Acid test ratio - Also known as the quick ratio, this short-term liquidity ratio measures an organization’s

ability to pay its short-term debts without having to sell any stock (inventories).

Accountability - The extent to which a person is held responsible for the success or failure of a task, job, or
project. It allows senior managers to have better control over the running of their organizations.

Accounting rate of return (ARR) - Also referred to as the average rate of return, this method of investment
appraisal calculates the average annual profit of an investment project expressed as a percentage of the
amount of invested.

Accumulated depreciation - This refers to the accrued value of non-current assets, most of which fall in
value over time due to depreciation.

Acquired needs theory (HL only) - D. McClelland’s theory of motivation, based on three types of needs
that must be satisfied in order to improve motivation: the need for achievement, power, and affiliation.

Adding value - The process of producing a particular good or service that is worth more than the cost of the
resources used to produce it.

Adaptive cultures - A type of organizational culture that exists in organizations that are responsive and
receptive to change. Organizations with adaptive cultures tend to be highly creative and embrace, rather
than resist, change.

Adverse variance - This discrepancy in the budget occurs when profit is lower than expected, due to costs
being higher than expected and/or revenues being lower than predicted.

Ageing population - A higher mean (average) age of the population.

Appraisal - Also known as a performance review, this is the formal procedure of assessing the performance
and effectiveness of an employee, in relation to his/her job description.

Arbitration - Method of stakeholder conflict resolution with all stakeholder groups in conflict agreeing to
accept the decision or judgement of the independent arbitrator.

Assets - The possessions owned by a business, which have a monetary value, e.g., buildings, land,
machinery, equipment, inventories, and cash.

Average revenue - This is the amount a business receives from its customers per unit of a good or service
sold. Mathematically, AR = TR ÷ Q = P where: AR = Average revenue TR = Total revenue Q = Quantity of
output, and P = Price

Autocratic management (leadership) - Management style that involves centralised and autonomous
decision-making, without input from others in the organization.

Average costs - This is the cost per unit of output. It is calculated by the formula: AC = TC ÷ Q where: AC =
Average cost TC = Total cost, and Q = Quantity of output

Bargain products - Goods or services that are those perceived by customers to be of high quality but sold
at a low price.

Backwards vertical integration - A method of external growth that involves a company buying another
company that is further away from the consumer in the chain of production.
Bad debt - This occurs when a debtor is unable to pay outstanding invoices to the business. The result is it
reduces the cash inflows for the vendor (seller).

Balance sheet - Also known as the statement of financial position, this set of final accounts shows the value
of a firm’s assets, liabilities, and the owners’ investment (or equity) in the business, at a particular point in
time.

Bankruptcy - Sometimes referred to receivership or corporate liquidation, this means a situation when a
person or business declares that they can no longer pay back their debts, so the entity collapses (fails).

Barriers to communication - Refers to the various factors that can prevent information being transferred
effectively or accurately.

Budget - A detailed financial plan for the future, usually involving the expected costs and revenues or a
cash flow forecast, for a pre-determined period of time.

Budgetary control - The financial methods used to attempt to balance actual outcomes with budgeted
outcomes. This is achieved by systematic observations and corrective measures to minimize variances.

Business - A decision-making organization established to produce goods and/or provide services.

Business angels - Wealthy and successful private individuals who risk their own money in a business
venture that has high growth potential.

Bureaucracy - The administrative systems within an organization, such as the formal policies and
procedures of the business. It includes the formal rules, regulations, and procedures of the organization.

Capital expenditure - Refers to business spending on fixed assets or capital equipment of a business.

Capital employed - The value of all sources of finance for a business, including internal and external
finance.

Cash - This refers to the money an organization has either “in hand” (at its premises) and/or “at bank” (i.e.,
in its bank account). It is the most liquid type of current assets.

Cash flow - The movement of an organization’s cash inflows (cash received from the sale of goods and
services) and cash outflows (used to pay for the costs of running the business).

Cash flow forecasting - A quantitative technique used to predict how cash is likely to flow into and out of
the business for a particular period of time.

Cash flow problems - These are liquidity issues that arise when an organization has insufficient funds to
run its business, i.e., when net cash flow is negative.

Cash inflow - Refers to the money coming into a business from earnings (sales revenue) and other sources
of finance, such as crowdfunding.

Cash outflow - Refers to the money going out of a business to pay for its costs, such as the purchase of
raw materials or the payment of wages and salaries.

Capital expenditure - A business organization’s spending on the purchase or acquisition of fixed assets,
e.g. spending on buildings (premises), machinery, equipment and tools.

Centralization - The situation where decision-making is predominantly made by a very small group of
senior managers at the top of the organizational hierarchy.
Chain of command - The formal lines of authority in an organization. It can be seen via an organizational
chart, which shows the formal path through which commands and decisions are communicated from senior
managers to subordinates.

Change management - Refers to processes and techniques used to plan, implement, and evaluate
changes in business operations.

Closure - This occurs when employers temporarily shut the business in response to extreme industrial
action of its employee (such as strike action).

Closing balance - Found in a cash flow forecast, this refers to the value of cash held by a business at the
end of a trading period (usually on the last trading day of the month).

Cost centre - A section or division of a business that has responsibility for its own operational costs. It is
held accountable for its departmental expenditure.

Collateral - Refers to the financial guarantee, using a firm’s fixed assets, for the purpose of securing loan
capital.

