Edexcel GCSE Business Glossary

adaptation
Adaptation is altering a product to suit a different purpose.

add value
When businesses talk about ‘adding value’, they are talking about ways to justify the difference between the price of a product and the cost of creating it.

aim
An aim is an overall goal or ambition that forms part of a long-term strategy. An aim is broad, general and applies to all areas of the business.

assets
Assets are money and other valuable items owned by a person or a business.

autonomy
Having autonomy at work is having independence to decide how to perform tasks.

average rate of return (ARR)
The average rate of return is the average annual return on an investment as a percentage of the amount invested:
average rate of return = (total profit/number of years)

bar gate stock graph
A bar gate stock graph is used to monitor the inflow and outflow of stock. Bar gate stock graphs provide a visual record of lead time, reorder level, minimum stock level and reorder quantity.

batch production
Batch production is a production process whereby products are made in groups or batches.

brand
A brand is a distinct identity. It consists of a name, a logo, slogans, the defining values of a product and how they are communicated to customers.

brand loyalty
Brand loyalty is a customer’s willingness to continue buying products from a specific brand.

break-even level of output
The break-even level of output is the minimum number of sales a business needs to make to cover its costs:
\(\text{break-even point in units} = \frac{\text{fixed costs}}{\text{(sales price – variable costs)}}\)

break-even point
The break-even point is the point where the revenue a business generates equals all its costs; the point at which there is no profit and no loss:
break-even point in costs/revenue = break-even point in units × sales price

budget
A budget is an estimate of income and expenditure for a set period of time in the future.

business enterprise
Business enterprise is the setting up, or the expansion, of a business by an entrepreneur or another business.

business operations
Business operations are the day-to-day activities of a business to meet its purpose of producing goods and/or services.

business plan
A business plan is a document for internal and external stakeholders that describes the business idea, the aims and objectives of the business, the target market, financial forecasts, sources of finance, location and the marketing mix.

capital investment
Capital investment is money spent on long-term physical assets used by a business, such as machinery and buildings.

cash
Cash is money that is easily available and can be kept physically (as coins and notes) or digitally (in online accounts).

cash flow
Cash flow is the amount of money flowing into and out of a business.

cash-flow forecast
A cash-flow forecast predicts the amount of cash that will flow into and out of a business in a set time period.

centralised organisational structure
In a centralised organisational structure, decisions are made by a few managers at the top of the hierarchy.

chain of command
The chain of command is how communication flows through the hierarchy of a business’s organisational structure.

closed questions
Closed questions are questions where the responses are limited to a set number of pre-determined options.

closing balance
The closing balance is the amount of money a business has available as cash (either in hand or in a bank account) at the end of each period: closing balance = opening balance + net cash flow.

commission
Commission is a payment made to someone when they complete an agreed task, such as making a sale.

competitive advantage
A business has a competitive advantage when customers think its products are better value or better quality than its competitors’ products.

cookies
Cookies are small files of information that are used to track what people do online.

cost of living
The cost of living is the amount of money a person needs to spend to pay for essentials.

cost of sales
Cost of sales is the direct cost of producing the goods or services sold.

creative
Being creative is producing original ideas.

credit
The term ‘credit’ refers to money loaned to a business by a bank, being able to obtain goods or services before you pay for them, as well as a payment received.

creditor
A creditor is a person or organisation that a business owes money to, such as a supplier.

crowd funding
Crowd funding is raising small amounts of capital from many investors, who are often given a limited reward (such as a discount or a free product) and not a share of the business.

curriculum vitae (CV)
A curriculum vitae (CV) is a document produced by an applicant for a job, containing their personal details, qualifications, employment history, hobbies and references.

customer profile
A customer profile is a collection of information about a specific customer, including demographic, geographical and behavioural data.

customer service
Customer service is meeting customer expectations before, during and after a sale.

data tracking
Businesses carry out data tracking to collect and analyse information about their customers.

debt
A debt is something, usually money, owed to another person or organisation.

debtor
A debtor is a person or an organisation that owes a business money.

decentralised organisational structure
In a decentralised organisational structure, decision-making is delegated to managers throughout the hierarchy.

design mix
When designing products, a business considers the design mix. The design mix has three elements: function, aesthetics and cost.

