GCSE & IGCSE Business key terms

186 terms with short definitions you can learn for the exam. Type to filter the list.

Command words 13

Analyse: Write an extended answer that expands and explores an issue, using the business context, with chains of reasoning. 6 marks on recent papers, marked in levels.
Calculate: Use maths to reach an answer from the data given. Usually 2 marks on recent papers. Show your working and give units (for example £ or %), rounded as the question asks.
Complete the table: Work out the missing values in a table of data, for example a cash-flow forecast.
Define: Give the meaning of a business term from the specification. Usually 1 mark: a short, exact definition.
Discuss GCSE: Write an extended answer that explores a business concept or issue. You do not have to apply it to a business context. The specification does not give a fixed tariff.
Evaluate: Write an extended answer that weighs up a business situation and reaches a supported conclusion. 12 marks on recent papers, marked in levels. The highest-tariff question on each paper.
Explain: Give a statement of fact, then two further expansion points that follow on from it. 3 marks: one point, two linked reasons or consequences.
Give: Recall a fact from the specification, for example one method or one example. Usually 1 mark.
Identify: Pick out the correct answer by reading a graph or a table of data. Usually 1 mark.
Justify: Write an extended answer that uses the information given to recommend one of two options to the business, with a supported reason. 9 marks on recent papers, marked in levels.
Multiple-choice IGCSE: Select the correct answer (or answers) from the options given. 1 mark each.
Outline: Give two linked points about a business concept or issue: a point plus one development. 2 marks. Use the business context when there is one.
State: Give a short answer, no longer than a sentence. On GCSE papers this is often taken from the context you are given. Usually 1 mark.

