Edexcel AS/A Level Business - Theme 2 ALL SOLUTION LATESTB SPRING -2023/24 EDITION GUARANTEED GRADE A+

Capital The money provided by the owners in a business Capital expenditure Spending on business resources that can be used repeatedly over a period of time Internal finance Money generated by the business or its current owners Retained profit Profit after tax that is 'ploughed back' into the business Revenue expenditure Spending on business resources that have already been consumed or will be very shortly Sale and leaseback The practice of selling assets, such as property or machinery, and leasing them back from the buyer Authorised share capital The maximum amount that can be legally raised Bank overdraft An agreement between a business and a bank that means a business can spend more money that it has in its account (going 'overdrawn'). The overdraft limit is agreed and interest is only charged when the business goes overdrawn Capital gain The profit made from selling a share for more than it was bought Crowd funding Where a large number of individuals invest in a business or project on the internet, avoiding the use of a bank Debenture A long-term loan to a business Equities Another name for an ordinary share External finance Money raised from outside the business Issued share capital Amount of current share capital arising from the sale of shares Lease A contract to acquire the use of resources such as property or equipment Peer-to-peer lending (P2PL) Where individuals lend to other individuals without prior knowledge of them, on the internet Permanent capital Share capital that is never repaid by the company Secured loans A loan where the lender requires security, such as property, to provide protection in case the borrower defaults Share capital Money introduced into the business through the sale of shares Unsecured loans Where the lender has no protection if the borrower fails to repay the money owed Venture capitalism Providers of funds for small or medium-sized companies that may be considered too risky for other investors Collateral An asset that might be sold to pay a lender when a loan cannot be repaid Incorporated business A business model in which the business and the owner(s) have separate legal identities Limited liability A legal status that means shareholders can only lose the original amount they invested in a business Long-term finance Money borrowed for more than one year Rights issue Issuing new shares to existing shareholders at a discount Short-term borrowing Money borrowed for 12 months or less Undercapitalised A business not raising enough capital when setting up Unincorporated businesses A business model in which there is no legal difference between the owner(s) and the business Unlimited liability A legal status which means that business owners are liable for all business debts Business plan A plan for the development of a business, giving details such as the products to be made, resources needed, and forecasts such as costs, revenues and cash flow Cash-flow forecast The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month Cash inflows The flow of money into a business Cash outflows The flow of money out of a business Net cash flow The difference between the cash flowing in and the cash flowing out of a business in a given time period Solvency The degree to which a business is able to meet its debts when they fall due Consumer income The amount of income remaining after taxes and expenses have been deducted from wages Consumer trnds The habits or behaviours of consumers that determine the goods and services they buy Economic growth The rise in output of an economy as measured by the growth in GDP usually as a percentage Economic variables Measures within the economy which have effects on business and consumers. Examples include unemployment, inflation and exchange rates Extrapolation Forecasting future trends based on past data Forecasting A business process, assessing the probable outcome using assumptions about the future Sales forecast Projection of future sales revenue, often based on previous sales data Time series data A method that allows a business to predict future levels from past figures Average cost or unit cost The cost of producing one unit, calculated by dividing the total cost by the output Fixed cost A cost that does not change as a result of a change in output in the short run Long run The time period where all the factors of production are variable Profit The difference between total costs and total revenue. It can be negative. Sales revnue The value of output sold in a particular time period. It is calculated by price x quantity of output Sales volume The quantity of output sold in a particular time period Semi-variable cost A cost that consists of both fixed and variable elements Short run The time period where at least one factor of production is fixed Total cost The entire cost of producing a given level of output Total revenue The amount of money the business receives from selling output Variable cost A cost that rises as output rises Break-even When a business generates just enough revenue to cover its total costs Break-even chart A graph containing the total cost and total revenue lines, illustrating the break-even output Break-even output The output a business needs to produce so that its total revenue and total costs are the same Break-even point The point at which total revenue and total costs are the same Contribution The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit. Margin of safety The range of output between the break-even level and the current level of output, over which a profit is made Budget A quantitative economic plan prepared and agreed in advance Budgetary control A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences Historical figures Quantitative information based on past trading records Production cost budget A firm's planned production costs for a future period of time Sales budget A firm's planned sales for a future period of time - can be measured in terms of volume or revenue Variance The difference between actual financial outcomes and those budgeted Variance analysis The process of calculating variance and attempting to identify their causes Zero-based budgeting or zero budgeting A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder (they are given a zero value). Amortisation The writing off of an intangible asset Cost of sales The direct costs of a business Exceptional costs A one off cost, such as a large bad debt Gross profit The difference between revenue/turnover and cost of sales Gross profit margin Gross profit expressed as a percentage of revenue/turnover Operating profit The difference between gross profit and business overheads, such