Collective bargaining - The process of negotiation of working conditions and pay between employer and
employees, or their representatives (such as a trade union and a senior management team).

Communication - The transfer of information from one entity to another. It is vital to how a business
operates.

Conciliation - This is the process of using a mediator to help facilitate negotiations during the conflict
resolution process.

Consumer profiles - The demographic and psychographic characteristics of consumers in different market
segments.

Copyrights - These intangible assets give the registered owner the legal rights to creative pieces of work,
such as the works of authors, musicians, conductors, playwrights (scriptwriters) and directors.

Conflict - This is a situation of friction or mutually exclusive goals between two or more parties, because the
needs and interests of workers are ignored or because the organization cannot meet the needs of all its
stakeholders at the same time.

Conflict resolution - The approaches or methods taken by employers and employees to oversee and
handle conflict in the workplace.

Consumers - The individuals or organizations that actually use a product.

Companies (corporations) - This refers to any business organisation that is owned by its shareholders,
who have limited liability. They comprise of privately held companies and publicly held companies.

Correlation - The relationship between two sets of numbers or variables, such as sales revenue at different
times of the year.

Corporate social responsibility (CSR) - This is an organization’s decisions and actions that impact society
in a positive way.

Competitors - These are the firm’s rivals, which operate in the same industry and contest for the same
customers.

Conciliation - Method of stakeholder conflict resolution which aims to align the incompatible interests of
different stakeholder groups by helping different parties to better understand each other’s interests.
Conglomerate - This form of external growth occurs when two or more businesses in unrelated industries
integrate through a merger, acquisition, or takeover.

Commission - Type of financial payment system that rewards workers a certain percentage of the sales of
each good or service that they are responsible for completing.

Cooperatives - These are for-profit social enterprises owned and run by their members (usually employees,
managers or customers). Their primary goal is to create value for their member-owners.

Corporate culture (organizational culture) - Refers to an organization’s set of core values and beliefs,
which shape the firm’s attitudes, behaviour, and norms.

Costs - The charges that an organization incurs from its operations, e.g., rent, wages, salaries, and
insurance.

Costs of sales (COS) - These are the direct costs of production, such as the cost of raw materials,
component parts, and direct labour.

Cowboy products - Goods or services that are perceived by customers to be of low quality but high price.

Creditor days ratio - The efficiency ratio that measures the average number of days an organization takes
to repay its creditors (suppliers who the business has bought products from using trade credit, so have yet
to pay for these).

Crowdfunding - Rising finance for a business venture or project by getting small amounts of money from a
large number of people, usually through online platforms.

Creditors - Also known as trade creditors, this refers to the suppliers that allow a business to purchase
goods and/or services on trade credit.

Credit control - The process of monitoring and management of debtors, such as ensuring only suitable
customers are given trade credit and that customers do not exceed the credit period.

Culture - Concept referring to the norms, attitudes, values, goals, and practices that characterises an
organization, a country, or a region of the world.

Culture clash - A situation that exists when two or more cultures exist within the same organization, with
wide-ranging differences in the values held by different individuals, thereby causing internal conflict.

Culture gap - The difference between an organization’s desired culture and its actual culture.

Cultural intelligence (cultural quotient) - This is a measure of a person’s ability to adapt and integrate to
different occupational, organizational, and national cultures. It signifies a person’s ability to manage change.

Cumulative net cash flow - The sum of an investment project’s net cash flows for a particular year plus the
net cash flows of all previous years.

Current assets - Short-term assets belonging to an organization which will last in the business for up to 12
months, e.g., cash, debtors, and stock (inventory).

Current ratio - A short-term liquidity ratio used to calculate the ability of an organization to meet its short-
term debts (within the next twelve months of the balance sheet date).

Current liabilities - These are the short-term debts of a business, which need to be repaid within twelve
months of the balance sheet date. Examples include bank overdrafts, trade creditors, and other short-term
loans.
Customers - The individuals or organizations that purchase a product.

Cyclical variations - The recurring fluctuations in sales revenues due to the trade cycle (or business cycle).

Deed of Partnership - A legally binding contract that all joint owners of a partnership sign, stating the
purpose of the business, the formal rights of the partners, and how any profits should be split.

Debtors - A type of current asset, referring to individual or business customers that owe money to the
organization as they have bought goods or services on trade credit, i.e., they need to pay within 30 and 60
days.

Differentiation - The process of distinguishing an organization’s products from those of other firms in the
same industry.

Directors - The group of senior managers who run a company on behalf of the owners of the company.

Demerger - This occurs when a company sells off a part of its business, thereby separating into two or
more separate entities. This often happens due to conflicts and inefficiencies of two or more firms previously
in a merger agreement, such as culture clashes.

Demographic segmentation - The process of splitting consumers according to statistical characteristics of

the population, such as age, gender, family size, religion, and ethnicity.

Diseconomies of scale - Growth that is excessive results in inefficiencies and higher average costs of
production, perhaps due to problems such as miscommunication, misunderstandings, and poor
management of resources.

Discount rate - Also known as a discount factor, this is the figure used to reduce the future value of money.
It is used to establish the present value of cash that is yet to be received by the business.

Discounted cash flow - This method of investment appraisal uses a discount rate (the inverse of
compound interest) to reduce the value of money received in future years because money loses its value
over time.

Demography - The statistical study of population trends, such as birth rates, death rates, age distribution,
and net migration rates.

Dismissal - The employer’s decision to terminate a worker’s employment contract, usually due to the
worker’s incompetence and/or a breach of their employment contract.

