Every term, in one place

The same 108 definitions the lessons link to inline, wherever a sentence uses them — gathered here so a definition is never more than one page away.

A

acid test ratioquick ratio: (Current assets − inventories) ÷ current liabilities — the current ratio with inventory removed, because inventory is the least liquid current asset: it has to be sold and then paid for before it becomes usable cash. The stricter of the two standard liquidity ratios.
average variable costAVC: Total variable cost divided by output — the variable-cost component of average cost. A change that shifts only fixed cost (like rent) shifts average cost without shifting AVC or marginal cost at all, a distinction examiners specifically test.

B

bank loan: A sum borrowed from a bank and paid back with interest — a bank needs verifiable evidence (trading history and/or collateral) before lending, which is why it suits an evidenced, established business better than an asset-light start-up.
barriers to entrybarrier to entry, barriers to entry and exit: Obstacles that make it difficult or costly for a new firm to enter a market — the spec names six sources: economies of scale, limit pricing, patents, branding, sunk costs and legal barriers. The same obstacles, viewed the other way round, work as barriers to exit too.
batch production: Producing a group of identical units together — a batch — before switching equipment and materials to produce a different batch of a different item. Spreads the one-off setup cost of each changeover across every unit in the batch, so cost per unit falls as batch size rises, without committing the firm to one standardised product the way flow production does.
budgetbudgeting, budgeted figure: A financial plan for a coming period, agreed in advance, setting a target figure for a revenue, cost or profit line — the fixed point of comparison variance analysis measures actual performance against.
buffer inventorybuffer stock, minimum stock level: The minimum stock level a firm aims never to fall below in normal conditions — a safety margin against unexpected demand or a delayed delivery. On the inventory control diagram it's the floor every delivery is timed to arrive at, not below.
business angelbusiness angels: A wealthy individual who invests their own money directly into an early-stage business in exchange for equity, usually alongside expertise, contacts and mentoring — the human-scale version of venture capital.
business cycletrade cycle, economic cycle: The economy's recurring, wave-like pattern of output over time, moving through four phases — boom (or peak), downturn/recession, slump (trough), and recovery — around a rising long-run trend. A whole-economy pattern over time, not to be confused with a single product's own product life cycle.
business plan: A document setting out how a proposed business intends to operate — its aims, the resources it needs, and its forecasts — used to secure finance, force realistic planning before money is committed, and act as a benchmark once trading starts.

C

capacity utilisation: Current output divided by maximum possible output, times 100 — the percentage of a firm's built capacity actually being used. The Pearson mark scheme accepts the formula alone as a full definition, but explicitly does not accept a description of under- or over-utilisation as answering 'define capacity utilisation.'
capital-intensive production: Production that relies mainly on machinery and automated capital relative to human labour — typically associated with flow production, where a high, stable volume of identical output is needed to justify the upfront cost of specialised equipment.
cartel: A formal or openly-coordinated agreement between firms to fix prices, restrict output, or divide up a market between them — the explicit form of collusion, and (in most jurisdictions, including the UK) illegal.
cash flow: The actual movement of cash into and out of a business's bank account, recorded in the period the money physically moves — not the period the underlying sale or purchase happens in. Genuinely distinct from profit, which is recorded on an accruals basis regardless of when cash changes hands.
cash-flow forecastcash flow forecast: A projection, built up month by month, of a business's expected cash inflows, outflows and resulting closing balance over a future period — its practical value is revealing in advance which future month the balance is projected to run short, while there's still time to arrange finance.
cell production: Organising workers into small, self-contained teams (cells), each responsible for a complete unit or a major sub-assembly using a repeatable process. Recovers much of flow production's process-repetition efficiency at the scale of a single cell, while keeping more of job and batch production's flexibility and worker engagement than a full flow line offers.
collusioncolluding, collude: An arrangement between firms — explicit (a cartel) or tacit (price leadership) — to avoid competing on price, letting them jointly restrict output and raise price closer to what a single monopolist would choose. Profitable for the firms as a group, but structurally unstable, because any individual firm can usually profit further still by secretly breaking the arrangement.
competition policyantitrust policy: Government or regulator rules restricting anti-competitive business behaviour — price-fixing, cartels, collusion, abuse of a dominant market position, anti-competitive mergers — to preserve the price and output outcomes a genuinely competitive market would produce.
competitive advantage: A real, defensible edge over rivals — lower costs than any competitor can match, or a genuinely differentiated product customers will pay more for — that lets a business outperform others selling into the same market. The result of successful product differentiation, not a separate, unrelated achievement.
consumer protection: Legislation setting minimum standards a business must meet in its dealings with customers — product safety, accurate advertising, fair contract terms, refund rights — correcting the information gap between what a seller knows about a product and what a buyer can verify before paying for it.
copyright: Automatic legal protection — no registration required — for an original creative, literary, musical or artistic work, stopping others reproducing it without the creator's permission from the moment it's created. The one intellectual property instrument that doesn't require registering anything.
credit salesale on credit, credit sales, sales on credit: A sale recorded as revenue in the period it is made, but not received as cash until an agreed later date (commonly 30, 60 or 90 days). The most common single reason a profitable period's cash inflow falls well short of its recorded revenue.
crowdfunding: Raising finance from a large number of individual contributors, typically via an online platform, usually in exchange for a reward, an early product, or a small equity stake — spreads the risk a single lender or investor would otherwise have to underwrite alone.
currency appreciationappreciation: A rise in a currency's value against other currencies under a floating exchange-rate regime, caused by market forces rather than a government decision — the floating-regime counterpart to revaluation.
currency depreciationdepreciation: A fall in a currency's value against other currencies under a floating exchange-rate regime, caused by market forces rather than a government decision — the floating-regime counterpart to devaluation.
current ratio: Current assets ÷ current liabilities — a measure of whether a business could, in principle, cover everything it owes within a year using everything it could turn into cash within a year. A ratio on its own means little; it needs comparing against the business's own prior years or a similar business, not a fixed textbook number.

