Definitions

● Consumer goods – the physical and tangible goods sold to the general public
– include durable consumer goods like cars and washing machines and
non-durable goods like food, drinks and sweets that can be used only once.
● Consumer services – the non-tangible products sold to the general public –
include hotel accommodation, insurance services and train journeys.
● Capital goods – the physical goods the industry uses to aid in producing other
goods and services, such as machines and commercial vehicles.
● Creating value – increasing the difference between the cost of purchasing
bought-in materials and the price the finished goods are sold for.
● Added value – the difference between the costs of purchasing bought-in
materials and the price the finished goods are sold for.
● Opportunity cost – the benefit of the next most desired option given up.
● Entrepreneur – someone who takes the financial risk of starting and managing
a new venture.
● Social enterprise – a business with mainly social objectives that reinvest most
of its profits into benefiting society rather than maximising returns to owners.
● Triple bottom line – the three objectives of social enterprises: economic, social
and environmental.
● Primary sector business activity – firms engaged in farming, fishing, oil
extraction and all other industries that extract natural resources so that they
can be used and processed by other firms.
● Secondary sector business activity – firms that manufacture and process
products from natural resources including computers, brewing, baking, and
clothes-making and construction.
● Tertiary sector business activity – firms that provide services to consumers
and other businesses such as retailing, transport, insurance, banking, hotels,
tourism and telecommunications.
● The public sector-comprises organisations accountable to and controlled by
the central or local government.
● Private sector – comprises businesses owned and controlled by individuals or
groups of individuals.
● Mixed economy – economic resources are owned and controlled by private
and public sectors.
● Free-market economy – economic resources are owned largely by the private
sector with little state intervention.
● Command economy – economic resources are owned, planned and
controlled by the state.
● Sole trader – a business in which one person provides the permanent finance
and, in return, has full control of the business and can keep all of the profits.
● Partnership – a business formed by two or more people to carry on a
business together, with shared capital investment and, usually, shared
responsibilities.
● Limited liability – the only liability or potential loss the shareholder has if the
company fails is the amount invested in the company, not the total wealth of
the shareholder.
● Private limited company – a small to medium-sized business owned by
shareholders who are often members of the same family; this company
cannot sell shares to the general public.
● Share – a certificate confirming part ownership of a company and entitling the
shareholder owner to dividends and certain shareholder rights.
● Shareholder – a person or institution owning shares in a limited company.
● Public limited company – a limited company, often a large business, with the
legal right to sell shares to the general public. Prices are quoted on the
national stock exchange.
● Memorandum of association – this states the name of the company, the
address of the head office through which it can be contacted, the maximum
share capital for which the company seeks authorisation and the declared
aims of the business.
● Articles of association – this document cover the internal working and control
of the business-for example, the names of the directors and the procedures to
be followed at meetings will be detailed.
● Franchise – a business that uses the name, logo and trading systems of an
existing successful business.
● Joint venture – two or more businesses agree to work closely together on a
particular project and create a separate business division to do so.
● Holding company – a business organisation that owns and controls a number
of separate businesses, but does not unite them into one unified company.
● Public corporation – a business enterprise owned and controlled by the
state-also known as nationalised industry.
● Revenue – total value of sales made by a business in a given time period.
Capital employed – the total value of all the long term finance invested in the
business.
● Market capitalisation – the total value of a company’s issued shares.
● Market share – business sales as a proportion of total market sales.
● Internal growth – business expansion by opening new branches, hops or
factories (also known as organic growth).
● Mission statement – a statement of the business’s core aims, phrased to
motivate employees and stimulate interest by outside groups.
● Corporate social responsibility – this concept applies to those businesses that
consider the interests of society by taking responsibility for the impact of their
decisions of customers, employees, communities and the environment.
● Management by objectives – coordinating and motivating all organisational
staff by dividing its overall aim into specific targets for each department,
manager and employee.
● Ethical code (code of conduct) – a document detailing a company’s rules and
guidelines on staff behaviour that all employees must follow.
● Stakeholders – people or groups who can be affected by – and therefore have
an interest in – any action by an organisation.
● Stakeholder concept – the view that businesses and their managers have
responsibilities to a wide range of groups, not just shareholders.
● Corporate social responsibility – the concept that accesses that businesses
should consider the interests of society in their activities and decisions beyond
the legal obligations that they have.
