Key Business Terms

Business studies glossary: Key business terms

Aim: long-term plans of the business.

Angel investor: a type of investor that is willing to invest in a business at an early, high-risk stage.

Break-even point: the point at which a business is neither making sales nor incurring losses. It is where total sales are equal to total costs.

Budget: an estimate or plan of a business's income and expenditure over a certain period.

Cash flow: the total amount of money moving in and out of a business over a certain period.

Cash flow forecast: a tool that helps businesses estimate the inflow and outflow of cash (usually on a monthly basis).

Contribution per unit: the difference between the selling price and variable cost per unit - remaining profit left after the sale of one unit.

Core competencies: the specific skill, knowledge, or attribute of a business that gives them an advantage over competitors.

Demand: the amount of a product or service consumers are willing and able to pay for.

Demographic: a particular sector of the population. It is used to segment markets into different groups of consumers that share similar attributes (ie. Age, income, gender, etc).

Diversification: an objective of a business to vary its range of products or services.

Dividends: a part of the company's profits that they pay to shareholders.

Economies of scale: the benefits of producing, purchasing or manufacturing on a large scale. Costs decrease as outputs increase.

Elasticity of demand: how reactive demand is to a change in price or income.

Entrepreneur: an individual who establishes and runs a new business, bearing in mind the risks associated with starting a new business.

Fairtrade: promoting improved trading terms and working environments for producers and manufacturers.

Fixed costs: any type of costs that do not change based on the level of output of your business. Fixed costs include costs like rent for office space or a storefront and salaries.

Franchisee: the party that purchases the right to a franchise in a franchising agreement.

Franchisor: the business owner who sells the franchising rights to another individual or business.

Gross domestic product ( GDP ): a country's total output of goods and services over a year.

Incorporation: the process of registering the business as a separate legal entity to the individual owner(s).

Limited liability: the company is a separate legal entity to its owner(s). In the case of debt, shareholders do not risk losing their personal assets.

Market: a place where buyers and sellers come together to trade goods and services.

Market segmentation: the process of dividing a market into smaller sections of consumers with similar characteristics, based on their wants and needs.

Market share: the total percentage of the market that is owned by a particular company, product or service, or brand.

Mission statement: a brief summary of the aims and objectives of a business. Its purpose is to set clear goals and guide the entire organisation.

Non-profit: an organisation that is not set up to make profits. For non-profit organisations, the goal is not to maximise profits. Rather, their objectives are to operate for the benefit of a community or society as a whole.

Not-for-profit: an organisation that does not aim to make a profit for its owners. All the money that is earned by the organisation is used to run the organisation.

Objectives: steps taken to achieve the aim of a business.

Opportunity cost: the potential benefits lost of choosing one alternative over the other.

Patent: the right to be the sole user of a technology, product, or process.

Primary research: any type of research that you conduct and collect yourself, instead of using someone else's research.

Private limited company: an incorporated company with limited liability that is owned by shareholders. The company's shares are not available to the general public - owners can decide whom they sell shares to.

Privatisation: the sale of government-owned industries and operations to private individuals or organisations.

Profit: the difference between the amount earned (total revenue) and the amount spent (total costs) to carry out business operations over a certain period.

Public limited company: an incorporated company that is owned by shareholders. Shareholders have limited liability and the company's shares are available for anyone to buy.

Retained earnings: the amount left over after a company has paid dividends to its shareholders.

Revenue: the income or earnings a business generates over a specific period.

Risk: the possibility of the desired outcome not occurring.

Sample: a subset of a population intended to be representative of an entire population.

Secondary research: a type of research where the researcher collects data from existing sources. The researcher examines information from published sources.

Sector: a business can be classified into one of three sectors based on the type of goods and service they supply. The primary sector includes the extraction of raw materials. The secondary sector includes production and manufacturing, whereas the tertiary sector is concerned with providing services.

Shareholders: each company is owned by its shareholders. Every shareholder holds a certain amount of a company's shares. The more shares a shareholder owns, the more of that company belongs to them.

Shareholders' agreement: explains all the different terms and conditions a shareholder can expect when buying and owning shares in a company.

Stakeholders: an individual or group that has an interest or concern in an organisation.

Social enterprise: a form of enterprise that has a social aim and operates to benefit a community or society as a whole.

Sole trader: also known as a sole proprietor, is someone who establishes and runs a business on their own. There is no legal distinction between the owner and the business.

Supplier: a business that provides goods and services on the market.

Takeover: a business taking ownership and control of another business.

Total cost: all fixed costs and variable costs of operating a business added together.

Trademark: a symbol, phrase, or word legally registered to represent a company, product or brand.

Unique selling point (USP): a factor or quality of a product or service that differentiates it from its competitors. An example of a product's USP could be its low price or superior quality.

Unit cost: the average cost of each unit.

Unlimited liability: when an individual is personally liable for the debts of the business. There is no distinction between the business and the individual (ie sole traders and certain types of partnerships).

Variable costs: costs that change based on the level of output of your business. Variable costs include the cost of shipping, packaging and raw materials.