c1 + c2 + c3/ macro + micro > C2 key terms > Flashcards

C2 key terms Flashcards

business (66 cards)

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1
Q

-*/Quantitative data

A

Numerical information that can be analyses using statistics

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2
Q

Qualitative data

A

non numerical information such as infromation from in depth interviews or focus groups

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3
Q

Price elasticity of demand

A

Measures the sensitivity of demand to a change in price

change in QD/change in price

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4
Q

Income elasticity of demand

A

Measures the sensitivity of demand to a change in price

change in QD/ change in incom

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5
Q

Sales forecasting

A

Predicting future sales revenue based on historical sales data, analysis of market surveys and trends

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6
Q

Extrapolation

A

Identifying the underlying trend in past data and projecting this trend forwards. Basically predicts future trends based on what happened in the past

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7
Q

Correlation

A

Measures the relationship between two variables

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8
Q

Time series analysis

A

Statistical methods to analyse and forecast sales
e.g calculating a 3 point moving average

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9
Q

The Delphi method

A

A method of sales forecasting technique where multiple rounds of questionnaires are sent to a panel of experts, who work towards a common opinion about future sales

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10
Q

Budget

A

A financial plan for the future. Can be for income, expenditure and profit

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11
Q

Budget variance

A

The different between the actual outcome and the predicted outcome

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12
Q

Variance analysis

A

Checking actual outcomes against predicted outcomes

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13
Q

Favourable variance

A

When the actual figure leads to more overall profit being made than was budgeted. This can be either actual costs were lower or actual revenue was higher

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14
Q

Adverse variance

A

When the actual figure leads to overall less profit being made. This can be when actual actual costs were higher than budgeted or actual revenue was lower than budgeted

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15
Q

Balance sheet

A

A statement of the firms assets, liabilities and shareholder or owners funds. It shows the net worth of a business at a specific point in time.

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16
Q

Non current (fixed) assets

A

Assets expected to be retained in the business for more than a year (used to produce the output of the business) e.g machinery , vehicles and computers

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17
Q

Current assets

A

Assets that are cash or can be turned into cash within a year. e.g stock, trade receivables

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18
Q

Non current (long term) liabilities

A

Money owed which is repaid over more than a year. e.g mortgage or loan

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19
Q

Net assets

A

The value of a company’s assets once the value of its liabilities has been deducted

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20
Q

Shareholder funds

A

Money that has been invested into the business by the owners through the sale of shares, and also includes retained profit and reserves

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21
Q

Working capital

A

represents the money needed in the business in order to pay for day to day expenses of a business

current assets - current liabilities

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22
Q

Capital employed

A

The amount of money used to finance a business in the long term. This finance has been either invested by shareholders or borrowed long term

Shareholder funds + non current liabilities

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23
Q

Depreciation

A

the decrease in value of fixed assets overtime e.g due to wear and tear

historical cost - residual value (estimated worth at the end of its life or current time period) / useful life of asset

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24
Q

ROCE

A

measures a companys profitability and efficiency to using its capital to generate profit.

