Key terms for AQA BUSS3

KEY TERMS FOR BUSS3

Functional Objectives & Strategies

Aims / goals

General statements of what   a business intends to achieve.  Precise   details of those intentions are set out in objectives

Business unit strategy

How a business attempts to   compete successfully in a particular market

Corporate objectives

Objectives that relate to   the business as a whole.  Usually set   by top management.

Corporate strategy

Concerned with the overall   purpose and scope of the business activities

Cost leadership

A business strategy   concerned with aiming to be the lowest-cost producer in an industry.  Usually requires exploitation of economies   of scale

Functional objectives

Set for each major business   function – designed to ensure that the corporate objectives are met

Mission statement

A statement of the overall   purpose of the business

Shareholder value

Where shareholders earn a   return from their investment which is greater than their required rate of   return

SMART objectives

Objectives that are more   likely to be achieved because they are Specific, Measurable, Achievable,  Realistic and Timed

Social responsibility

The way in which a business   meets its responsibilities to society as a key external stakeholder

SWOT analysis

Assessment of the internal   strengths and weaknesses of a business and the external opportunities and   threats that the business needs to consider

Targets

Similar to objectives.  Targets are often set at an individual or   team level

Financial Strategies and Accounts

Acid-test ratio

A liquidity ratio that   looks at whether a business can pay for current liabilities out of cash and   near-cash assets (it ignores the value of stocks)

Asset turnover

A ratio that calculates the   relationship between revenues and the total assets employed in a business

Assets

Amounts owned by, or owed   to a business

Average rate of return

A measure of the total   accounting return from an investment project

Balance sheet

The financial statement   that provides a snapshot of the assets and liabilities of a business at a   particular date

Capital expenditure

Expenditure on assets which   are intended to be kept in the business (e.g. IT systems, machinery) rather   than sold or turned into products

Cash flow targets

Specific objectives set by   a business for cash-flow generated by a business

Corporation tax

The tax levied on the   profits of companies.  The percentage   varies depending on the size of the profits earned; typically 20-30%

Cost minimisation

A strategy of achieving the   most cost-effective way of delivering goods and services to the required   level of quality

Creditor days

A ratio that estimates the   average period (in days) taken to settle amounts owed by a business to   suppliers

Current ratio

A simple and popular   measure of liquidity that assess the ability of current assets (e.g. cash,  stocks) to finance current liabilities (e.g. trade creditors)

Debentures

A long-term source of   finance – a debenture is a form of bond or…