as selling and administrative expences Operating profit margin Operating profit expressed a percentage of revenue/turnover Profit for the year or net profit The difference between operating profit and interest and exceptional items Profit for the year margin or net profit margin Net profit after tax, expressed as a percentage of revenue/turnover Statement of comprehensive income A financial document showing a company's income and expenditure over a particular time period, usually one year Revenue or turnover The total income of a business resulting from sales of goods or services Acid test ratio Similar to the current ratio but excludes stocks for current assets. A more severe test of liquidity. Assets Resources that belong to a business Capital Money put into the business by the owners Current assets Liquid assets ie those assets that will be converted into cash within one year Current liabilities Money owed by the business that must be repaid within one year Current ratio Assesses whether or not a business has enough resources to meet any debts that arise in the next 12 months. It is found by dividing current liabilities into current assets. Intangible assets Non-physical assets, such as brand names, patents and customer lists Inventories Stocks, such as raw materials and finished goods held by a business Liabilities Money owed by the business to banks and suppliers, for example Liquidity The ease with which assets can be converted into cash Net assets Total assets - total liabilities Non-current assets Long-term resources that will be used by the business repeatedly over a period of time Non-current liabilities Money owed by the business for more than one year, sometimes called long-term liabilities Shareholders' equity The amount of money owed by the business to the shareholders Statement of financial position (balance sheet) A summary at a particular point in time of the value of a firm's assets, liabilities and capital Trade and other payables Money owed by the business to suppliers and utilities, for example. Sometimes called trade creditors Trade and other receivables Money owed to the business by customers and any prepayments made by the business Working capital The funds left over to meet day-to-day expenses after current debts have been paid. It is calculated by subtracting current liabilities from current assets Administration A failing business appoints a specialist to rescue the business or wind it up External factors Factors beyond the control of businesses cause it to collapse Internal factors Factors that business are able to control cause it to collapse Overtrading The situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast Batch production A method that involves completing one operation at a time on all units before performing the next Capital intensive Production methods that make more use of machinery relative to labour Capital productivity The amount of output each unit of capital (one machine) produces Cell production Involves producing a family of products in a small self-contained unit (a cell) within a factory Division of labour Specialisation in specific tasks or skills by an individual Downsizing The process of reducing capacity, usually by laying off staff Efficiency Producing a level of output where average cost is minimised Flow production Large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line Job production A method of production that involves employing all factors to complete one unit of output at a time Kaizen A Japanese term that means continuous improvement Labour intensive Production methods that make more use of labour relative to machinery Labour productivity The amount of output each unit of labour (one worker) produces Lean production An approach to operations that focuses on the reduction of resource use Outsourcing Giving work to sub-contractors to reduce costs Production The transformation of resources into goods or services Productivity The output per unit of input per time period Specialisation In business, the production of a limited range of goods Standardisation Using uniform resources and activities or producing a uniform product Capacity utilisation The use that a business makes of its resources Excess or surplus capacity When a business has too many resources, such as labour and capital, to produce its desired level of output Full capacity The point where a business cannot produce any more output Mothballing Leaving machines, equipment or building space unused, but maintained, so they could be brought back into use if necessary Over-utilisation The position where a business is running at full capacity and 'straining' resources Rationalisation Reducing the number of resources, particularly labour and capital, put into the production process, usually undertaken because a business has excess capacity Under-utilisation The position where a business is producing at less than full capacity Buffer stocks Stocks held as a precaution to cope with unforeseen demand Kanban A card or an object that acts as a signal to move or provide resources in a factory Lead time The time between placing the order and the delivery of goods Re-order level The level of current stock when new orders are placed Re-order quantity The amount of stock ordered when an order is placed Stock rotation The flow of stock into and out of storage Work-in-progress Partly finished goods Quality Features of a product that allow it to satisfy customers' needs. It may refer to some standard of excellence. Quality assurance A method of working for businesses that takes into account customers' wants when standardising quality. It often involves guaranteeing that quality standards are met. Quality chains When employees form a series of links between customers and suppliers in business, both internally and externally Quality circles Groups of workers meeting regularly to solve problems and discuss work issues Quality control Making sure that the quality of a product meets specified quality performance criteria Statistical process control The collection of data about the performance of a particular process in a business Total quality management (TQM) A managerial approach that focuses on quality and aims to improve the effectiveness, flexibility and competitiveness of the business Appreciation of a currency A rise in the value of a currency Base rate The rate of interest around which a bank structures other interest rates. Boom The peak of the economic cycle where GDP is growing at its fastest Consumer price index (CPI) A common measure of price changes used in the EU Deflation A fall in the general price level. Also used to describe a situation where economic growth is falling or negative when inflation is falling. CONTINUED..