Direct costs - Costs that are clearly associated with the output or sale of a certain good, service or
business operation, e.g., raw materials.

Dividends - The payments from a company’s profit (after interest and tax) paid to the shareholders
(owners) of the company. The amount of dividends paid to an individual shareholder depends on the
number of shares held by the individual.

Debtor days ratio - The efficiency ratio that measures the average number of days an organization takes to
collect debts from its customers (as they have bought goods and services on trade credit but have yet to
pay for these).

Decentralization - The situation in an organization where decision-making authority is delegated

throughout, rather from a central authoritative group.

Depreciation - The fall in the value of a fixed asset over time, mainly due to wear and tear (usage) and
obsolescence.
Delayering - This occurs when an organization removes one or more layers in its hierarchical structure, i.e.,
the number of layers of management is reduced, or made flatter.

Delegation - The act of line managers entrusting and empowering employees with authority to successfully
complete a particular task, project, or job role.

Democratic management (leadership) - Management style that actively involves the participation of
employees in the decision-making process.

Differentiated piece rate - Financial payment system advocated by F.W. Taylor to reward workers based
on the level of their output or productivity.

Division of labour - The process of splitting up different parts of a job or task and assigning different
employees or teams to each particular part of the work. This helps to improve operational efficiency and
output.

Economy brands - Goods or services that are perceived by customers to be of low quality and sold at a
low price.

Economies of scale - These are cost-saving benefits enjoyed by a business as it increases the size of its
operations, i.e. lower average costs (the cost per unit).

Efficiency ratio - Financial planning and decision-making tool to measure how well the resources of a
business are used in order to generate income from the firm’s capital.

Entrepreneurs - The individuals who take risks in overseeing a business organization or business venture,
usually in pursuit of profit.

Entrepreneurship - The knowledge, skills and experiences of individuals who have the capability to
manage the overall production process.

Employees - These are the workers within an organization. Their interests include: job security, a
competitive remuneration package, a safe working environment, and opportunities for career development.

Employee participation - This means that workers are given responsibilities and autonomy to do their jobs.

Employee representatives - The individuals or groups of individuals who are elected to act on behalf of
their worker members. For example, trade unions represent their members in the negotiation process with
employer representatives.

Employee share ownership scheme - Type of financial payment system that involves giving workers
shares in the company they work for, either free of charge or at a discounted price.

Empowerment - The delegation of decision-making power to workers, granting them the autonomy and
authority to be in charge of their own jobs and to execute their own ideas.

Equity theory - J.S. Adams’ theory of motivation suggests that people make social comparisons of fairness
in the workplace (based on the ratio of their input (effort) to output (rewards).

Esteem needs - In Maslow’s hierarchy of needs, this refers to the desire of people to feel respected, having
value and having self-respect.

Ethical code of practice - The formal documented philosophies and values of a business, so that
stakeholders know what is considered acceptable or not acceptable within the organization.

Ethical objectives - Organizational goals based on moral guidelines that determine decision-making.
Ethics - These are moral guidelines or codes of practice which govern good organizational behaviour.

Equity - Refers to the value of the owners' stake in the business, i.e., what the business is worth at the time
of reporting the balance sheet.

External sources of finance - Finance that comes from outside the organization, usually with the help of a
third-party provider, such as a bank, business angel, venture capitalist or government.

External communication - Refers to communications conducted between stakeholders of one organization

and another organization.

External recruitment - The approach or process of hiring people from outside the organization to fill job
vacancies.

Expectancy theory - V. Vroom’s theory of motivation suggests people only put in the amount of effort to do
a job or task if they expect their performance to be recognized and rewarded.

Expenses - These are a firm’s indirect costs of production, e.g., rent, management salaries, marketing
campaigns, accountancy fees, bank interest charges, travel expenses, utilities, repairs and maintenance,
and general insurance.

External stakeholders - Stakeholder groups that are not directly involved in the running of an organization
but have a direct interest in its operations.

External economies of scale - Category of economies of scale that occurs when a firm’s average cost of
production falls as the industry grows, i.e., all firms in the industry benefit.

External diseconomies of scale - This occurs when an individual firm has higher cost per unit of output
due to factors beyond its control as the industry as a whole grows.

External factors - The issues or factors that are beyond the control of the organization, e.g., national
minimum wage legislation.

External growth - Also known as inorganic growth, this takes place when an organization requires the
support of a partner organizations for its growth.

Extrapolation - A forecasting technique that identifies the trend from using past data and then extending
this trend line to predict future sales.

Factors of production - The collective term for the resources used in the production process, i.e. land,
labour, capital and entrepreneurship.

Favourable variance - This discrepancy in the budget occurs when profits are higher than expected, due to
lower than expected costs and/or higher than predicted revenues.

Finance - Refers to the various available money that an organization has to fund its business activities.

Finance and accounts - Function of an organization responsible for ensuring that the business has
sufficient funds in order to conduct its daily operations.

Financiers - Financial institutions (such as banks) and individual investors who provide source of finance
for businesses. They are interested in the organization’s ability to generate profits and to repay debts.

Financial economies of scale - Banks and other lenders charge lower interest to larger businesses for
overdrafts, loans and mortgages as they represent lower risk.
Final accounts - These are the published accounts of an organization, made available to and used by
different stakeholders, e.g., managers, employees, shareholders, sponsors, financiers, and investors.

