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Buss3 A2 Key Terms
Business
Question | Answer |
---|---|
Corporate objectives | A quantifiable statement of a business’s goals which should include measurable targets. |
Functional objectives | A quantifiable statement of a department’s goals which should enable it to contribute to the achievement of the business objective. |
Functional strategy | The plan by which the department intends to achieve its functional objectives on a day-to-day basis. |
SMART targets | Specific Measurable Agreed Realistic Time-based |
Cash-flow targets | A financial objective focused on maintaining a healthy cash balance. |
Cost minimisation | The process by which businesses attempt to maximise profits by keeping costs low. |
ROCE targets | The minimum percentage return a business strives to achieve from the capital employed in business activities. |
Shareholders’ returns | The financial rewards to a shareholder in return for their investment; this can include dividends paid and increased share value. |
Satisficing | Aiming to achieve a satisfactory level of profit. |
Executive director | A member of the board of directors who also holds a position of responsibility in the business on a day-to-day basis, for example marketing director, finance director. |
Non-executive director | A member of the board of directors who does not work for the business on a day-to-day basis but sits on the board in an advisory or consultative role. |
Income statement | A financial document that summarises a business’s trading activity and expenses to show whether it has made profit or a loss. |
Gross profit | Profit after cost of sales has been deducted. |
Operating profit | Profit after all other expenses have been deducted, also referred to as net profit. |
Gross profit margin | Gross profit expressed as a percentage of sales revenue. |
Operating profit margin | Operating profit expressed as a percentage of sales revenue. |
Profit quality | The sustainability of profit. |
Profit utilisation | How profit is being used, i.e. whether it is being ploughed back into the business or distributed to shareholders. |
Balance sheet | A financial document that summarises the net worth of a business – it balances total assets with total equity and liabilities. |
Inventories | The IFRS term for stocks. |
Total equity | The total amount of money being utilised in the business from share capital and retained profit. |
Non-current assets (fixed assets) | Items of value owned by the business that are likely to be kept for more than one year. |
Current assets | Resources owned by the business whose value varies as a result of daily business activities, e.g. cash, inventories. |
Intangible assets | Purchased items without physical form such as goodwill or brand names. |
Current liabilities | Financial obligations of the business payable within 12 months. |
Non-current liabilities (long-term liabilities) | Debts that the business has more than one year to repay. |
Net current liabilities | Current liabilities plus current assets [do not forget that current liabilities are a negative figure and shown in () on the balance sheet] |
Net assets | Total assets minus total liabilities [also obtained by non-current assets plus net current liabilities minus non-current liabilities]. |
Working capital | A measure of a firm’s ability to meet day-to-day expenses. |
Depreciations | An accounting practice which allows the value of a fixed asset to be spread over its useful life. |