● Manager – responsible for setting objectives, organising resources and
motivating staff to meet the organisation’s aims.
● Leadership - is the art of motivating a group towards achieving common
objectives.
● Autocratic leadership – a style of leadership that keeps all decision-making at
the centre of the organisation.
● Democratic leadership – a leadership style that promotes workers' active
participation in decisions.
● Paternalistic leadership – a leadership style based on the approach that the
manager is in a better position than the workers to know what is best for an
organisation.
● Laissez-faire leadership – a leadership style that leaves much of the business
decision-making to the workforce – is a ‘hands off’ style approach and the
reverse of the autocratic style.
● Informal leader – a person who has no formal authority but has the respect of
colleagues and some power over them.
● Emotional intelligence (EI) – the ability of managers to understand their own
emotions, and those of the people they work with, to achieve better business
performance.
● Motivation – the internal and external factors that stimulate people to take
actions that lead to achieving a goal.
● Self-actualisation – a sense of fulfilment reached by feeling enriched and
developed by what one has learned and achieved.
● Motivating factors (motivators) – aspects of a worker’s job that can lead to
positive job satisfaction, such as achievement, recognition, meaningful and
interesting work and advancement at work.
● Hygiene factor – aspects of a worker’s job that have the potential to cause
dissatisfaction, such as pay, working conditions, status and over-supervision
by managers.
● Job enrichment – aims to use workers' full capabilities by allowing them to do
more challenging and fulfilling work.
● Time based wage rate – payment to a worker made for each period of time
worked, e.g.; one hour.
● Piece rate – a payment to a worker for each unit produced.
● Salary – annual income that is usually paid on a monthly basis.
● Commission – a payment to a salesperson for each sale made.
● Bonus – a payment made in addition to the contracted wage or salary.
● Profit sharing – a bonus for staff based on the profits of the business-usually
paid as a proportion of basic salary.
● Performance-related pay – a bonus scheme to reward staff for above-average
work performance.
● Fringe benefits – benefits given, separate from pay, by an employer to the
same or all employees.
● Job rotation – increasing the flexibility of employees in the variety of work they
do by switching from one job to another.
● Job enlargement – attempting to increase the scope of a job by broadening
and deepening the tasks undertaken.
● Job redesign – involves restricting a job-usually with employees’ involvement
and agreement- to make work more interesting, satisfying and challenging.
● Quality circles – voluntary groups of workers who meet regularly to discuss
work-related problems and issues.
● Worker participation – workers are actively encouraged to become involved in
decision-making within the organisation.
● Team working – production is organised so that groups of workers undertake
complete units of work.
● Human resource management (HRM) – the strategic approach to effectively
managing an organisation’s workers so that they help the business gain a
competitive advantage.
● Recruitment – the process of identifying the need for a new employee,
defining the job to be filled and the type of person needed to fill it and
attracting suitable candidate for the job.
● Selection – involves the series of steps by which the candidates are
interviewed, tested and screened to choose the most suitable person for the
vacant post.
● Job description – a detailed list of the key points about the job to be
filled-stating all of its key tasks and responsibilities.
● Person specification – a detailed list of the qualities, skills and qualifications
that a successful applicant will need to have.
● Employment contract – a legal document that sets out the terms and
conditions governing a worker’s job.
● Labour turnover – measures the rate at which employees are leaving an
organisation. It is measured by: Number of employees leaving in 1
year/average number of people employed * 100
● Training – work-related education to increase workforce skill and efficiency.
● Induction training – introductory training programme to familiarise new recruits
with the systems used in the business and the layout of the business site.
● On-the-job training – instruction at the place of work on how a job should be
carried out.
● Off-the-job training – all training undertaken away from the business, e.g.
work related college courses.
● Employee appraisal – the process of assessing the effectiveness of an
employee judged against pre-set objectives.
● Dismissal – being dismissed or sacked from a job due to incompetence of
breach or discipline.
● Unfair dismissal – ending a worker’s employment contract for a reason that
the law regards as being unfair.
● Redundancy – when a job is no longer required, the employee doing this job
becomes unnecessary through no fault of their own.
● Work-life balance – a situation in which employee are able to give the right
amount of time and effort to work and to their personal life outside work, for
example to family or other interests.
● Equality policy – practices and processes aimed at achieving a fair
organisation where everyone is treated in the same way and has the
opportunity to fulfil their potential.