Fixed assets - The long-term assets (possessions) of an organization that have a monetary value and are
used repeatedly but are not intended for resale within the next twelve months, e.g. property and equipment.

Fixed costs - Costs that do not change with the level of output, e.g., loan repayments and management
salaries.

Flat organization - Also known as a horizontal structure, this type of organizational structure has only a few
layers of management.

Flat structure - Type of organizational structure that has few levels in the organizational hierarchy.

Flexitime - A form of flexible work practice that enables employees to work a set number of core hours each
week, often at the office during peak periods of the day and/or week.

Forward vertical integration - This external growth method occurs when one company buys another
business that is closer to the consumer in the chain of production.

Foreign direct investment (FDI) - This refers to cross-border investment in which a foreign company
establishes an ongoing and significant stake (financial interest and degree of influence) in its operations in
another economy.

Formative appraisals - Type of appraisal that takes place on a continual basis in order to allow workers to
improve their performance and effectiveness.

Franchise - This growth strategy involves the right to trade using another company’s products, brand name
and corporate logo.

Franchising - A growth method that involves two parties, with the franchisor giving the licensing rights to a
franchisee to sell goods and services using the franchisor’s brands and products.

Fringe benefits - Also known as perks, these are financial benefits of a job in excess of the basic pay
(wage or salary).

Functions of management - The various roles and responsibilities of managers, i.e., coordinating,
commanding, and controlling business operations.

Geographical mobility - The ability and willingness of employees to relocate to another location or country
for work reasons.

Geographic segmentation - The marketing process that involves characterising consumers according to
their different geographical locations.

Gearing ratio - The efficiency ratio that measures the extent to which an organization is financed by
external sources of finance (i.e. loan capital as a percentage of the firm’s total capital employed).

Gig economy - Labour markets in which people are on short-term, impromptu, temporary contracts. This
includes freelance worker and independent contractors.

Globalization - Refers to the process of greater integration and interdependence of businesses and
economies throughout the world.

Goods - These are physical (tangible) products, such as cars, clothes, flowers, food, furniture,
smartphones, and toys.
Goodwill - The reputation and established networks (know-how) of an organization, which adds to a firm’s
monetary value.

Gross domestic product (GDP) - GDP is a measure of the monetary value of a country’s annual output or
its national income. MNCs contribute to the host country's GDP.

Gross profit - This refers to the profit from a firm’s everyday trading activities. It is calculated by the
formula: Sales revenue – Cost of sales.

Gross profit margin (GPM) - A profitability ratio that measures an organization’s gross profit expressed as
a percentage of its sales revenue. It is also an indicator of how well a business can manage its direct costs
of production.

Government - The ruling authority within a state or nation. The government, as an external stakeholder, is
interested in businesses complying with the laws of the country, such as employment legislation.

Gods of management - Charles Handy’s theory of the different types of organizational culture. His theory
identified four ‘gods’ or types of culture: power, task, role, and person cultures.

Gratuity pay - Financial reward for long-term service or for the completion of a fixed-term contract.

Hierarchical (hierarchy) - A type of organizational structure that is tall/vertical, with many levels in terms of
ranks.

Hierarchy of needs - A. Maslow’s theory of motivation that people are motivated by different levels of
needs: physiological, safety, social (love and beginning), esteem and self-actualization.

Horizontal integration - This external growth strategy occurs when a merger, acquisition, or takeover takes
place between two or more companies operating within the same industry (thereby reducing competition).

Host country - This is any nation that allows a multinational company to set up in its country.

Homeworking - Also referred to as work from home (WFH), this is an aspect of flexitime that involves
people using their homes to conduct their jobs.

Human resources (HR) - The business function that handles all aspects relate to the workforce, involving
all aspects of a firm's operations related to staff (personnel) within an organization.

Human resource management - HRM is a broad term used to describe the overall management of an
organization's workforce, e.g. attracting, selecting, training, assessing, rewarding and retaining workers.

Human resource planning - Also known as workforce planning, this is the management process of
anticipating the organization’s current and future human resource needs.

Hygiene factors - Also known as maintenance factors, these are the factors that F. Herzberg argued cause
dissatisfaction in the workplace (rather than motivation), so must be addressed.

liquid assets - These items of value, owned by the business, cannot be sold quickly, are difficult to sell,
and/or cannot be sold easily without incurring a significant loss in value.

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

Indirect costs - Also known as overhead costs, these costs are not easily identifiable with the sale or output
of a specific good, service or business operation.
Internal stakeholders - These stakeholders are part of the organization, such as employees, managers,
directors, and shareholders.

Internal diseconomies of scale - Higher unit costs of production that occur due to internal problems of
mismanagement as a business organization grows.

Internal economies of scale - Category of economies of scale that occurs for and within a particular
organization (rather than the industry in which it operates) as it grows in size.

Initial public offering (IPO) - An IPO occurs when an organization sells all or part of its business to
shareholders on a public stock exchange for the first time. This changes the legal status of the business to a
publicly held company.

Insolvency - Refers to the situation where a person or a business is unable to meet their bill and other debt
obligations. The debts (liabilities) of the individual or organization exceed their assets.

Intangible assets - Non-physical fixed assets that are valuable to a firm’s survival and success, such as
brand value, goodwill, copyrights, trademarks, and patents.

Intellectual property rights - Abbreviated as IPRs, and also known as intellectual property protection,
these are a firm's fixed, intangible assets with a monetary value, comprised of goodwill, patents, copyrights
and trademarks.