discrimination
A person experiences discrimination when they are treated differently because of a protected characteristic. In law, these characteristics are limited to: age, gender reassignment, being married or in a civil partnership, being married or on maternity leave, disability, race (including colour, nationality, ethnicity or national origin), religion or belief, sex or sexual orientation.

disposable income
Your disposable income is the amount of money you have left after paying for essentials.

dividend
A dividend is a share of profit paid to the shareholders (owners) of a company.

domestic business
A domestic business is a business operating in its country of origin.

dynamic pricing
Dynamic pricing sets prices based on real-time market demands.

e-commerce
E-commerce is using the internet to carry out business transactions.

e-tailer
An e-tailer sells goods and services over the internet; e-tailers do not have a physical location.

economic growth
Economic growth is a rise in the total amount of goods and services produced in an economy over time.

economy
A country’s economy is all the activities related to the production of goods and services, and the use of money, in a country.

entrepreneur
An entrepreneur is a person who identifies new business ideas and uses these ideas to start new businesses, creating a product to meet a customer need. Entrepreneurs take financial risks in the hope of making a profit.

environmental considerations
Environmental considerations involve businesses acting in a way that reduces the negative impact they have on the planet.

equity
Equity is the value of a business.

ethical considerations
Ethical considerations involve businesses acting in ways that are generally seen as morally correct and in line with moral principles.

ethically
Acting ethically is acting in ways that are generally seen as morally correct and in line with moral principles.

exchange rate
The exchange rate is the value of one country’s currency in relation to another.

export
When you export products, you move them out of a country. Exported products are referred to as ‘exports’.

extension strategies
Extension strategies, such as changing the product or updating the packaging, are actions taken by a business to extend the maturity stage of the product life cycle.

external (inorganic) growth
External (inorganic) growth takes place when a business grows from the outside by joining with other businesses through mergers or takeovers.

external recruitment
External recruitment means the successful candidate for a job is brought into the business from outside.

external sources of finance
External sources of finance are funds that come from outside a business, and they include loan capital and share capital.

financial data
Financial data are data about the financial performance of a business.

fixed costs
Fixed costs are costs that do not vary with the level of output. Examples of fixed costs include insurance, rent, tax and salaries.

flat organisational structures
In a business with a flat organisational structure, there are few levels, a short chain of command and each manager has a wide span of control.

flow production
Flow production is a production process whereby products travel along a continuous production line.

focus group
A focus group is a type of primary research. It is a facilitated group discussion.

footfall
Footfall is the number of people passing a location within a given time period.

forecast
A forecast is a prediction. To forecast means to predict something.

franchise
A franchise is a business where the franchise owner (the franchisor) allows an entrepreneur (the franchisee) to sell its goods and services using its brand name, in exchange for an initial fee and a share of profit.

franchisee
A franchisee is an entrepreneur who is given permission by a franchise owner (the franchisor) to sell its goods and services using its brand name, in exchange for an initial fee and a share of profit.

franchisor
A franchisor is an established business that gives an entrepreneur (the franchisee) permission to sell its goods and services using its brand name, in exchange for an initial fee and a share of profit.

globalisation
Globalisation is the increasing interconnectedness between countries.

gross profit margin
Gross profit margin is the percentage of sales revenue that is maintained as gross profit:
\(\text{gross profit margin (%)} = \left( \frac{\text{gross profit}}{\text{sales revenue}} \right) \times 100\)

gross profit or loss
Gross profit or loss is the revenue a business has left after deducting the costs of making and selling its goods and services: gross profit (or loss) = sales revenue  cost of sales.

hierarchical organisational structure
In a business with a hierarchical organisational structure, there are many levels, a long chain of command and each manager has a narrow span of control.

import
When you import products, you move them into the country. Imported products are referred to as ‘imports’.

incorporated
An incorporated business is registered with the government, which means the business and its owners are separated in the eyes of the law. Limited companies and public limited companies are incorporated.

inflation
Inflation is the rate at which prices increase over a period of time.

innovation
Innovation is developing or improving an existing product.

insight
Having insight means having a clear understanding of a situation.

insolvent
A business is insolvent when it is unable to pay its debts.

interest rate
The amount of interest payable on savings, a loan or an overdraft, as a percentage of the money saved or loaned.