Key terms 138

Above the line promotion IGCSE: Paid advertising in mass media such as TV, radio, newspapers and websites.
Acid test ratio IGCSE: (Current assets minus inventory) ÷ current liabilities. A tougher test of liquidity than the current ratio.
Added value GCSE: The difference between the selling price of a product and the cost of the inputs used to make it. Added through branding, quality, design, convenience or a USP.
Aesthetics GCSE: How a product looks, feels, smells, tastes or sounds. One part of the design mix.
Aim: A general, long-term goal of a business, such as to survive or to grow.
Average rate of return (ARR) GCSE: The average yearly profit from an investment as a percentage of the cost of the investment.
Bar gate stock graph GCSE: A graph showing stock levels over time, with the maximum stock, reorder level, buffer stock, lead time and reorder quantity.
Batch production: Making a group of identical products together before switching to a different batch.
Below the line promotion IGCSE: Promotion that does not use mass media, such as sales promotions, direct mail and sponsorship.
Boston matrix IGCSE: A tool that classifies a business's products by market share and market growth: stars, cash cows, question marks and dogs.
Branding: Giving a product a name, logo and image that makes it recognisable and different from rivals.
Break-even point: The level of output where total revenue equals total costs, so the business makes neither a profit nor a loss.
Buffer stock: The minimum level of inventory a business keeps to cover unexpected demand or late deliveries.
Business plan GCSE: A document that sets out a business idea, its objectives, target market, marketing mix, finance and financial forecasts.
Capital employed IGCSE: The long-term finance used in a business: total equity plus non-current liabilities.
Capital-intensive IGCSE: Production that uses a high proportion of machinery and equipment compared with labour. The opposite is labour-intensive production, which uses mostly people.
Cash flow: The movement of money into (inflows) and out of (outflows) a business over a period of time.
Cash-flow forecast: A prediction of a business's cash inflows, cash outflows and bank balance over future months.
Centralised structure: An organisation where most decisions are made by a few senior managers at the top.
Competitive advantage: Something that makes customers choose a business over its rivals, such as lower prices or better quality.
Cost of sales: The direct costs of making or buying the goods that a business sells in a period.
Crowdfunding GCSE: Raising money from a large number of people, each giving a small amount, usually online.
Current assets IGCSE: Assets that are likely to be turned into cash within a year, such as inventory, trade receivables and cash.
Current liabilities IGCSE: Debts that must be paid within a year, such as trade payables and overdrafts.
Current ratio IGCSE: Current assets ÷ current liabilities. A measure of liquidity.
Customer service GCSE: The help and support a business gives customers before, during and after a sale.
Decentralised structure: An organisation where decision-making is delegated to managers lower down or in different branches.
Delegation: Passing authority to make decisions down to a lower level in the organisation.
Demographics: Characteristics of a population such as age, gender and income, used to segment a market.
Design mix GCSE: The balance of function, aesthetics and cost that a business considers when designing a product.
Differentiation: Making a product different from rivals' products so it stands out to customers.
Diseconomies of scale IGCSE: Rises in average (unit) cost when a business becomes too large, for example because of poor communication.
E-commerce: Buying and selling goods and services online.
E-tailer GCSE: A business that sells goods to consumers online.
Economies of scale: Falls in average (unit) cost as a business grows and increases output.
Entrepreneur: A person who organises resources, makes business decisions and takes risks to start and run a business.
Ethics: Moral principles: doing what is right, not just what is legal.
Exchange rate: The price of one currency in terms of another currency.
Exports: Goods and services produced in one country and sold to buyers in another country.
External recruitment: Filling a job with someone from outside the business.
Factors of production IGCSE: The resources used to produce goods and services: land, labour, capital and enterprise.
Fixed costs: Costs that do not change with the level of output in the short run, such as rent and salaries.
Flat structure: An organisation with few layers of management and wide spans of control.
Flexible hours GCSE: A working pattern where employees can vary when they start and finish work.
Flow production: Continuous production of identical products on a production line, giving low unit costs.
Franchise: An agreement where a franchisee pays a franchisor fees to trade using its brand, products and business model.
Freelance contract GCSE: An agreement where a self-employed worker is paid to complete particular work for a business.
Fringe benefits: Rewards given to employees on top of pay, such as a company car, discounts or health insurance.
Globalisation: The growing links between the world's economies through trade, investment and communication.
Gross profit: Revenue minus cost of sales.
Herzberg IGCSE: Motivation theorist who split factors at work into hygiene factors (which prevent dissatisfaction) and motivators (which motivate).
Hierarchical structure: An organisation with many layers of management, narrow spans of control and a long chain of command.
Imports: Goods and services bought from other countries.
Induction training: Training that introduces new employees to the business, its people, rules and procedures.
Inflation: A sustained rise in the general level of prices over time.
Interest rate: The cost of borrowing money, or the reward for saving, shown as a percentage.
Internal recruitment: Filling a job with someone who already works for the business.
Inventory: Stock: raw materials, work in progress and finished goods held by a business.
Job description: A document that sets out the title, duties and responsibilities of a job.
Job enrichment: Giving employees more challenging tasks and responsibility to motivate them.
Job production: Making a single, one-off product, often to a customer's own specification.
Job rotation: Moving employees between different tasks to add variety to their work.
Just in time (JIT): A stock control method where materials arrive only when they are needed, so little inventory is held.
Kaizen IGCSE: Continuous improvement through many small changes suggested by all employees.
Lead time: The time between ordering stock and it arriving.
Lean production IGCSE: Methods that cut waste of time, materials and space, such as JIT and kaizen.
Limited liability: The owners' risk is limited to the money they have invested; their personal possessions are safe.
Liquidity: The ability of a business to pay its short-term debts as they fall due.