Internal sources of finance - Finance that come from within the organization, from its own resources and
assets without the help of a third-party provider.

Investment - Capital expenditure with the intention of a financial return on this spending at some point in
the future.

Investment appraisal - The formal process of quantifying the financial risks of an investment decision, in
order to establish whether the expenditure can be justified from a financial perspective.

Jargon - Specialist or technical language used in different fields or professions in order to improve
communications.

Joint venture - An external growth method that involves two or more organizations agreeing to create a
new business entity, usually for a finite period of time.

Job analysis - The process of examining what a particular job involves, thereby enabling the HR
department to determine the roles, tasks, duties, responsibilities, and skills required to do the job.

Job description - Document containing the particulars of a job, e.g., the job title, roles and responsibilities,
and other duties.

Job enlargement - A type of non-financial motivation that takes place when more tasks or activities are
added to a worker’s job description.

Job enrichment - Type of non-financial reward, involving enhancing the experiences of workers, giving
workers a wide range of challenging tasks and more responsibility at work.

Job evaluation - An assessment of the value of a job in relation to other jobs in the organization, so that the
remuneration and other rewards can be determined in an objective, transparent and fair manner.
Job rotation - Type of non-financial motivation that involves workers switching between jobs (tasks) for a
period of time.

Job security - The assurance given to employees that they will keep their current job for the foreseeable
future, usually stated in an employment contract.

Labour turnover (HL only) - The amount of people who leave an organization, expressed as a percentage
of the workforce, per time period (usually one year).

Laissez-faire leadership (management) - A hands-off approach to leadership by devolving decision-

making power to the workforce.

Language barriers to communication - These obstacles to effective communications stem from

miscommunications and misunderstandings due to language issues such as tones, jargon, slang, dialects,
and accents.

Lateral integration - An external growth method that involves two or more firms in a merger, acquisition, or
takeover that have similar operations but do not directly compete with each other.

Lateral integration - An external growth method that involves two or more firms in a merger, acquisition, or
takeover that have similar operations but do not directly compete with each other.

Leadership - The art of inspiring and motivating other people towards achieving a common organizational
aim or vision.

Leasing - This financial service enables businesses to have access to fixed assets, by hiring these assets,
but without the high costs of capital expenditure.

Leadership style - Refers to the way in which managers and leaders provide direction for others.

Levels of hierarchy - The number of layers of formal authority in an organization. It is represented in an

organizational chart.

Liabilities - The debts of a business, i.e., the money owed to others, e.g., money owed to financiers, trade
creditors, and the government (for tax).

Line manager - The person directly above an employee in the organizational structure of a business.

Limited liability - This legal status of a business enables its shareholders (business owners) not to be liable
for more than the original amount of money invested in the business.

Limited partnership - This is a special type of partnership where one or more partners contribute capital
and enjoy a share of the profits but do not participate in the running of the business. However, at least one
partner must still have unlimited liability.

Liquidity - Refers to the ease with which a business can convert its assets into cash without affecting its
market value, i.e., it measures a firm’s ability to repay short-term liabilities without having to use external
sources of finance.

Liquidity crisis - A situation that arises when a business is unable to pay its short-term debts. This can
eventually lead to bankruptcy.

Liquidity position - This is a measure of the extent to which a business has sufficient liquidity to continue
its operations and activities.
Liquidity problem - Also known as a cash flow problem, this issue occurs when there is a lack of cash in
the organization because its cash inflows are less than its cash outflows, i.e., it experiences negative net
cash flow.

Liquidity ratios - These are financial ratios that examine an organization’s ability to pay its short-term
liabilities and debts, namely the current and acid test ratios.

Loan capital - Also known as debt capital, this refers to borrowed funds from financial lenders, such as
commercial banks.

Local community - The general public and local businesses that have a direct interest in the activities of
the organization. They are interested in the firm’s ability to create jobs and to operate in a socially
responsible way.

Lock-out - This occurs when, during an industrial dispute, employers shut out their employees. Locks may
be changed and/or added security is used to prevent employees from entering the workplace.

Long-term finance - Refers to sources of finance of more than five years, for the purchase of long-term
fixed assets or to fund the growth of a business in overseas markets.

Manager - Someone with decision-making authority in an organization and has responsibility for problem-
solving in order to achieve specific organizational goals.

Management - The art of getting things done through others by setting clear objectives and organising
organizational resources.

Matrix structure - A flexible type of organizational structure consisting of team members from different
departments or divisions of the business who work together temporarily on a particular task or project.

Managerial economies of scale - Larger businesses can afford to hire specialist functional managers, thus
improving the organization’s efficiency and productivity.

Mass markets - A marketing approach that focuses on supplying to wide-ranging groups of customers in a
market, without having split them into separate market segments, such as the markets for bottled water or
breakfast cereal.

Market - A market is the collective term for the buyers and sellers of a particular good or service.

Market growth - Refers to an increase in the size of a market, usually measured by the rise in total sales
revenue of the market or industry.

Market leader - Refers to the business with the largest market share in a given industry.

Marketing - Business function of identifying the needs and wants of customers so that the organization can
provide goods and services to meet these requirements and desires, usually in a profitable way.

Marketing economies of scale - Larger businesses can spread their fixed costs of marketing by promoting
and advertising a greater range of brands and products.

Marketing mix - The key elements of a marketing strategy to ensure its success in meeting the needs and
wants of the organization’s customers and the firm’s marketing objectives.