D

difficulties of budgetingdifficulty of budgeting: The practical obstacles to producing an accurate, useful budget — most commonly, that it inherits any error in the sales and cost forecasts it's built from, that thorough preparation (especially zero-based budgeting) costs real management time, and that departments can be incentivised to overstate what they need to make their own budget easier to hit.
diminishing returnslaw of diminishing returns, diminishing marginal returns: A short-run phenomenon: as more of a variable factor (like labour) is added to at least one fixed factor (like a fixed factory size), the extra output from each additional unit eventually starts to fall. Not the same phenomenon as diseconomies of scale, which is a long-run effect with no fixed factor involved at all — a distinction the mark scheme tests directly.
diseconomies of scale: A long-run rise in long-run average cost as output increases, typically driven by coordination and communication costs growing faster than the size of the organisation — more layers of management between the top decision-maker and the factory floor, which is the same principal-agent machinery that drives divorce of ownership from control, not a separate phenomenon.
division of labourspecialisation, specialization: Splitting a production process into narrow, repeated tasks performed by different workers, rather than one worker completing the whole process alone — raises output per worker through practice, saved time, and more scope for innovation, at the cost of monotony and dependence on the rest of the specialised chain. Named explicitly in the spec via Adam Smith's account of it.

E

economies of scaleeconomy of scale, internal economies of scale: A long-run fall in long-run average cost as output increases, because there is no fixed factor being shared more efficiently — there is no fixed factor at all in the long run. A genuinely different mechanism from diminishing returns, even though both are commonly (and wrongly) described as "efficiency going up."
efficiency: In this Business Studies (WBS12) sense — distinct from Economics' allocative, productive and dynamic efficiency: producing at the output where average cost is at its minimum. Falling below or rising above that output raises average cost either way, from spreading fixed costs too thinly or from straining fixed capacity too hard, so 'more efficient' specifically means 'closer to minimum-AC output.'
employee protection: Legislation setting a legal floor under an individual employee's pay and working conditions — minimum wage, maximum working hours, protection from unfair dismissal — correcting the weaker bargaining position an individual worker has relative to the business employing them.
environmental protection: Legislation restricting a business's pollution, waste and resource use, forcing it to bear a cost — a fine, a required filter, a compliance process — that approximates the cost its activity would otherwise impose on third parties for free. The business-legislation response to a negative externality.
exchange rate: The price of one currency expressed in terms of another — how much foreign currency a unit of the domestic currency buys, or vice versa.

F

factoringinvoice factoring, debt factoring: Selling trade receivables (money owed by customers) to a specialist factoring company for a discounted lump sum paid immediately, rather than waiting for customers to pay in full. Converts a delayed, uncertain quick asset into cash sooner, at the cost of the factor's fee — a liquidity tool, not a profitability one.
fiscal policyreflationary fiscal policy, deflationary fiscal policy: The government's own demand-side policy lever, working through government spending (G) and taxation (which changes disposable income and therefore C). Reflationary fiscal policy raises G and/or cuts tax to raise AD; deflationary fiscal policy does the reverse. Decided by the elected government, not the central bank.
fixed costfixed costs, total fixed cost, TFC: A cost that does not change with the level of output in the short run — e.g. rent, insurance, a salaried manager's pay — owed in full even at zero output.
flow productionmass production, continuous production: Continuous, standardised production of identical units moving through a sequence of stages without stopping — the limiting case of batch production where batch size becomes effectively infinite, so the one-off setup cost per unit falls toward zero. Buys the lowest cost per unit at the price of the least flexibility.
franchisingfranchise, franchisor, franchisee: A business relationship in which an established business (the franchisor) allows another person or business (the franchisee) to trade under its name, using its brand and systems, usually for a fee and an ongoing share of revenue. The Define-question mark scheme requires both parts: the grant of permission, and the specific right to trade under the franchisor's name.