Loan: A sum of money borrowed from a bank and repaid with interest over an agreed period.
Margin of safety: The amount by which actual (or budgeted) sales are above the break-even level of sales.
Mark-up IGCSE: Profit per item as a percentage of the cost per item.
Market: Where buyers and sellers come together to exchange goods and services.
Market map GCSE: A diagram that positions products or businesses against two features, such as price and quality, to show gaps in the market.
Market orientation IGCSE: An approach where a business researches what customers want before developing products.
Market research: Gathering and analysing information about customers, competitors and the market.
Market segmentation: Dividing a market into groups of customers with similar characteristics.
Market share: One business's sales as a percentage of total sales in the market.
Marketing mix: The 4 Ps: product, price, promotion and place.
Maslow's hierarchy of needs IGCSE: Motivation theory with five levels of need: physiological, safety, social, esteem and self-actualisation.
Merger: Two businesses agreeing to join together to form one business.
Motivation: The reasons why people work hard and want to do a job well.
Multinational: A business with operations (such as factories or offices) in more than one country.
Net profit GCSE: Gross profit minus other operating expenses and interest.
Niche market IGCSE: A small, specialised part of a larger market.
Non-current assets IGCSE: Assets owned for more than a year, such as buildings, vehicles and machinery.
Objective: A specific, measurable target that helps a business achieve its aims.
Off-the-job training: Training that takes place away from the employee's normal work, such as at a college or a course.
On-the-job training: Training carried out while doing the job, for example by watching an experienced worker.
Operating profit IGCSE: Gross profit minus other operating expenses.
Organic growth: Growth from within the business, such as opening new branches or launching new products.
Overdraft: A facility that lets a business take more money out of its bank account than it has in it, up to an agreed limit.
Partnership: A business owned by two or more people who share the decisions, profits and (usually) unlimited liability.
Penetration pricing: Setting a low price when a product is launched to attract customers and gain market share.
Person specification: A document setting out the qualifications, skills, experience and qualities needed for a job.
Pressure group GCSE: An organisation that tries to influence what businesses or governments do, for example on environmental or ethical issues.
Primary research: New information collected first-hand for a specific purpose, such as surveys or focus groups.
Primary sector IGCSE: Businesses that extract raw materials or natural resources, such as farming, fishing and mining.
Private limited company (Ltd): A company owned by shareholders, with limited liability, whose shares cannot be sold to the general public.
Product life cycle: The stages a product goes through: development, introduction, growth, maturity and decline.
Product orientation IGCSE: An approach where a business develops a product first and then tries to sell it.
Productivity: A measure of efficiency: output per worker (or per input) in a given time.
Profit: Total revenue minus total costs, when revenue is higher. If costs are higher, the result is a loss.
Promotion: Communicating with customers to inform them and persuade them to buy, for example by advertising or special offers.
Public corporation IGCSE: A business owned and run by the government, often to provide an essential service.
Public limited company (plc): A company with limited liability whose shares can be bought and sold by the public on a stock exchange.
Public relations (PR) IGCSE: Activities that build a positive image of the business, such as press releases and events.
Qualitative data: Information about opinions, feelings and attitudes that cannot easily be measured in numbers.
Quality assurance: Checking quality at every stage of production, with all workers responsible, to prevent faults.
Quality control: Inspecting products, often at the end of production, to find and remove faults.
Quantitative data: Information that can be measured and expressed in numbers.
Recruitment: The process of finding and appointing new employees.
Retailer GCSE: A business that sells goods to consumers through shops.
Retained profit: Profit kept in the business and reinvested rather than paid to the owners.
Return on capital employed (ROCE) IGCSE: Operating profit as a percentage of capital employed. Shows how well a business uses its long-term finance to make profit.
Revenue: The money a business receives from selling its goods or services: price × quantity sold.
Risk GCSE: The chance that something will go wrong, such as a business failing or losing money.
Secondary research: Information that has already been collected by someone else, such as government statistics or reports.
Secondary sector IGCSE: Businesses that turn raw materials into finished goods, such as manufacturing and construction.
Share capital: Money raised by selling shares in a company.
Skimming: Setting a high price when a product is launched, often when it is new or innovative, then lowering it later.
Sole trader: A business owned by one person, who usually has unlimited liability.
Span of control: The number of employees who report directly to one manager.
Sponsorship: Paying to be linked with an event, team or person to promote a brand.
Stakeholder: Any person or group with an interest in, or affected by, a business, such as employees, customers or the local community.
Statement of comprehensive income IGCSE: A financial statement showing revenue, costs and profit over a period of time.
Statement of financial position IGCSE: A financial statement showing the assets, liabilities and capital of a business on a particular date.
Takeover: When one business buys enough shares to gain control of another business.
Tariff: A tax placed on imported goods.
Taylor IGCSE: Motivation theorist who believed workers are mainly motivated by money and favoured piece-rate pay and simple, repeated tasks.
Temporary contract: An employment contract that lasts for a fixed period of time.
Tertiary sector IGCSE: Businesses that provide services, such as banking, retail and transport.
Total quality management (TQM) IGCSE: An approach where every employee is responsible for quality at every stage.
Trade bloc: A group of countries that agree to reduce or remove trade barriers between them.
Trade credit: When a supplier lets a business buy goods now and pay for them later, often in 30 to 90 days.
Unique selling point (USP) GCSE: A feature that makes a product different from all its competitors.
Unlimited liability: The owners are personally responsible for all the debts of the business and could lose their personal possessions.
Variable costs: Costs that change directly with the level of output, such as raw materials.
Venture capital GCSE: Finance provided to new or growing businesses by investors who take a share of the business in return.