● Diversity policy – practices and processes aimed at creating a mixed
workforce and placing positive value on diversity in the workplace.
● Marketing – the management task that links the business to the customer by
identifying and meeting the needs of customers’ profitability does this by
getting the right product to the right place at the right time.
● Marketing objectives – the goals set for the marketing department to help the
business achieve its overall objectives.
● Marketing strategy – a long-term plan established for achieving marketing
objectives.
● Market orientation – an outward-looking approach basing product decisions
on consumer demand, as established by market research.
● Asset-led marketing is an approach to marketing that bases strategy on the
firm’s strengths and assets instead of purely on what the customer wants.
● Product orientation – an inward-looking approach that focuses on making
products that can be made-or have been made for a long time-and then trying
to sell them.
● Social marketing – this approach considers not only the demands of
consumers but also the effects on all members of the public (society) involved
in some way when firms meet these demands.
● Demand – the quantity of a product that consumers are willing and able to buy
at a given price in a time period.
● Supply – the quantity of a product that firms are prepared to supply at a given
price in a time period.
● Equilibrium price – the market price that equates supply and demand for a
product.
● Market size – the total level of sales of all producers within a market.
● Market growth – the percentage change in the total size of a market (volume
or value) over a period of time.
● Market share – the percentage of total sales in the total market sod by one
business. This is calculated by the following formula: Firm’s sales in time
period/total market sales in time period * 100
● Direct competitor – a business that provides the same or very similar goods or
services.
● USP-unique selling point (or proposition) – the special feature of a product
that differentiates it from competitors’ products.
● Product differentiation – making a product distinctive to stand out from
competitors’ products in consumers’ perception.
● Niche marketing – identifying and exploiting a small segment of a larger
market by developing products to suit it.
● Mass marketing – selling the same products to the whole market without
attempting to target groups within it.
● Consumer profile – a quantified picture of consumers of a firm’s products,
showing proportions of age groups, income levels, location, gender and social
class.
● Market segment – a subgroup of a whole market in which consumers have
similar characteristics.
● Market segmentation – identifying different segments within a market and
targeting different products or services to them.
● Market research – this is the process of collecting, recording and analysing
data about customers, competitors and the market.
● Primary research – the collection of first-hand data directly related to a firm’s
needs.
● Secondary research – a collection of data from second-hand sources.
● Qualitative research – research into the in-depth motivations behind
consumer buying behaviour or opinions.
● Quantitative research – research that leads to numerical results that can be
statistically analysed.
● Focus groups – a group of people who are asked about their attitude towards
a product, service, advertisement or new style of packaging.
● Sample – the group of people participating in the market research survey
selected to represent the overall target market.
● Random sampling – every member of the target population has an equal
chance of being selected.
● Systematic sampling – every nth item in the target population is selected.
● Stratified sampling – this draws a sample from a specified sub-group or
segment of the population and uses random sampling to select an appropriate
number from each stratum.
● Quota sampling – when the population has been stratified, and the interviewer
selects an appropriate number from each stratum.
● Cluster sampling – using one or a number of specific groups to draw samples
from and not selecting from the whole population, e.g. using one town or
region.
● Open questions – those that invite a wide-ranging or imaginative response-
the results will be difficult to collate and present numerically.
● Closed questions – questions to which a limited number of pre-set answers
are offered.
● Marketing mix – the four key decisions that must be taken to market a product
effectively.
● Customer relationship management (CRM) – using marketing activities to
establish successful customer relationships and maintain customer loyalty.
● Brand – an identifying symbol, image or trademark that distinguishes a
product from its competitors.
● Intangible attributes of a product – subjective opinions of customers about a
product that cannot be measured or compared easily.
● Tangible attributes of a product – measurable product features that can be
easily compared with other products.
● Product – the end result of the production process sold on the market to
satisfy a customer's need.
● Product positioning -is the consumer perception of a product or service
compared to its competitors.
● Product portfolio analysis – analysing a business's range of existing products
to help allocate resources effectively between them.
● Product life cycle – the pattern of sales recorded by a product from launch to
withdrawal from the market. It is one of the main forms of product portfolio
analysis.
● Extension strategy – these are marketing plans to extend the maturity stage of
the product before a brand new one is needed.
● Consumer durable –manufactured process that can be reused and is
expected to have a reasonably long life, such as a car or washing machine.
● Price elasticity of demand (PED) – measures of demand responsiveness
following a price change.
