Business keyword - Terminology everyone should know

These are some business keywords (terminoloy) that everyone should know to speak on business language.

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Added Value is the difference between a product`s price and the total cost of the inputs that went into making it. It is the extra worth created in the productions process.

Capital refers to all non-natural resources used in the production process. An example is money, but the term also includes resources such as machinery, tools, equipment and factories.

Division of labour refers to the specialization of workers in the provision of goods and/or services by breaking a job down into particular roles or tasks that are repeated by the same workers.

Enterpreneurs are people who manage, organize and plan the other three factors of production. They are risk takers who exploit business opportunities in return for profits.

Factors of production are the inputs ( or resources ) necessary for the production process : land, labour, capital and enterprise.

Functional areas is the term used to refer to the different sections of a business. These are usually named as the marketing, production, finance and human resources departments.

Labour refers to physical and mental human effort used in the production process.

Land means natural resources that can be found on the planet. This includes renewable and non-renewable natural resources such as water, fish, wood and physical land itself.

Opportunity cost refers to cost measured in terms of the best alternative that is foregone when a choice is made

Primary sector refers to businesses involved in the cultivation or extraction of natural resources, such as farming, mining, quarrying, fishing, oil exploration and forestry.

Secondary sector is the section for the economy where business activity is concerned with the construction and manufacturing of products.

Tertiary sector refers to the section of the economy where business activity is concerned with the provision of services to customers.

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Articles of Association is the document that sets out the internal organization and rules of a limited company. Details might include the powers of each director and voting rule.

Certificate of incorporation is the name of the document issued to a limited company to show it has been legally formed.

Charities are not-for-profit organizations established to support good causes, from society`s point of view.

Company refers to a business that is owned by shareholders.

Deed of partnership is the legal contract signed by the owners of a partnership which specify responsibilities and their share.

Incorporation means that there is a legal difference between the owners of a company and the business itself. This ensures that owners of a company are protected by limited liability.

Limited liability is a restriction on the amount of money that owners can lose if the business goes into bankruptcy, i.e. they cannot lose more than they invested in the business.

Memorandum of Association is the legal document that specifies the basic information of a company, such as name and adress

NGO are private sector organizations that operate for the benefit of others rather than aiming to make a profit.

Partnerships are a form of private sector business owned by 2-20 people (partners). They share the responsibilities and burdens of running ad owning the business.

Private Limited Company is a business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public.

Private sector is the part of the economy under the control of private individuals and businesses, rather than the government

Public Limited Company is an incorporated business organization that allows the general public to buy and sell shares of company

Public corporations (or state-owned enterprises) are organizations wholly owned by the government but run as commercial establishments, e.g. the BBC ( British Broadcasting Corporation ).

Public sector is the part of the economy control by the government (education service, emergency)

Stock Exchange is the market place for trading stocks and shares of public limited companies. London Stock etc.

Silent partner (or sleeping partner) refers to an investor of a partnership who is not directly involved in the daily running of the business.

Sole trader refers to a self-employed person. He she runs the business on their own and has sole responsibility for its success (profits) or failure (unlimited liability)

Unlimited liability is a feature of sole traders an ordinary partners who are legally liable for all monies owed to their creditors, even if this mean that they have to sell their personal possessions to pay for this.

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Aims are the long term goals of a business, often expressed in the firm`s mission statement. They are a general statement of a firm`s purpose or intentions and tend to be qualitative in nature.

CSR (corporate social responsibility) is the consideration of ethical and environmental issues relating to business activity. A business that adopts CSR acts morally towards its stakeholders.

Ethics are the moral  values that determine and affect business behavior and decision making, such as taking actions that are in the best interest of the natural environment

Mission Statement refers to the declaration of an organization`s overall purpose. It forms the foundation for setting the objectives of a business.

Objectives are the relatively short-term targets of an organization. They tend to be expressed as SMART objectives.

SMART objectives are objectives that are specially measurable, achievable, realistic and timed.