interest
When a business borrows money from a bank, interest is the cost of borrowing. When a business saves money with a bank, interest is a form of revenue received:
\(\text{interest (on loan) in %} = \left( \frac{\text{total amount repaid – borrowed amount}}{\text{borrowed amount}} \right) \times 100\)

internal (organic) growth
Internal (organic) growth takes place when a business grows from the inside by increasing its trading activities by developing new goods and services, or by entering new markets.

internal recruitment
Internal recruitment means the successful candidate for a job already works for the business and will be appointed to a new job role within the business.

internal sources of finance
Internal sources of finance are funds that come from within a business, and they include retained profit and selling assets.

international trade
International trade is the flow of products between countries.

interview
An interview is a type of primary research that involves an in-depth one-to-one conversation.

invention
An invention is something that has never been made before.

investment
From a business perspective, an investment is the money, effort or time that is put into something in the hope of receiving a profit in return.

job description
A job description is a recruitment document produced by a business that outlines the job role and the responsibilities associated with it.

job enrichment
Job enrichment means performing a wider variety of tasks with varying levels of responsibility.

job production
Job production is a production process whereby each product is made individually.

job role
A job role is an employee’s position within an organisational structure, and it determines their responsibilities and the tasks they complete at work.

job rotation
Job rotation means performing a wider variety of tasks at the same level.

Just-in-time (JIT)
Just-in-time (JIT) is a stock control system where stock is delivered just as it is needed. Businesses using JIT do not hold buffer stock.

legislation
Legislation is a collective term that describes the laws passed by Parliament.

limited liability
When a business has limited liability, the owners are not personally liable for the business’s debts, and the amount of financial loss an owner must personally cover is limited to the money they have invested in the business.

loan
A loan is a specified amount of money borrowed from a bank, which is paid back with interest over a set period of time.

loan capital
Loan capital is finance borrowed from a bank or other financial organisation, which must be repaid, with interest, over a pre-agreed period of time.

logistics
Logistics deal with coordinating the purchase and delivery of stocks of raw materials and finished goods, making sure suppliers deliver to the business and the business delivers to its customers.

long term
Long term refers to an extended period of time, and is usually measured in years, not days or months.

loss leader
A loss leader is a product sold at a loss to attract customers.

luxury goods
Luxury goods are products that are expensive and desirable but not essential.

margin of safety
The margin of safety is the difference between a business’s break-even point and its maximum possible output: margin of safety = actual or budgeted sales − break-even sales.

market
A market is the place where a seller and a buyer make an economic transaction.

market conditions
Market conditions are the factors that determine the external environment in which a business operates, such as the number of businesses competing in a market, and the state of the economy.

market data
Market data are data about the market or industry as a whole.

market research
Market research is the process of collecting and analysing information about the market, competitors and customers to gain information about customer behaviours and consumer trends.

market segmentation
Market segmentation is the process of breaking the whole market down into smaller parts, grouping customers who share similar characteristics.

market share
Market share is the percentage of the total market that a business occupies.

marketing data
Marketing data are data about the marketing activities and performance of a business.

marketing mix
The marketing mix is the key elements of a marketing plan: product, price, promotion and place.

mass market
The mass market is the whole market. A product designed for the mass market is designed to be bought by most customers.

merger
A merger occurs when two or more businesses agree to join together to operate as one.

motivation
Motivation is the desire to succeed.

multinationals
Multinationals are businesses that operate in more than one country.

National Living Wage
The National Living Wage is the minimum amount a person aged 21 and over can be paid per hour; it is set by the government each year.

National Minimum Wage
The National Minimum wage is the minimum amount a person between the ages of 16 and 20, and an apprentice in the first year of an apprenticeship, can be paid per hour.

needs
Needs are things people require for a satisfactory life, such as somewhere to live and food to eat.

negative cash flow
When more cash leaves a business than comes in during a given period, it has negative cash flow.

net cash flow
Net cash flow is the difference between cash inflows and cash outflows in a given period: net cash flow = cash inflows – cash outflows.

net profit margin
Net profit margin is the percentage of sales revenue that is maintained as net profit: \(\text{net profit margin (%)} = \left( \frac{\text{net profit}}{\text{sales revenue}} \right) \times 100\)

net profit or loss
Net profit or loss is the revenue a business has left after deducting all its costs: net profit (or loss) = gross profit − other operating expenses and interest.

objective
An objective is a SMART target used by business leaders to track progress, which is often short term. An objective focuses on a particular business area, and each business area may have many objectives.