● Markup pricing – adding a fixed markup for profit to the unit price of a product.
● Target pricing – setting a price that will give a required rate of return at a
certain level of output/sales.
● Full-cost pricing – setting a price by calculating a unit cost for the product
(allocated fixed and variable costs) and then adding a fixed profit margin.
● Contribution-cost pricing - setting prices based on the variable costs of
making a product in order to make a contribution towards fixed costs and
profits.
● Competition-based pricing – a firm will base its price upon the price set by its
competitors.
● Penetration pricing – setting a relatively low price often supported by strong
promotion in order to achieve a high volume of sales.
● Dynamic pricing – offering goods at a price that changes according to the next
level of demand and the customers’ ability to pay.
● Market skimming – setting a high price for a new product when a firm has a
unique or highly differentiated product with a low price elasticity of demand.
● Promotion – the use of advertising, sales promotion, personal selling, direct
mail, trade fairs, sponsorship and public relations to inform consumers and
persuade them to buy.
● Promotion mix – the contribution of a firm's promotional techniques to sell a
product.
● Above-the-line promotion – a form of promotion that is undertaken by a
business by paying for communication with consumers.
● Advertising – paid-for communication with consumers to inform and persuade,
e.g. TV and cinema advertising.
● Below-the-line promotion – a promotion that is not a directly paid-for means of
communication but is based on short-term incentives to purchase.
● Sales promotion – incentives such as special offers or special deals directed
at consumers or retailers to achieve short-term sales increases and repeat
consumer purchases.
● Personal selling – a member of the sales staff communicates with one
consumer intending to sell the product and establish a long-term relationship
between the consumer and the company.
● Sponsorship – payment by a company to the organisers of an event or
team/individuals so that the company name becomes associated with the
event/team/individuals.
● Public relations – the deliberate use of free publicity provided by newspapers,
TV and other media to communicate with and achieve understanding by the
public.
● Branding – the strategy of differentiating products from those of competitors
by creating an identifiable image and clear expectations about a product.
● Marketing OR promotional budget – the financial amount made available by a
business to spend on marketing/promotion during a certain period.
● Channel of distribution – this refers to the chain of intermediaries that the
product passes through the firm producer to the final consumer.
● Internet (online) marketing – refers to advertising and marketing activities that
use the internet, email and mobile communications to encourage direct sales
via electronic commerce.
● E-commerce – the buying and selling goods and services by businesses and
consumers through an electronic medium.
● Viral marketing – using social media sites or text messages to increase brand
awareness or sell products.
● Integrated marketing strategy – the key marketing decisions complement
each other and work together to give customers a consistent message about
the products.
● Added value – the difference between the cost of purchasing raw materials
and the price the finished goods are sold is the same as creating value.
● Intellectual capital – intangible capital of the business that includes human
capital (well-trained and knowledgeable employees), structural capital
(database and information system) and relational capital (goods links with
suppliers and customers).
● Production – converting inputs into outputs.
● Level of production – the number of units produced during a time period.
● Productivity – the ratio of outputs to inputs during production, e.g. output per
worker per time period.
● Efficiency – producing output at the highest ratio of output to input.
● Effectiveness – meeting the enterprise's objectives by using inputs
productively to meet customers’ needs.
● Labour intensive – involving a high level of labour input compared with capital
equipment.
● Capital intensive – involving a high quantity of capital equipment compared
with labour output.
● Operations planning – preparing input resources to supply products to meet
expected demand.
● CAD-computer-aided design – using computer programs to create
two-or-three-dimensional (2D or 3D) graphical representations of physical
objects.
● CAM-computer-aided manufacturing – the use of computer software to control
machine tools and related machinery in manufacturing components or
complete products.
● Operational flexibility – the ability of a business to vary both the production
level and the range of products following changes in consumer demand.
● Process innovation – using a new or much-improved production or service
delivery method.
● Job production – producing a one-off item specially designed for the
consumer.
● Batch production – producing a limited number of identical products- Each
item in the batch passes through one production stage before passing on to
the next stage.
● Flow production – producing items in a continually moving process.
● Mass customisation – using flexible computer-aided production systems to
produce items to meet individual customers’ requirements at mass-production
cost levels.
● Optional location – a business location that combines quantitative and
qualitative factors best.
● Quantitative factors -are measurable in financial terms and will directly impact
either the costs of a site or its revenues and profitability.
