed to the business, by it's customers, for goods/service they have received but have yet to pay for.
Productivity
Measures the quantity of inputs required to produce a unit of output.
Quality
Measures the extent to which a product meets customer's requirements.
Unit costs
The average cost of producing one unit.
Capacity utilisation
Measures the proportion of it's capacity a firm is using.
Absenteeism
When an employee is not present at their place of work (for reasons other than planned absence).
Unit labour costs
Measure the labour cost per unit produced.
Labour turnover
The percentage of a business's labour force who leave the business over a given period of time.
Labour or employee retention
The extent to which a business holds on to it's employees.
Core competencies
The unique abilities that a business possesses that provide it with a competitive advantage.
Competitive advantage
Is a superiority that a business possesses over it's rivals that may allow it to achieve its objectives.
Outsourcing
When an organisation uses a separate organisation to complete part of its work.
Research and development (R&D)
Is the generation and application of scientific knowledge to create a new product or develop a new production process which can increase the business's productive efficiency.
Profit quality
Measures the extent to which a particular type of profit is sustainable for example, if high profits a made in a year due to the sale of an asset, this is not quality profit as, it could not be sustained year on year.
Employee engagement
Describes the connection between a business's employees and its mission, goals and objectives.
A brand
A brand is a unique name, design, symbol or other feature that distinguishes one sellers product or service from others in the same market.
Sustainable production
Is the manufacturing or creation of goods or services in a way that minimises negative impacts on the environment.
The balanced scorecard
A planning and management strategy designed to match business activities to the aspirations set out in the business's vision statement.
Social responsibility
Is the ethical framework and obligations the business has towards its stakeholders and society as a whole. It involves making decisions that positively impact society while avoiding actions that have negative consequences.
Fair trade
A social movement that exists to promote improved trading terms and living conditions for producers in less-developed countries.
Elkington's triple bottom line
A management approach that places equal importance on people, profit and the planet when reporting its overall annual performance.
Enterprise
Is the skill needed to make a new idea work.
Innovation
Is the successful exploitation of new ideas
Regulation
The enforcement of principles or rules that result from the passing of laws.
Financial services
Are any products which are financial in nature and include those supplied by banks and other financial institutions.
Privatisation
The process by which a business changes from being owned by the government to being owned by private individuals (shareholders of public limited company). It can also be when a public limited company (PLC) stops trading on the stock exchange and becomes privately owned (LTD).
Monopoly
Exists when there is a single supplier in the market
Infrastructure
Refers to the physical and organisational structure required to allow both society and an economy to operate efficiently for example, transport and communication networks.
Globalisation
Refers to the increasing trade between countries and the growing internationalisation of businesses.
Cartels
Exist when two or more companies collude to control prices and/or supply in order to control the extent of competition within a market.
Anti-competitive practices
Are actions taken by businesses to limit the extent of rivalry that exists within a particular market, or the use of unfair trading activities.
A dominant market position
A position of strength enjoyed by a business which allows it to prevent effective competition from existing within a market.
A merger
The joining together of two businesses to create one larger organisation.
A takeover
Occurs when one business buys a controlling share in another.
Collective bargaining
Involves negotiation between management and trade union representatives over pay and other working conditions.
Trade unions
An organisation of workers established to protect and improve the economic position and working conditions of its members.
Gross domestic product (GDP)
The value of aggregate demand. That is the total demand of ALL products produced in an economy. It includes all consumer spending, all investment made by financial institutions, all government spending and the net value of imports and exports.
A recession
A period of at least two consecutive quarters (six months) when GDP has fallen below zero i.e. two consecutive quarters when there has been negative GDP.
An exchange rate
The price of one currency expressed in terms of another for example, £1 = $1.2
Price elasticity of demand
Measures how responsive demand for a product is to changes in price.
Inflation
The persistent rise in the general level of prices.
Deflation
Is the rate of decrease of the general level of prices.
Consumer Price Index (CPI)
Measures the rate of inflation based on the changes in the prices of a basket of goods and services.
Taxation
Is a payment that has to be made to government by individuals, firms, households or other organisations.
The budget balance
The difference between how much the government spends each year and how much it earns through taxes.
Fiscal policy
The use of taxation by the government to influence the economy.
Monetary policy
Refers to the actions taken by the Bank of England to manage the supply and cost of money in the economy, to achieve economic goals. It's aim to maintain price stability and promote sustainable economic growth.
Interest rates
The cost of borrowing money or, the reward for saving it.
Protectionism
Are policies implemented by the government to protect certain domestic industries. They include Tariffs, quotas and subsidies.
Tariffs
A tax which a domestic government places on imported products.
Import quotas
A physical limit that is set on the number of products that can be imported over a given time.
Subsidies
A payment given by government to domestic producers (certain industries in their home country) to help lower production costs and help make them more price competitive against cheaper, overseas producers.
Soft loans
A government loan provided to failing businesses with preferential terms in order to help said businesses compete against low cost producers from overseas.
A global strategy
When a business produces a standardised products, with little localisation, to meet the needs of consumers across the globe.
An emerging market (or economy)
A market that has low incomes per head but, is enjoying GDP of higher than 7%.
Economic growth
The rate of growth enjoyed by an economy over a period of time.
A multinational business
A business that has production facilities in more than one country.
Demography
The study of human populations for example, their size, and growth rates.
Migration
The movement of people between countries.
Urbanisation
The movement of people between the countryside and cities.
Stakeholders
Is any individual that has an interest in the business. For example the owners, customers, suppliers, local community.
A pressure group
An organised group of individuals or organisations that seeks to influence behaviours of businesses and governments.
Cloud computing
Involves the centralised storage of data in remote servers (the 'cloud') and online access by users worldwide on internet-connected devices
Computer-aided design (CAD)
Computer software that allows businesses to create, modify and adapt new product plans.