Formulas 35

Acid test ratio (given) IGCSE: Acid test ratio = (current assets − inventory) ÷ current liabilities.
Average (mean) GCSE: Mean = total of the values ÷ number of values. Part of the quantitative skills in Appendix 2.
Average (unit) cost IGCSE: Average cost = total costs ÷ output. Falls with economies of scale and rises with diseconomies of scale.
Average rate of return (ARR) GCSE: ARR (%) = (average annual profit ÷ cost of investment) × 100. Average annual profit = (total returns over the life of the investment − cost of investment) ÷ number of years.
Break-even level of output IGCSE: Break-even (units) = fixed costs ÷ (selling price − variable cost per unit). Round up to a whole unit. Learn this.
Break-even point (revenue) GCSE: Break-even revenue = break-even units × selling price.
Break-even point (units) GCSE: Break-even = fixed costs ÷ (sales price − variable cost per unit). Round UP to a whole unit, because selling one less means a small loss.
Current ratio (given) IGCSE: Current ratio = current assets ÷ current liabilities. Written as a ratio, for example 1.5 : 1.
Exchange rate conversion IGCSE: Home currency to foreign currency: multiply by the exchange rate. Foreign currency to home currency: divide by the exchange rate. Example: £200 at £1 = US$1.25 is 200 × 1.25 = US$250. Learn this.
Gross profit GCSE: Gross profit = sales revenue − cost of sales.
Gross profit (given) IGCSE: Gross profit = revenue − cost of sales.
Gross profit margin GCSE: Gross profit margin (%) = (gross profit ÷ sales revenue) × 100.
Gross profit margin (given) IGCSE: Gross profit margin (%) = gross profit × 100 ÷ revenue.
Interest on a loan (%) GCSE: Interest (%) = ((total repayment − borrowed amount) ÷ borrowed amount) × 100.
Margin of safety GCSE: Margin of safety = actual or budgeted sales − break-even sales (in units, or in £ if both figures are in £).
Mark-up (given) IGCSE: Mark-up (%) = profit per item × 100 ÷ cost per item.
Market share GCSE: Market share (%) = (one business's sales ÷ total market sales) × 100. Used when interpreting market data.
Market share IGCSE: Market share (%) = (one business's sales ÷ total market sales) × 100.
Net cash flow GCSE: Net cash flow = cash inflows − cash outflows.
Net cash flow and balances IGCSE: Net cash flow = cash inflows − cash outflows. Closing balance = opening balance + net cash flow, and it becomes next month's opening balance. Learn this.
Net profit GCSE: Net profit = gross profit − other operating expenses and interest.
Net profit margin GCSE: Net profit margin (%) = (net profit ÷ sales revenue) × 100.
Opening and closing balances GCSE: Closing balance = opening balance + net cash flow. This month's closing balance is next month's opening balance.
Operating profit (given) IGCSE: Operating profit = gross profit − other operating expenses.
Operating profit margin (given) IGCSE: Operating profit margin (%) = operating profit × 100 ÷ revenue.
Percentage change GCSE: Percentage change = ((new figure − old figure) ÷ old figure) × 100. Part of the quantitative skills in Appendix 2.
Percentage change IGCSE: Percentage change = ((new figure − old figure) ÷ old figure) × 100.
Productivity IGCSE: Labour productivity = output ÷ number of workers (in a given time period). Learn this.
Profit or loss GCSE: Profit = total revenue − total costs. A negative answer is a loss (write it as a loss or with a minus sign).
Profit or loss IGCSE: Profit = revenue − total costs. A negative answer is a loss. Learn this.
Return on capital employed, ROCE (given) IGCSE: ROCE (%) = operating profit × 100 ÷ capital employed.
Revenue GCSE: Revenue = price × quantity sold. Example: 400 items at £5 = £2,000.
Revenue IGCSE: Revenue = price × quantity sold. Learn this.
Total costs GCSE: Total costs = total fixed costs + total variable costs. Total variable costs = variable cost per unit × quantity.
Total costs IGCSE: Total costs = fixed costs + variable costs. Total variable costs = variable cost per unit × output. Learn this.

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