BUSINESS ACCOUNTING

1.      Profit and loss account: An account that records business sales revenue, all costs and expenses, and any loss/profit made during the year.

2.      Trading account: The part of the profit and loss account that records revenue, cost of sales and gross profit.

3.      Sales turnover: The value of sales in a certain time period.

4.      Net profit: Profit after subtracting all expenses/ overheads from gross profit.

5.      Gross profit: profit after subtracting the cost of sales from sales turnover.

6.      Corporation tax: Tax on company net profits.

7.      Dividends: Annual payments from company profits to shareholders.

8.      Depreciation: The fall in the value of fixed assets over time.

9.      Liquidity: The ability of the business to convert its assets in to cash and pay off short term debts.

10.  Current ratio: Current asset / current liabilities

11.  Acid test ratio: current asset-stock / current liabilities

12.  Return on capital employed (%): Net profit / Capital employed X 100

13.  Retained profit: Profit made after payment of tax and dividends. It is reinvested back into the business.

14.  Gross profit margin(%): Gross profit / Sales turn over X 100

15.  Net profit margin (%): Net profit / Sales turnover X 100

16.  Balance sheet: The account records all business assets and liabilities and the value of shareholders funds.

17.  Working capital: The capital needed by a business to finance its day to day needs.

18.  Fixed assets: Assets owned by a business that it expects to keep and use for more than one year.

19.  Current assets: Assets that the business will use up or turn into cash within one year.

20.  Current liabilities: Loans and debts of the business that will be repaid within one year.

21.  Long term liabilities: The money value of the debts that do not have to be repaid in one year.

22.  Shareholders fund: Finance provided by shareholders –share capital or retained profits.

23.  Capital employed: Total value of business’s long term finance.

      

OTHER EXTERNAL INFLUNCES ON BUSINESS

1.      Technological change: Changes in products or the ways products are made resulting from research into new ideas.

Examples: Mobile phones with cameras.

2.      Pressure group: Groups of people who share a common interest and take action to achieve the changes they are seeking.

3.      Private costs:  The costs to producers and consumers of an economic activity.

4.      External costs: The cost of an economic activity paid for by the rest of society, not the producers/consumers

5.      External benefits: The benefits of an economic activity received by the rest of society other than producers/consumers.

6.      Private benefits: The benefits of an economic activity to producers/consumers.

Cost benefit analysis: An analysis usually carried out the government, into the overall costs and benefits of a large new project

GOVERNMENT AND ECONOMIC INFLUENCES ON BUSINESS

1.      Exports: Goods and services sold by a country to other countries.

2.      Imports: Goods and services bought by one country from other countries.

3.      Boom: The stage when an economy is at the peak of its activity.

4.      Recession: When income and output begin to fall in an economy.

5.      Slump: The lowest part of the business cycle.

6.      Recovery: When growth begins to increase as an economy comes out of a slump or recession.

7.      Exchange rate: The price of one currency in terms of another.

8.      Exchange rate depreciation: A fall in the exchange rate of a currency.

9.      Direct taxes: Paid directly from incomes.

10.  Indirect taxed: Taxes on goods and services.

11.  Import tariff: A tax on imported goods to discourage their sales.

12.  Import quota: A legal limit on the quantity of a product that may be imported.

13.  Consumer protection laws: Laws designed to protect consumers from unfair actions by producers or retailers.

14.  Monopoly: A business that has no competition in its market- it is the sole seller.

15.  Contract of employment: A legal agreement between workers and employers listing the rights and responsibilities of employees.

Forms of business organisation

1.      Limited liability: The liability of the owners for the debts of the business is limited to the owners’ investment.

Example: Shareholders in all companies have limited liability.

2.      Articles of Association: A legal document that must be completed before a business is given company status. It provides details of the internal rules of the company.

Example: The issuing of shares and the rights and duties of directors.

3.      Memorandum of Association: A legal document that must be completed before a business is given company status. It provides important information for shareholders.

Example: The name, address, registered office and issued capital of the business. The objectives of the business are also stated.

4.      Annual General Meeting (AGM): Companies must hold these each year.

Example: All shareholders have the right to attend and vote on which directors should run the company.

5.      Co-operative: An organisation runs by a group of people, each of whom has a financial interest in its success and a say in how it is managed.

6.      Franchise: A business that uses the name, promotional logos and trading methods of an existing successful business.