Marketing objectives - These are the goals or targets that help to give marketing teams (or marketing
departments) a sense of purpose and direction.
Market orientation - This is an approach to marketing that focuses on meeting the specific demands
(desires and needs) of customers and potential customers.

Marketing plan - A document that shows the marketing objectives and marketing strategy of a particular
business.

Marketing planning - The structured process of formulating marketing objectives and appropriate
marketing strategies to achieve these goals.

Market size - The total number of individual customers or the total value of sales revenue in a certain
market.

Market share - Refers to the sales revenue that an organization accounts for within a given market or
industry. It is measured by expressing the firm’s sales revenue as a percentage of the whole industry’s sales
revenue.

Market segment - A distinct group of customers with similar characteristics, tastes, and preferences.

Market segmentation - The process of dividing a market for a product into smaller or distinct groups of
customers in an effort to meet their specific desired needs and wants.

Marketing strategies - The different long-term actions used by an organization to achieve its marketing
goals.

Merger - This form of external growth involves two or more companies agreeing to form a single, larger
company thereby benefiting from operating on a larger scale.

Mentoring - The training process of pairing, or attaching, an employee (the trainee or mentee) with a more
experienced colleague (the mentor) who acts as a coach, trainer, or advisor.

Motivation - The intrinsic desire to do something, which exists when workers do something because they
actually want to, rather than because they have to.

Motivators - Also known as growth factors, these factors address the higher-level needs in Herzberg’s
motivation theory and are based around the job itself, e.g., achievement, purpose, and responsibility.

Microfinance - An external source of finance provided by financier who support entrepreneurs of small
businesses, especially females and those on low incomes who are ordinarily unable to secure loans from
commercial banks.

Microfinance providers - Refers to the financiers or organizations that lend small amounts of money to
entrepreneurs of small businesses, especially females and business owners on very low incomes.

Mission statement - A succinct and motivating declaration of an organization’s purpose of existence, who
they are, and what they do.

Migrant workers - People who move to other countries in search of better job opportunities.

Needs - The basic necessities that an individual must have in order to survive, such as food, water, and
shelter.

Non-governmental organizations (NGOs) - A type of non-profit organization (NPO) operating in the

private sector of the economy for the benefit of others in society (rather than for shareholders).

Net assets - Refers to the overall value of an organization’s assets after all its liabilities are deducted. It is
calculated by the formula: total assets minus current liabilities minus non-current liabilities.
Net cash flow - The numerical difference between an organization’s total cash inflows and its total cash
outflows, per time period. The formula to calculate this is: Cash inflows – Cash outflows.

Net current assets - Also known as working capital, this is shown on a balance sheet to reveal the liquidity
position of a business, this is found by using the formula: Current assets – Current liabilities.

Niche markets - Marketing approach that focuses on supplying highly specialised products to cater for a
small and select target market.

Non-current assets - Also known as fixed assets, this refers to the long-term assets or possessions of an
organization with a monetary value but are not intended for resale within the next twelve months of the
balance sheet date.

Non-current liability - Also known as long-term liability, this refers to debt owed by a business which will
take longer than a year (from the balance sheet date) to repay.

Net migration - This measures the difference between the number of people from abroad who enter a
country (immigration) and the number of people who leave (emigration), usually for employment purposes.

Net present value (NPV) - A method of investment appraisal that calculates the real value (rather than the
absolute value) of an investment project by discounting (adjusting) the actual value of money received in the
future.

Non-verbal communication - Refers to any form of communication other than oral (verbal) communication,
such as email, letters, and body language.

No-strike agreement - This is a promise from the employee representatives that its members will use resort
to strike action as a method of industrial action.

Objective - An objective is a target or goal a business organization strives to achieve.

On the job training - Type of training that takes place within the organization, so employees are performing
tasks at the place of work.

Off the job training - Type of training led by external specialists and takes place away from the place of
work.

Opening balance - Found in a cash flow forecast, this refers to the value of cash held by a business at the
start of a trading period (usually the beginning of the month).

Open channels of communication - Refers to any method of communication when information is not
confidential and can be shared by and with anyone.

Operations (or operations management) - The business function referring to the process of making goods
and providing services from the available resources of a business to meet the needs and wants of its
customers.

Optimal output level - The level of output where the average cost of production is at its lowest value, so at
this level of output, profit is maximized.

Occupational mobility - The ability and willingness of employees to do another job or pursue a different
career.

Organization by function - Structuring a workforce according to business functions, i.e., specialised roles
or tasks.
Organization by geography - Arranging the different cost centres of a business based on the location of its
operations domestically and/or overseas.

Organization by product - Arranging the different cost centres of a business based on what it produces,
i.e. its range of different goods and/or services.

Oral communication - Also known as verbal communication, this refers to communication via the use of
speech, such as appraisals, interviews, and meetings.

Organizational barriers to communication - These obstacles are caused by a lack of understanding of

the internal functions and structures of the business, as well as the individual roles within the organization.

Organization by product - Structuring a workforce according to the goods or services sold. Each
department focuses on a different product within the organization’s overall product portfolio.

Organization by region - Structuring a workforce according to different geographical areas based on where
the firm’s operations are.

Organizational chart - A diagrammatic representation of an organization’s formal organizational structure.

Organizational structure - The formal interrelationships and hierarchical arrangements within a firm.

Outsourced workers - Also known as outsourced vendors or the contractual fringe, these are the
individuals or other organizations hired on a contract basis to carry out a specific but non-core role in
Charles Handy’s Shamrock organization.