Net profit / capital employed x 100

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25
Current Ratio
Measures the ability of a business to pay its short term obligations e.g. those due within 1 year. Ideal is 1.5:1 current assets / current liabilities
26
Acid test ratio
Measures the ability of a business to pay its short term obligations after stock has been excluded as stock is the most difficult asset to turn into cash. Ideal 1:1 Current assets-stock / current liabilities x
27
Gearing ratio
Measures how much of the business if financed by borrowing. Above 50% is highly geared and is considered higher risk Non current liabilities / capital employed x 100
28
Window dressing
The manipulation of financial accounts by a business to improve the appearance of its performance Could insufficiently depreciate fixed assets so that its value is overstated in the balance sheet and its profit is more than it should be.
29
Non financial performance
Performance of a business based on data other than the businesses financial information e.g. customer attitude surveys, employee attitude surveys, market share, productivity and a company's environmental record
30
Vision statement
A description of what a business sets out to achieve in the medium to long term. Should provide a clear guide to senior management of the future direction of the business
31
Aims
A broad, long term goal that a company wants to achieve, providing overall direction for the organisation
32
Objectives
Targets the business will set to achieve its aims
33
SMART objectives
Objectives that are Specific, Measurable, Achievable, Realistic and Time bound. They are quantifiable, therefore can be used more easily to monitor progress
34
Mission statement
A broad statement of its aims and values. It will guide everyday operations and decision making of the business
35
Strategy
A medium to long term plan
36
Corporate strategy
A medium to long term plan that affects the entire business. Decided upon by senior management/leaders. Decisions on how to achieve a businesses mission/vision/aims/objectives
37
Divisional strategy
Plans that relate to divisions in the business. e e.g. business may be divided by products. IT is guided by the corporate strategy
38
Functional strategy
Plans that relate to a single functional operation such as: production, marketing or HRM and the activities involved within each of these functions.
39
Tactics
Short to medium term decisions that aim to implement strategic decisions. They are usually carried out by middle management and are less complex and more flexible than strategic decisions. For example an advertising campaign
40
SWOT analysis
A tool to identify and analyse the external strengths and weaknesses of an organisation. As well as external opportunities and threats created by the business and economic development
41
Porters 5 forces
A model that suggests there a 5 main forces on a business that determine the behaviour of businesses and the likely levels of profitability They are: buyer power Supplier power threat of substitution threat of new entry competitive rivalry
42
Ansoff's matrix
A strategic tool used by businesses to achieve growth. It suggests the level of risk associated with each strategy and considers whether to target existing customers or new customers and if existing products should be developed/ 4 strategies: market penetration product development Diversification market development
43
Horizontal integration
When a business merges or takes over another business in the same industry at the same stage of production
44
Vertical integration
When a business merges with or takes over a business at either the previous or next stage of production. (Either backwards- taking over a supplier or forwards vertical- taking over a customer)
45
Organic growth
Involves expansion from within a business for example by expanding their product range or by increasing sales
46
External growth
Growth that comes from buying new businesses e.g. through mergers or takeovers
47
Merge/takeover
Merge involves two or more equals, while takeovers involve one larger company that takes over a smaller company. Mergers are always agreed upon using mutual consent, while takeovers may or may not be friendly
48
Franchise
A franchise is the legal right to use the brand name, products and business style of an existing business. The franchisor is the business who sells their brand name to others, and the franchisee is the business person who has bought the franchise.
49
Rationalism
The reorganisation of a business in order to increase its efficiency. This reorganisation normally leads to a reduction in business size, a change of policy or an alternation of strategy relating to particular products.
50
Outsourcing
Outsourcing is the business practice of hiring a third party outside a company to perform services or create goods that used to be performed by the company own employees and staff
51
Scientific Decision Making
Involves the use of facts and data in a systematic way in order to arrive at a logical and evidence based decision Involves using models like decision trees, critical path analysis and cost benefit analysis
52
Intuitive decision making
Intuitive decision making uses experience and intuition to make a gut feeling
53
Strategic decisions
Strategic decisions are long term and will affect the direction the business takes. These decisions will affect the entire business and will be made by the owners or senior management
54
Operational decisions
The day to day decisions made in the business. These are lower level decisions that tend to be short term and have little risk
55
Tactical decisions
Tactical decisions are short term to medium terms and are less complex than strategic decisions and are usually carried out by middle management.
56
Decision trees
A decision tree is a mathematical model used to help managers make decisions. A decision tree uses estimates and probabilities to calculate likely outcomes. It also helps to decide whether the net gain from a decision is worthwhile
57
Critical path analysis .CPA
CPA, is a method of planning and controlling large projects and is used to make decisions on the management of resources and time. It is a technique used to find the cheapest and quickest way to complete a task
58
Cost benefit analysis
It is a method of assessing the viability of a project based on analysis of all the social costs and benefits involved. This includes both private and external costs and benefits.
59
Investment appraisal
Investment appraisal is a technique used to evaluate planned investment by a business and measure its planned financial value to the business
60
Payback
The amount of time it would take for a business to recover a projects initial cost
61
Average rate of return (ARR) + formula
This measures the average annual profit as a percentage of the initial investment Average annual profit / cost of investment X 100
62
Discounted cashflow/ net present value (NPV) + formula
This takes account the time value of money which recognises that e.g £1 earned in five years time is not the same as £1 earned today. It shows how much an investment is worth throughout its lifetime, discounted to todays value. Income x discount factor, add them all together deduct cost of investment any positive figure is good
63
Special order
A special order is an extra order or an order for an item specially requested by a customer
64
Contribution
This allows a business to analyse whether each of its products covers its own variable cost. After variable costs have been taken away from the selling price, what is left "contributes" to paying off the fixed costs. After these costs have been paid, whats left is profit
65
Total contribution formula
Total revenue - Total variable costs
66
Contribution per unit
Selling price per unit - variable cost per unit
c1 + c2 + c3/ macro + micro
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