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Buss3 A2 Key Terms

Business

QuestionAnswer
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.
Created by: c appleton