observations
Observations are a type of primary research where market researchers watch how customers behave in a natural setting, and record what they see.

obsolete
When something is obsolete it is no longer useful; it is out of date.

open questions
Open questions have unlimited responses, allowing the respondent to answer in their own way.

opening balance
The opening balance is the amount of money a business has available as cash (either in hand or in a bank account) at the beginning of each period: opening balance = closing balance of the previous period.

operating expenses
Operating expenses are the ongoing expenses required for maintaining a business’s day-to-day operational activities.

organisational structure
A business’s organisational structure sets out how employees are organised in terms of who reports to whom.

overdraft
An overdraft is a pre-arranged credit agreement with a bank, which allows a business to borrow money up to a pre-agreed limit at an agreed interest rate.

overheads
Overheads are business expenses that are not directly related to creating a product, such as rent, electricity and computer software.

partnership
In a partnership, two or more people sign a legal document called a deed of partnership, in which they agree how they are going to run a business together and how profit will be shared. A partnership is unincorporated and has unlimited liability.

person specification
A person specification is a recruitment document produced by a business that outlines the qualifications, skills, experience and characteristics the business is looking for in a successful candidate for a job.

place
Place is how products are sold and distributed to customers.

positive cash flow
When more cash comes into a business than leaves during a given time period, it has positive cash flow.

premium brand
A premium brand is a brand that is seen to be of higher quality than other brands and great value.

premium pricing
Premium pricing is charging a higher price than the market average.

pressure group
A pressure group is an organisation that tries to influence the behaviour of consumers, businesses and governments. A pressure group normally has a specific ethical or environmental goal.

price
Price is the amount a business charges its customers for a product.

primary research
Primary market research collects first-hand (original) data, which did not previously exist and is specific to the current problem.

private limited company
A private limited company is a business that is owned by shareholders. It is incorporated and has limited liability.

procurement
Procurement is the process of identifying suitable suppliers and buying the necessary goods or services from them.

product
Products are the goods and/or services that a business sells to its customers.

product differentiation
Product differentiation is marketing goods and services with minor variations to suit specific customer needs.

product life cycle
The product life cycle refers to the stages a product or service goes through over the course of its life: launch, growth, maturity and decline.

production processes
Production processes are the methods a business uses to produce its products. There are three different methods: job production, batch production and flow production.

Productivity
Productivity is the output per unit of input; for example, labour productivity is how much an employee can produce.

profit
Profit is revenue received minus total costs.

profit satisficing
When a business profit satisfices, it sets a minimum acceptable level of profit instead of maximising potential financial gains.

profitability
Profitability is a business’s ability to generate profit from sales made.

promotion
Promotion is the activities a business carries out to raise awareness of its products and to encourage customers to make a purchase.

promotional strategies
Promotional strategies are the ideas a business has for advertising their products.

public limited company (plc)
A public limited company (plc) is a business that can sell shares to the public on a stock market, and has limited liability.

qualitative data
Qualitative data are non-numerical (descriptive) data that are harder to analyse but help us understand things such as behaviours and feelings.

quality assurance
Quality assurance is when quality is checked at every stage of the production process.

quality control
Quality control is when quality is checked at the end of the production process before the finished product is delivered to customers.

quality
Quality is achieved when goods and services meet customer expectations.

quantitative data
Quantitative data are numerical data, which are easy to collect, count and analyse.

questionnaire
A questionnaire is a type of primary research consisting of a series of questions.

raw materials
Raw materials are basic or unprocessed materials used in the manufacturing of goods.

recession
A recession is a period of economic decline that lasts longer than six months.

recruitment process
The recruitment process is the steps taken to attract suitable candidates to apply for a job vacancy.

representative
Representative is being typical of a group. If market research data are gathered from an accurate sample of the target market, it is representative.

retailer
A retailer sells goods or services from a physical location, such as a high street store, a village shop or a market stall.

retained profit
Retained profit is profit from previous years that is kept within the business.

retention
Retention is the amount of time an employee stays working for a business.

revenue forecast
A revenue forecast is a prediction of future sales revenue based on an analysis of current sales data and market trends.

revenue
Revenue is the total amount of money made from business operations: (sales) revenue = price × quantity. It is also known as ‘income’.

reward
A reward is something that you get in return for doing something well.

risk
Risk is the possibility of harm or loss.