Social Audit refers to an independent assessment how a firm`s actions affect society such as revi of the firm`s environmental impact, it`s contributions to society and staff welfare.

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Conflict refers to situations where people have disagreements on certain matters due to differences in their opinions. It can lead to arguments and tension between various stakeholder groups.

Directors are the senior members of staff who have been elected by shareholders of a company to run the business on their behalf

External Stakeholders of a business are not part of been elected by shareholders of a company to run the business on their behalf.

Industry trade groups (or trade associations) are organizations that specialize in promoting the aims of a particular industry through education and public relations campaigns.

Internal stakeholders of a business are members of the organizations, i.e. the employees, shareholders, managers and directors of the business.

Managers are the people responsible for the daily running of a business or a department within the business. They are accountable to the directors and responsible for their staff teams.

Pressure groups consist of individuals with a common concern who seek to place demands on organizations to act in a particular way or to influence a change in their behavior.

Shareholder concept refers to the notion that shareholders are the key stakeholder group as any business ultimately belongs to its shareholders

Special Interest Group (SIG) refers to the organizations of people who have a common interest (such as environmental protection) and collectively act to achieve that interest.

Stakeholders are individuals or organizations that have a direct interest (known as a stake) in the activities and performance of a business, e.g. shareholders, employees, customers and suppliers.

Stockholders (or shareholders) are the owners of company. Shares in a company can be held by individuals and other organizations.

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Balance of payments is an annual record of a country`s earnings and it`s import expenditure. A surplus exists if the value of exports exceeds that of imports ( vice versa for a deficit)

Deregulation refers to the removal of government rules and regulations which constrain an industry. It should therefore enhance efficiency and encourage more competition within the industry.

Direct tax is levy on the income of individuals or businesses, such as personal income tax and corporation tax.

Economic growth measures changes in the Gross Domestic Product of a country over time. Growth is said to occur if there is an increase in GDP for two consecutive quarters.

Ethics are the moral values and judgments ( of what is right) that society believes organizations should consider in their decision making.

Exchange rate refers to the value of a country`s currency in terms of another currency

External shocks (or exogenous shocks) are unforeseeable and unexpected changes in the external business environment that tend to affect all businesses in the economy

Fiscal policy refers to government policies that deal with taxation and government expenditure in order to affect the level of economic activity

GDP is the total value of a nation`s annual output. It`s used as an indicator of the level of economic activity in a country

Indirect tax is a levy on the purchase of goods and services, e.g. sales taxes and excise duties.

Inflation occurs when the general price level in an economy continuously rises. It is measured by changes in the cost of a representative basket of products purchased by the average household.

Interest rate is a measure of the price of money in terms of the amount charged for borrowed funds or how much is offered on money that is saved.

Monetary policy refers to government policies concerned with changing interest rates to control the money supply and exchange rate

PEST analysis is a decision-making framework used to analyze the opportunities and threats of the political, economic, social and technological environments on business activity.

Protectionism refers to any measure taken by a government to safeguard its businesses from foreign competitors. This presents a threat for businesses trying to operate in overseas markets.

Tariffs are a method of protectionism whereby the domestic government taxes foreign imports.

Trade Cycle ( or business cycle) refers to the fluctuation in the level of economic activity over time. Economies tend to move through the cycle booms, recessions, slumps, recovery and growth.

Unemployment refers to the number of people in the workforce who are willing and able to work but cannot find employment.

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Ansoff`s matrix is an analytical tool to devise product and market growth strategies, depending on whether firms want to market new or existing products in either new or existing markets.

Backward vertical integration takes place when a business amalgamates with a firm operating in an earlier stage of production, e.g. a car manufacturer taking over a supplier of tires or other components.

Barriers to entry are the obstacles that make it difficult for a new firm to enter a market. Examples include high set-up costs and the market power of established firms in the industry.

Conglomerates are business that provide a diversified range of products and operate in an array of different industries

Diseconomies of scale are the cost disadvantages of growth. Unit costs are likely to eventually rise as a firm grows, e.g. lack of control, coordination and communication.

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