Important Business Terms to Know

Key Terms

Business Activity

* Barter System - a system of exchange which involves the swapping of goods between individuals.

* Capital Goods - goods used to produce other goods, such as tools, equipment and machinery.

* Consumers - individuals who use or 'consume' goods and services to satisfy their needs and wants.

* Customers - individuals who buy goods and services supplied by businesses.

* De-industrialization - the decline in manufacturing.

* Division of labour - specialization in specific tasks or skills by individuals.

* Factors of production - resources used by businesses to produce goods and services.

* Markets - anywhere that buyers and sellers communicate to exchange goods and services.

* Money - any substance which is generally accepted as a means of exchange.

* Needs - human requirements which must be satisfied for survival.

* Primary production - activities which involve the extraction of raw materials from the earth and the growing of food.

* Secondary production - activities such as manufacturing which transform raw materials into finished goods.

* Specialisation - in business, the production of a limited range of goods.

* System - parts that work together to achieve an objective; a system can be a communication system, a business, an economic or political system.

* Tertiary production - activities which involve the provision of services.

* Wants - human desires which are unlimited.

Starting a Business

* Business plan - a statement made by a business, outlining the way it will attempt to achieve its objectives.

* Copyright - the ownership of material such as books and films which is protected by law from re-use without permission.

* Hire purchase/credit sale - methods used to buy goods now and ay off the balance over a period of time. In the case of the former, the goods only belong to the buyer when the final payment is made.

* National Insurance contributions - payments made by employees and employers to the government as a form of insurance premium.

* Patent - a licence which prevents the copying of an idea.

Business Stakeholders

* Directors - people elected by shareholders to run companies.

* Dividend - a proportion of a company's profits paid to owners of shares in that company.

* Manager - an individual who is accountable for more work than he or she could undertake alone.

* Shareholder concept - the traditional approach to running a business which involves focusing on the needs of the shareholders.

* Stakeholders - groups of people who are interested in business activity.

* Stakeholder concept - an approach to running a business that involves taking into account the needs of all stakeholders.

* Stakeholder objectives - the goals of people with interests in the business. What stakeholders want to achieve.

Business Aims and Objectives

* Corporate aims - the overall purpose of a business.

* Behavioural theories - theories which state that business objectives are determined jointly by groups of interested parties.

* Mission statement - a brief summary of a firm's aims and objectives.

* Objectives - the goals or outcomes a business wants to achieve.

* Profit maximization - producing a level of output which generates the most profit for a business.

* Sales revenue maximization - producing a level of output where sales revenue is greatest.

* Satisticing - generating sufficient profit to satisfy the owners, not necessarily at an output which gives greatest profit.

* Shareholder value - the benefit to shareholders of a rising share price and rising dividends.

* SMART