● Qualitative factors – non-measurable factors that may influence business
decisions.
● Multi-site location – a business that operates from more than one location.
● Offshoring – the relocation of a business process done in one country to the
same or another company in another country.
● Multinational – a business with operations or production bases in multiple
countries.
● Trade barriers – taxes (tariffs) or other limitations on the free international of
goods and services.
● Scale of operations – the maximum output that can be achieved using the
available inputs (resources)-this scale only be increased in the long term by
employing more of all inputs.
● Economies of scale – reductions in a firm’s unit (average) costs of production
that results from an increase in the scale of operations.
● Diseconomies of scale – factors that cause average costs of production to rise
when the scale of operation is increased.
● Enterprise resource planning – the use of a single computer application to
plan the purchase and the use of resources in an organisation to improve the
efficiency of operations.
● Supply chain – all of the stages in the production process from obtaining raw
materials to selling to the consumer point of origin to point of consumption.
● Sustainability – production systems prevent waste by using the minimum of
non-renewable resources so that production levels can be sustained in the
future.
● Inventory (stock) – materials and goods required to allow for the production
and supply of products to the customer.
● Economic order quantity – the optimum or least-cost of stock to re-order,
taking into account delivery costs and stock-holding costs.
● Re-order quantity – the number of units ordered each time. Lead time – the
normal time taken between ordering new stocks and their delivery.
● Buffer inventories – the minimum level of inventory level that should be held to
ensure that production can still take place should a delay in delivery occur or
should production rates increase.
● Just-in-time – this inventory-control method aims to avoid holding inventories
by requiring supplies to arrive just as needed in production and completed
products are produced to order.
● Start-up capital – the capital an entrepreneur needs to set up a business.
● Working capital – the capital needed to pay for raw materials, day-to-day
running costs and credit offered to customers. In accounting terms, working
capital = current assets – current liabilities.
● Liquidity – the ability of a firm to pay its short-term debts.
● Liquidation – when a firm cases trading and assets are sold for cash to pay
suppliers and other creditors.
● Capital expenditure – the purchase of assets expected to last more than one
year, such as building and machinery.
● Revenue expenditure – spending on all costs and assets other than fixed
assets and including wages and salaries, and materials bought for stock.
● Overdraft – The bank agrees to a business borrowing up to an agreed limit as
and when required.
Factoring = selling of claims over trade receivables to a debt factor in
exchange for immediate liquidity-only a proportion of the value of the debts
will be received as cash.
● Hire purchase – an asset is sold to a company that agrees to pay fixed
repayments over an agreed time period. The asset belongs to the company.
● Leasing – obtaining the use of equipment or vehicles and paying a rental or
leasing charge over a fixed period; this avoids the need for the business to
raise long-term capital to buy the asset; ownership remains with the leasing
company.
● Equity finance – permanent finance raised by companies through the sale of
shares.
● Long-term loans – loans that do not have to be prepaid for at least one year.
● Long-term bonds OR debentures – bonds issued by companies to raise debt
finance, often with a fixed interest rate.
● Right issue – existing shareholders are given the right to buy additional
shares at a discounted price.
● Venture capital – risk capital invested in business start-ups or expanding small
businesses that have good profit potential but do not find it easy to gain
finance from other sources.
● Crowdfunding – the use of small amounts of capital from a large number of
individuals to finance a new business venture.
● Microfinance – providing financial services for poor and low-income customer
who do not have access to banking services, such as loans and overdrafts
offered by traditional banks.
● A business plan -is a detailed document giving evidence about a new or
existing business that aims to convince external leaders and investors to
finance the business.
● Direct costs – these costs can be clearly identified with each unit of production
and can be allocated to a cost centre.
● Variable costs – costs that vary with output.
● Fixed costs – costs that do not vary with output in the short run.
● Marginal costs – the extra cost of producing one more unit of output.
● Indirect costs – costs that cannot be identified with a production unit or
allocated accurately to a cost centre.
● Break-even point of production – the output level at which total costs equal
total revenue; neither a profit nor a loss is made.
● The margin of safety – the amount by which the sales level exceeds the
break-even level of output.
● Contribution per unit – selling price less variable cost per unit.
● Income statement – records the revenue, costs and profit (or loss) of a
business over a given period of time.
● Gross profit – equal to sales revenue less costs of sales.