salary
A salary is a fixed amount paid to an employee, which is often calculated annually.

sales process
The sales process is the stages of interaction between a business and a customer, from initial enquiry to final sale and beyond.

sales revenue
Sales revenue is the income generated from the sales of goods and services: (sales) revenue = price × quantity.

sales targets
Sales targets are goals setting out how many goods or services a business aims to sell in a specific time period.

sample
In market research, the sample is a smaller group of people that stand in for the target market.

saturated market
A saturated market is a market where there are no more possible customers for a product.

secondary research
Secondary market research reviews existing data, which have already been collected for another purpose, either within the business or outside the business.

selection process
The selection process involves shortlisting suitable candidates and inviting them to attend an interview.

share capital
Share capital is finance raised from the sale of shares on a stock market. Individuals or businesses buy shares in return for equity in the business, which means they are partial owners of the business and they receive a share of the business’s profits in the form of dividends.

shareholder
A shareholder is a person or an organisation that owns part of a limited company by holding shares in it.

short term
Short term refers to a limited period of time, and is usually measured in days or months.

SMART target
A target is something you are aiming for, and a SMART target is Specific, Measurable, Achievable, Realistic and Timebound.

social media
Social media is the collective name for digital technologies, such as Facebook® and TikTok®, which allow people to share information.

sole trader
A sole trader is unincorporated and has unlimited liability. One individual has full control of the business, and there are no other decision-makers.

solvent
A business is solvent when it is able to pay its debts.

span of control
The span of control is the number of subordinates each manager is directly responsible for in a business’s organisational structure.

stakeholder
A stakeholder is anyone who has an interest in, or is affected by, the activities of a business.

start-up
A start-up is a new business in the early stages of its development. Start-ups are usually focussed on a single product.

stock market flotation
A stock market flotation is the process a company goes through to become a public limited company, when a business makes shares available on a stock market.

stock
Stock is the raw materials or finished goods held by a business.

strength
A strength is a factor that benefits a person or an organisation.

substitute
A substitute product is a different product that could be used to fulfil the same purpose; for example, water is a substitute for Coca-Cola® because both can be used to quench thirst.

supplier
A business that provides goods or services to another business.

survey
A survey uses one or more different types of primary research to answer market research questions. A survey can include a questionnaire, but it can also include focus groups, interviews and observations.

sustainability
Sustainability is using the Earth’s resources in a way that acknowledges they are limited and avoids using them up.

takeover
A takeover occurs when one business buys a second business.

target market
In market research, the target market is everyone the research wants to study.

tariffs
Tariffs are taxes charged on imports.

total costs
Total costs are fixed costs plus variable costs: total costs (TC) = total fixed costs (TFC) + total variable costs (TVC).

trade bloc
A trade bloc is a group of countries that work together to encourage trade between member countries, and to protect themselves from trade with countries outside the trade bloc.

trade credit
Trade credit is a pre-arranged credit agreement with a supplier, allowing a business to purchase goods and services from suppliers and pay by a specified later date.

trade-off
A trade-off occurs when a business has to give up one thing in return for another.

training
Training is the process of providing employees with the necessary knowledge and skills to carry out their job roles efficiently.

undercut
Undercutting a competitor’s price means setting a lower price than a competitor for a similar product.

unincorporated
An unincorporated business is not registered with the government, which means the business and its owners are the same in the eyes of the law. Sole traders and partnerships are unincorporated.

unique selling point (USP)
A unique selling point is a feature that makes a product stand out from its competitors.

unlimited liability
When a business has unlimited liability, the owners are personally liable for the business’s debts, and there is no limit to the financial loss an owner must personally cover.

validity
Validity is having an accurate basis in fact. Market research with a high level of validity accurately represents the target market.

values
A business’s values are the principles it uses to guide how it operates.

variable costs
Variable costs are costs that do vary with the level of output. Examples of variable costs include raw materials, packaging, utilities, commission and hourly labour.

venture capital
Venture capital is an investment made by a larger business or a successful entrepreneur into a start-up business, in return for a share of the business.

wage
A wage is a payment made to an employee, which is often calculated hourly.

weakness
A weakness is a factor that limits the likelihood of success for a person or an organisation.

wholesaler
A wholesaler buys large quantities of a product from a manufacturer and then breaks it down into smaller quantities to sell on to retailers and/or e-tailers.