Overdraft - A banking service that enables customers (personal and business customers) to withdraw more
money from their account than exists in the account.

Partnership - A business alliance consisting of between 2 and 20 individual owners who are jointly
responsible for the business (although this number can vary between countries).

Patents - The official rights given to a business to exploit an invention or process for commercial purposes.

Paternalistic management (leadership) - Management style that involves treating workers as family
members, so managers make decisions believed to be in the best interest of the workforce

Payback period (PBP) - The investment appraisal method that considers the time it takes for the amount of
money invested in a project to be repaid using the proceeds generated from the investment.

Peripheral workers - According to Charles Handy, these are the contingent workers, consisting of part-time
and temporary staff hired by the organization.

Performance-related pay (PRP) - Type of financial payment system used to pay people a bonus for
reaching or exceeding a set target.

Person culture - One of Charles Handy’s types of culture, where people regard themselves or their skills
set as being more important than the organization itself.

Person specification (HL only) - Document containing details of the attributes and qualities of the ideal
person for a particular job, such as preferred qualifications, experiences, knowledge, skills, and personality.

Personal funds - Internal source of finance, with entrepreneurs using their own savings, usually to finance
their start-up business.

Physiological needs - Also known as basic needs, these are the requirements for human survival in
Maslow’s hierarchy of needs.
Piece rate payment - Financial reward system that pays workers based on their output or productivity, e.g.,
$8 per unit of output.

Portfolio workers - People who carry out several different jobs, often for different contractors, at the same
time and usually on a temporary basis.

Power culture - One of Charles Handy’s types of culture, where an individual (such as the founder or a
figurehead), or a small group of senior staff, makes decisions for the organization.

Premium products - Goods or services that are perceived by customers to be of high quality and high
price.

Pressure groups - Individuals who come together or organizations that are set up for a common concern.
They aim to influence government and public opinion in order to create the desired social change.

Price - Also known as average revenue, this is the amount of money a product is sold for.

Primary sector - Business activity involved with the extraction of natural resources, e.g. fishing, mining and
agriculture.

Principal - The principal refers to the capital outlay or the original amount spent on an investment project.

Privately held company - This is a business owned by shareholders with limited liability, but the shares
cannot be traded on a public Stock Exchange.

Product differentiation - Refers to the process by which firms attempt to make their goods and services
different from those provided by other firms in the market in order to increase their own sales revenue.

Product orientation - This is an approach to marketing that focuses on making products a business knows
how to make well, rather than primarily concentrating on the needs and desires of potential customers.

Product position map - Also known as a perception map, this is a graphical illustration of customer
perceptions of a business, its products, and/or brands in comparison to other firms in the industry.

Profit - Refers to the positive difference between a firm’s total revenues and its total costs for any given
period of time.

Profit - The financial surplus after all costs, including expenses, have been paid (formerly referred to as "net
profit").

Profit and loss account - Also known as the income statement, this shows a firm’s profit (or loss) after all
production costs have been subtracted from the organization’s revenues, each year. It is also known as the
statement of profit or loss or income statement.

Profit margin ratio - A profitability ratio that measures a firm’s overall profit (after all costs of production
have been deducted) as a percentage of its sales revenue. It is also an indicator of how well a business can
manage its indirect costs (overhead expenses).

Profit after interest and tax - This section of the P&L account shows the actual value of profit earned by
the business after all costs have been accounted for.

Profit before interest and tax - This section of the P&L account shows the value of a firm’s profit (or loss)
before deducting interest payments on loans and taxes on corporate profits.

Production - The process of creating goods and/or services using the factors of production available to the
business.
Productivity - Refers to the operational efficiency of employees by calculating levels of output per worker.
The more motivated employees are, the more productive they will be.

Professional core - According to Charles Handy, these are the core workers consisting of full-time
specialists who are vital for the organization’s operations and survival.

Project-based organization - Also known as a matrix structure, this flexible organizational structure is
based on the specific needs of a particular short-term or temporary project.

Profit-related pay - Type of financial reward system which remunerates workers a certain percentage of the
annual profits that the business earns.

Profit centre - A section or division of a business that has responsibility for both costs and revenues
generated within the department. It is held accountable for the amount of profit generated.

Promotion (HL only) - The career advancement of an employee in terms of their hierarchical ranking and
professional responsibilities.

Psychological barriers to communication - Also referred to as emotional barriers to communication,

these obstacles are caused by individuals with contrasting and conflicting mindsets, opinions, or priorities.

Psychographic segmentation - Segmentation that involves characterising consumers according to

people’s lifestyle choices and personal values.

Purchasing economies of scale - Larger firms can gain huge cost savings by buying vast quantities of
stocks (raw materials, components, semi-finished goods and finished goods).

Purpose - An intrinsic, non-financial type of motivation involving people doing genuinely meaningful work,
making a difference on a personal, professional or social level.

Public sector - Businesses in this section of the economy are run and owned by the government in order to
provide essential services for society as a whole, e.g., education and healthcare services.

Publicly held company - A joint-stock company owned by shareholders. The shares in a publicly held
company can be bought and sold by the general public, without prior approval of existing owners.

Qualitative investment appraisal - Method of investment appraisal used to determine whether a project is
worth investing in by using non-numerical techniques, e.g., whether the project aligns with the organization’s
mission.

Quantitative investment appraisal - Method of investment appraisal used to determine whether an

investment project is worthwhile based on financial analysis, namely, PBP, ARR, and NPV.

