A market
Where buyers and sellers meet to agree price
Competition
Rivalry amongst sellers
Business plan
It is used mainly when first setting up to plan the start up of the business, it includes the product/ service, marketing, finance, members etc
Franchises and franchisees
Franchises-brand that allows people to set up branches of their business
Franchisees- people that set up the branch
Co-operative
A business that is owned and ran by its members who have equal say
Ansoffs matrix
It is a tool used to show how a business could grow- product development, diversification, market penetration an market development.
Market size
The value of all the goods sold in that market
Market growth
The size of the market expands
Monopoly
A market with only one seller- or one where a business has 25% or more market share
Oligopoly
A market that is dominated by a few large sellers
Monopolistic competition
A market with many sellers that sell very similar products and compete on non price differences
Generally accepted accountancy principle (GAAP)
Framework of rules and principles for accountancy.
AP- consistency
All accounts will be produced in the same way
AP- going concern
Assumes that the business is being run normally and will be for the foreseeable
AP- matching (accruals)
When transactions are made
AP-materiality
The big picture- only counting assets that are important to the business
AP- objectivity
Looking at the real value of assets- no estimates or bias
AP- prudence (conservatism)
Not overstating things- better to understate than overstate
AP- realisation
Looks at when legal ownership changes not when payment is made
Break-even
When revenue is equal to total costs- the output level at which this is reached
Contribution
After variable costs have been covered it is any revenue that goes towards covering fixed costs or profit
Margin of safety
The difference between actual output and break-even level of output
Stepped cost
A cost that doesn’t change between a high and low threshold of activity
Depreciation
Assets deteriorate in value over time
Return on capital employed (ROCE) ratio
Profit before tax/ long term capital employed (aka net assets+no- current liabilities) x100
Gross profit margin ratio
Gross profit/turnover x100
Net profit margin
Net profit/turnover x100
Return on equity
Net profit/ equity x100
Asset turnover
Turnover/net assets (non-current assets)
Stock turnover
Cost of sales/stock
Debtor collection period
Debtors/turnover x365
Creditor payment
Creditors/cost of sales x365
Current ratio
Current assets/current liabilities
Acid test ratio
Current assets-stock/current liabilities
Gearing ratio
Non-current liabilities/non-current liabilities+net assets x100
Interest cover
Profit before tax and interest (operating profit) / interest
Earnings per share
Profit after tax/ number of shares
Price earnings
Share price/ earning per share
Dividend per share
Dividend/ number of shares
Dividend yield
Dividend per share/ share price
Dividend cover
Profit after tax/ dividends
Workforce planning
The process used to plan the quantity and quality of workers that are required
Part time working
When workers only work for part of a week
Flexi-time
Workers have to work core hours but can work earlier or later than them- set amount of hours
Term-time working
Workers only work during school term time- holidays off
Time off in-lieu
During busy hours workers can be asked to work more but they will work less when it is not busy- set amount of hours
Job sharing
Workers share the amount they work, day to day or morning and afternoon
Remote working
Workers are able to work away from the office
Zero hour contracts
Workers have no set or guaranteed hours
Compressed hours
Workers have a set amount of hours but do them across less days eg 4 days
Annualised hours
Workers have a set amount of hours per year, they have set hours to work each week then extra that they are on call for- no overtime
Managerial appraisal
Appraisal done by the employees direct manager
Peer appraisal
Assessment done by colleagues
Self-assessment
Workers asses themselves before doing a managerial assessment
360 degree appraisal
Assessment done by everyone- peer, self, manager
Target setting
Setting SMART goals for employees to follow that are. Achievable and monitored
Lateness
Total number of late arrivals x100 / total number of scheduled attendances
Labour turnover
Number of employees leaving during a year/ average number employed during the year x100
Absenteeism
Total days absent in a month x100/ total available working days in a month
Workforce productivity
Output/ average number of employees
Holiday entitlement
Basic rate is 28 days a year if an employee works five days a week but it can be calculated by doing- the amount of days they work a week x5.6
Performance related pay
Y
Blake+ Mouton’s leadership grid
The level of focus on tasks and people- task focused-authoritarian, low both-impoverished, people focus-country club, high both-team leader, compromised both-middle of the road
McGregors theory x+y
Theory x- assumes staff are lazy, lack initiative, lack will/ability to work unsupervised and are motivated by money
Theory y- assumes staff enjoy their work, willing to accept responsibility, are self-disciplined and not just motivated by money
Carlyle+ Galtons trait theory
M- motivational I-integrity S-self-confidence C-creativity I-intelligence
Tannenbaum+ Schmidt’s contingency approach
Authority focus-focus on use of groups
Tell—-sell—-consult—-participate
Adair’s three circle theory
Venn diagram between use of team, individuals and tasks
Leadership styles
Autocratic-full managerial control
Paternalistic- leader decides what is best for the employees
Democratic-leadership is shared within the group
Laissez-faire-managers give employees little direction
Leadership
Workers want to follow them and are motivated by them
Forecasting
Using existing data to predict future trends
Limitations of forecasts
Only reliable as data used, careful about making assumptions from past data about the future, moving averages don’t look at recent/ more reliable data, doesn’t’t take into account changing objectives
Qualitative vs quantitative forecasting
Quan- numerical data
Qual-based on opinions
Qualitative methods of forecasting
Structured-Delphi technique, expert opinion
Unstructured- brainstorming and intuition
Quantitative methods of forecasting
Sales, costs, cash flow, profit
Seasonal variation
Variations that occur over the year- eg seasons,holidays, weather
Cyclical variation
Variations that occur as the business cycle changes
Calculate cyclical variation
Actual sales- (3yr) moving average
Information found by time series analysis
Trend, cyclical+ seasonal variations, random fluctuations
International trade
The trade of goods+ services across borders of countries
Exchange rates
One currency in terms of another
Factors considered when trading internationally
Language, logistics, culture and customs, currency and buying habits
Globalisation
Increased integration and interdependence of markets
Support for businesses that trade internationally
Export factoring- bank is middle man so ensures payment, export insurance, support+ training from the gov eg passport to export programme
Free trade
Trade without barriers- tariffs or quotas
Trading bloc
A group of countries often in one geographical area that protect themselves from imports from non-members
Benefits to businesses of trading blocs
Cheaper raw materials, access to a larger market, stability- selling in another market, economies of scale, access to foreign banks- more competitive interest rates
Disadvantages of trading blocs to businesses
Trade outside the bloc hindered, increased competition, easier to be taken over by foreign investors, increased regulation-cost
Advantages to a franchiser
Don’t have to spend loads to expand, franchisees have to get supplies from them- high prices, get revenue from franchisees
Disadvantages to the franchiser
Loss of control, cost of supporting them, there may be conflict
Advantages to a franchisee
Use of brand name, specialist training +advice available, easier to get loans, don’t have to do eg market research
Disadvantages to a franchisee
Royalty payments, supplies have to brought from the franchiser- high prices, is only for a fixed time, less control, cant sell it without permission
Delphi technique
Questionnaires are given to experts, they give their opinion on the what they think will happen, the results are then put into a report which is given back to the experts to get to an average result