Purpose and types of business acitvity

Unit-1.             THE PURPOSE OF BUSINESS ACTIVITY

Definitions with examples

1.      Specialisation:- Where resources are used to concentrate on producing one particular product.

Example:- Countries specialise, eg Qatar in oil production. Labour within a firm can specialise, too.

2.      Division of labour:- Each worker does one specialised job.

Example:- In a computer assembly factory each worker will perform a specialist task.

3.      Business objectives:- The target or aims that a business is working towards.

Example:- Increase profits, increase sales, survive. Objectives can differ between businesses. The objectives of any one business can change over time. Eg. Survival at start-up and profits once it is established.

4.      Value added:- The difference between the selling price of a product and the cost of the bought-in materials needed to make it.

Example:- If a firm sells a product for £15, but the materials that were bought- in from other firms only cost £6, then the value added is£9

5.      Stake holders:- Groups of people with a direct interest in the performance of a business.

Example:- Workers, customers, consumers, shareholders, government, banks etc.

6.      Primary production:-Industries that extract and exploit the natural resources of the earth.

Examples: Mining, agriculture, forestry and fishing

7.     Secondary production:- Industries that manufactures goods made from the raw materials provided by the primary sector.

Examples: Car production, computer assembly, food canning and steel making.

8.      Tertiary production:- Industries that provide services to consumers and other sectors of industry.

Examples: Travel agents, banking, insurance, health services and transport.

9.      De-industrialisation:- Relative decline in the importance of a country’s secondary sector.

10.      Public sector:- The sector of the economy in which organisations are owned and controlled by the state (government).

Examples: In most mixed economies, health services and railway services are in the public sector.

11.      Private sector:- The sector of the economy in which organisations are owned and controlled by individuals.

Examples: In most mixed economies, retailing and farming businesses are in the private sector.

12.      Free market economy:- All resources are privately owned. Prices are determined by supply and demand.

13.     Planned economy or command economy:-An economic system in which the state is responsible for resource allocation.

14.      Mixed economy:- An economic system which allows both the state and the market mechanism to allocate resource.

15.      Privatisation:- The sale of state owned assets such as public corporations to the private sector.

16.      Capital intensive business:- Use a high proportion of capital equipment to produce their output.

17.      Labour intensive business:- Use a high proportion of labour to produce their output.

18.      Internal growth:- Business growth achieved by expanding the existing business.

19.      External growth:- Business growth achieved by merging with or taking over other business.

Loss Leader

Good or service advertised and sold at below cost price. Its purpose is to bring in (lead) customers in the retail store (usually a supermarket) on the assumption that, once inside the store, the customers will be stimulated to buy full priced items as well. See also price leader.

Communication Process

Maslows' need hierarchy Theory

http://www.businessballs.com/maslow.htm



Privatisation and its advantages and disadvantages

Advantages:

1. Basic advantage in privatization is accurateness and commitment towards the service as they private organizations are very much concerned about the profits they make ultimately which depend on the quality of service being provided by them and the public response to it.

2. Privatization generates more revenue compared to government enterprises, thus govt can indirectly earn a bit more by leasing out enterprises to private organizations.

3. Customer support and satisfaction basically is of much interest in private enterprises comparatively.

Disadvantages:

1. The biggest threat is reliability. There is nothing that backs up the private organizations, where as govt can back up its enterprises easily in terms of funds. There are more chances of bankruptcy in private orgs where are 0 to few in govt orgs.

2. Though the quality of service may be little compromised, its reliable.

3. Some departments need social responsibility which can be done only by government like police department, traffic management.

Qualities of a Good salesman

1.Knowledge of self

2.Knowledge of the product

3.Knowledge of the company
4.Knowledge of the customers
5.Knowledge of the selling techniques
6.personal qualities

Functions of packaging

1.Protection
2.Identification
3.Convenience
4.Promotion
5.Innovation

Types of packages

1.Consumer package:-http://searchcrm.techtarget.com/definition/consumer-packaged-goods

2.Family package:-When products are related in use and are of similar quality the firm makes the packages identical for all products by using common features on all the packages.

3.Reuse package:- It is also known as dual package. A producer sells the contents in such a package which can be reused for other purposes after the product is consumed.

4.Multiple package:- It is a practice of placing several units in the container. Eg:- make-up set, babies care set,etc.

Management by exception

Control by Exception is an important principal of organisational control. According to this principle, only significant deviations (exceptions) from the standards of performance are reported to the management.If the actual work performed is according to the standard fixed, it need not be brought to the attention of the manager.But if there is much deviation from the standard, it should be brought to the attention of the manager