Quaternary sector - Business activity involving the creation or sharing of knowledge and information.

Range - The difference between the highest and the lowest values in a data set.

Random variations - Irregular, erratic, or unexpected fluctuations in sales revenues, caused by unexpected
and unpredictable factors.

Ratio analysis - A quantitative management planning and decision-making tool, used to analyse and
evaluate the financial performance of a business. These can be further categorised as profitability, liquidity,
and efficiency ratio analysis.

Raw materials - These are the natural resources used in the production process to create goods and
provide services to customers.
Recruitment - The process of hiring a suitable worker. This would typically involve a thorough job analysis
in order to attract suitable candidates and then to selecting (hiring) the one(s) most suited to the job.

Recruitment process - A major and vital aspect of human resource management, this refers to the
procedures involved in the hiring of the right employees, with the right aptitudes and attitudes.

Redundancies - Also known as layoffs, this is the process of employers cutting back on its staffing, as
certain job roles are no longer required, i.e. the job roles cease to exist.

Remuneration - The overall financial package of a person, e.g., salaries, commission, profit-related pay,
performance-related pay, share ownership schemes, and fringe benefits.

Residual value - Also known as the scrap value, this is the value of a fixed asset at the end of its useful life
before it is replaced.

Responsibility - Refers to a line manager’s level of concern in term of the people they are in charge of. An
organization chart shows the breadth and depth of a person’s roles and responsibilities in the business.

Restricted channels of communication - Also known as closed channels of communication, this refers to
when information is confidential so need to be communicated formally to only those who need to know.

Retained profit - Also referred to as retained earnings, this refers to the value of a firm’s earnings after all
costs are paid (including interest and tax) and shareholders have been compensated (dividends).

Retention - The opposite of labour turnover, this measures the ability of an organization to keep its
employees at the firm.

Return on capital employed (ROCE) - A profitability ratio that measures a firm’s efficiency and profitability
in relation to its size (as measured by the value of the organization’s capital employed).

Risk bearing economies of scale - Large businesses can bear greater risks than smaller ones due to a
greater product portfolio. Hence, inefficiencies will harm smaller firms to a greater extent.

Role culture - One of Charles Handy’s types of culture, where operations and organizational norms are
underpinned by formal and hierarchical structures, and clear policies and procedures.

Revenue - The money (income) received by a business from the sale of goods and/or services.

Revenue expenditure - Refers to business spending on its everyday and regular operations.

Revenue stream - The different sources of revenue (or income) for a business, e.g., revenue from
sponsorship deals, merchandise sales, membership fees and royalties.

Units of production method - Method of depreciation that apportions an equivalent value of depreciation
to a non-current asset based on each physical unit of output. Depreciation is based on the units of usage
rather than time (as used for the straight-line method).

Unique selling point (USP) - An exclusive feature or aspect of a business, its products or brands that
makes it distinct from others in the same industry.

Unlimited liability - This means the owner(s) of a business (such as a sole trader or partner) is personally
liable for any business debts, even if this requires the debts to be settled by selling off personal
assets.Second item

Variance - Refers to a discrepancy between the planned (budgeted) item of expenditure or revenue and the
actual amount.
Variance analysis - This is the management process of comparing planned and actual costs and revenues,
in order to measure and compare the degree of budgetary success.

Value added - The numerical difference between the cost of factor inputs in the production process and the
price that the final output is sold for.

Values - The organization’s beliefs and moral standards, which form an essential part of its organizational
culture.

Variable costs - Costs that change with the level of output - they rise when output or sales increase, e.g.,
raw materials and packaging costs.

Vertical integration - When an acquisition or takeover occurs between two companies operating in different
industries.

Vision - The overall purpose of an organization’s existence, which forms a major element of its corporate
culture.

Vision statement - An inspiring declaration of what an organization ultimately strives to be, or to achieve, in
the distant future.

Visual communication - A method of communication that relies on the use of visual stimuli to communicate
information or ideas, such as infographics, charts, and images.

Wants - These are the desires of individual customers, i.e., the goods and services that they would like to
have (rather than things they need to survive), such as a new smartphone, a family holiday in an overseas
location, fresh flowers, or jewellery.

Wages - Type of financial reward payment system based on time or output. Wages are paid as time rate
(hours) or piece rate (output).

Window dressing - Also known as creative accounting, this is the legal manipulation of financial statements
based on the accounting principles and rules in the country in order to make the figures look more flattering
(in the same way that people clean and tidy their homes before guest are due to arrive).

Work-in-progress - Also referred to as semi-finished goods, these are parts and components used in the
production process.

Workforce - The total number of employees in a business organization at any particular point in time.

Work-to-rule - The form of industrial action involves all employees being instructed by their representatives
to follow all the rules, regulations and policies of the organization, word for word.

Workforce planning - Also known as human resource planning, this refers to the ongoing process through
which the current and future human resource needs of a business are identified and anticipated.

Working capital - The money available for the day-to-day running of a business. It is calculated by
subtracting current liabilities from current assets.

Working capital cycle - Also referred to as net current assets, this refers to the duration between a
business paying for its production costs of a good or service and receiving the cash from customers
purchasing the product.

Written communication - A method of communication that relies on the use of texts, such as emails,
letters, executive summaries, abstracts, notices, and reports.
Zero budgeting - A method of budgeting that requires all budget holders to justify each dollar of spending
subject to management approved before the funds are released.