● Revenue (formerly called sales turnover) – the total value of sales made
during the trading period = selling price * quantity sold.
● Cost of sales (or cost of goods sold) – this is the direct cost of the goods that
were sold during the financial year.
● Operating profit (formerly net profit) - is gross profit minus overhead
expenses.
● Profit for the year (profit after tax) – operating profit minus interest costs and
corporation tax.
● Dividends – the share of the profits paid to shareholders as a return for
investing in the company.
● Retained earnings (profit) – the profit left after all deductions, including
dividends, have been made, this is ‘ploughed back’ into the company as a
source of finance.
● Low-quality profit – one-off profit that cannot easily be repeated or sustained.
● High-quality profit – profit that can be repeated and sustained.
● Non-current assets – assets to be kept and used by the business for more
than one year. Used to be referred as ‘fixed assets’.
● Intangible assets – items of value that do not have a physical presence, such
as patents, trademarks and current assets.
● Current assets – assets that are likely to be turned into cash before the next
balance sheet date.
● Inventories – stocks held by the business in the form of materials, work in
progress and finished goods.
● Trade receivables (debtors) – the value of payments to be received from
customers who have bought goods on credit.
● Current liabilities – debts of the business that will usually have to be paid
within one year.
● Accounts payable (creditors) – value of debts for goods bought on credit
payable to suppliers, also known as ‘trade payables’.
● Non-current liabilities – the value of debts of the business that will be payable
after more than one year.
● Statement of financial position (balance sheet) – an accounting statement that
records the value of a business’s assets, liabilities and shareholders’ equity at
one point in time.
● Shareholders’ equity – total value of assets – total value of liabilities
● Asset – an item of monetary value that is owned by a business.
● Liability - is a business's financial obligation that it must pay in the future.
● Share capital – the total value of capital rose from shareholders by the issue
of shares.
● Intellectual capital OR property – the amount by which the market value of a
firm exceeds its tangible assets minus liabilities – an intangible asset.
● Goodwill – arises when a business is valued at or sold for more than the
balance sheet value of its assets.
● Cash-flow statement – a record of the cash received by a business over a
period of time and the cash outflows from the business.
● Liquidity – the ability of a firm to pay its short-term debts.
● Window-dressing – presenting the company accounts in a favourable light –
to flatter the business performance.
● Cash flow – the sum of cash payments to a business (inflows) less the sum of
cash payments (outflows).
● Liquidation – when a firm ceases trading, and its assets are sold for cash to
pay suppliers and other creditors.
● Insolvent - when a business cannot meet its short-term debts.
● Cash inflows – payments in cash received by a business, such as those from
customers (trade receivables) or from the bank, e.g. receiving a loan.
● Cash outflows – payments in cash made by a business, such as those to
suppliers and workers.
● Cash-flow forecast – an estimate of a firm’s future cash inflows and outflows.
● Net monthly cash flow - is the estimated difference between monthly cash
inflows and outflows.
● Opening cash balance – cash held by the business at the start of the month.
● Closing cash balance – cash held at the end of the month becomes next
month’s opening balance.
● Overtrading – expanding a business rapidly without obtaining all of the
necessary finance so that a cash-flow shortage develops.
● Credit control – monitoring of debts to ensure that credit periods are not
exceeded.
● Bad debt – unpaid customers’ bills that are now very unlikely ever to be paid.
● Creditors – suppliers who have agreed to supply products on credit and who
have not yet been paid
● A budget- is a detailed financial plan that forecasts revenue and expenses
over a specified period.
● Budget holders - are usually the managers and operational directors of
companies who are tasked by the owners/shareholders or the board of
directors to ensure that the company follows whatever budget is laid out for
them.
● Variance analysis - is a method of assessing the difference between
estimated budgets and actual financial performance.
● Delegated budget - involves giving some delegated authority over the setting
and achievement of budgets to junior managers.
● Incremental budgeting - is a type of a budgeting process that is based on the
idea that a new budget can best be developed by making only some marginal
changes to the current budget.
● Zero-based budgeting - means budgeting by justifying and approving all
expenses for each accounting period, rather than basing it on your past
spending.
● A favourable variance - is where actual income is more than budget, or actual
expenditure is less than budget.
● Flexible budgeting - is a budgeting process which consists of preparing
multiple budget scenarios that are adjusted for different volumes.
● An adverse variance - is where actual income is less than budget, or actual
expenditure is more than budget.