G

grantgrants: External finance, usually from a government body or development fund, that never needs to be repaid or exchanged for equity — narrowly targeted at a specific sector, region or activity, and competitively awarded.
gross profit margingross margin: Gross profit expressed as a percentage of revenue: gross profit ÷ revenue × 100. Isolates how much of every pound of revenue is left after the direct cost of the goods or services sold, before overheads, interest or tax are taken out — a measure of pricing and production efficiency, not overall performance.

H

health and safety: Legislation requiring a business to take specific, provable measures preventing injury or harm to employees and customers. A general claim about employee or customer 'wellbeing' alone does not meet the legal — or mark-scheme — definition of this term.

I

intellectual propertyIP, intellectual property rights: Legally-protected ownership of a genuinely original idea, invention, brand identifier or creative work. Covers three distinct legal instruments examined separately, not interchangeably: copyright, patents and trademarks.
internal financeinternal source of finance: Money a business raises from its own existing resources (owner's capital, retained profit, sale of assets) rather than from an outside lender or investor — no interest, no equity given up, but capped by what the business already has.
inventory controlinventory management: A firm's system for managing its stock of raw materials and work-in-progress, built from four numbers on the spec's own diagram — buffer inventory, reorder level, reorder quantity and lead time — each derived from the others rather than chosen independently.

J

job production: Producing a single, unique unit (or a very small, one-off quantity) to a specific customer's exact specification, from start to finish, before starting the next unit. One end of the production-method spectrum: maximum flexibility, but the setup cost of getting ready to produce is never spread across more than one unit, so cost per unit is the highest of the four methods.
just in timeJIT: An inventory system in which materials or components arrive only as they're needed for production, minimising or eliminating buffer inventory. Cuts stock-holding costs and the risk of obsolete stock, but removes the safety margin against a delayed or unreliable delivery — a genuine trade-off, not a free efficiency gain.

K

Kaizencontinuous improvement: TQM's practice of continuous, incremental improvement — many small, regular changes rather than one large, infrequent overhaul. The specific method by which a TQM culture actually improves quality over time, not a synonym for any quality-related improvement.

L

labour-intensive production: Production that relies mainly on human labour relative to machinery — typically associated with job production, low output volumes, and products where human judgement or customisation matters more than unit-cost minimisation.
lead time: The time between placing an order and the delivery arriving — the figure that determines how far above buffer inventory the reorder level has to sit. A longer lead time needs a higher reorder level to cover the same usage rate.
lean production: A production approach aimed at minimising all forms of waste — materials, time, inventory, motion — without cutting output or quality. Just in time and waste minimisation are its two spec-named practices, and together are the spec's route to competitive advantage from lower unit costs.
leasing: Renting an asset (machinery, vehicles, premises) rather than buying it outright — avoids a large upfront capital outlay, and because the leasing company retains ownership, it avoids the collateral problem a purchase-financed asset would raise.
lifestyle business: A business deliberately built and kept at whatever size suits the way its owner wants to live and work, rather than pursued for maximum growth or profit — staying small is the point, not a sign of failure to grow.
limited liability: An owner's liability capped at the amount they invested — typically the value of their shares — because a private limited company or plc is its own legal person and it is the company, not the shareholder personally, that owes the debt.
liquidity: A business's ability to meet its short-term obligations as they fall due — measured with the current ratio and acid-test ratio (2.3.3.2), and genuinely separate from profitability: a profitable business with cash tied up in unsold stock or unpaid credit sales can still be short of liquid cash.

M

minimum wagenational minimum wage, NMW, wage floor: A legal wage floor below which pay cannot fall. In a competitive labour market a binding floor set above equilibrium creates unemployment; under monopsony, a floor set between the monopsony wage and the competitive wage can raise both the wage and employment together by removing the dominant employer's incentive to under-hire.

N

net borrower: A business (or household) whose outstanding debt exceeds its interest-bearing savings, so a rise in interest rates raises its costs, via debt interest, by more than it raises its income. The mirror case of a net saver.
net cash flow: Total cash inflows minus total cash outflows for a single period on a cash-flow forecast. Added to that period's opening balance to give its closing balance, which becomes the next period's opening balance.
net exporter: A business (or country) whose sales into foreign markets exceed its foreign-currency-priced purchases, so its revenue is more exposed to exchange-rate movements than its costs are. A depreciation of the domestic currency benefits a net exporter, since its goods become more price-competitive abroad; an appreciation hurts it.
net importer: A business (or country) whose foreign-currency-priced purchases exceed its foreign-currency-priced sales, so its costs are more exposed to exchange-rate movements than its revenue is. An appreciation of the domestic currency benefits a net importer, since foreign inputs become cheaper; a depreciation hurts it.
net saver: A business (or household) whose interest-bearing savings exceed its outstanding debt, so a rise in interest rates raises its income, via interest earned, by more than it raises its costs. The mirror case of a net borrower.
niche marketniche markets: A small, specific group of customers with a particular need a mass-market product doesn't meet — or a strategy targeting one with a differentiated product, competing on distinctiveness or premium value rather than the low-cost, high-volume advantage a mass-market strategy relies on. Usually fewer direct competitors and room to charge a premium price, at the cost of a genuinely smaller pool of customers to sell to.
non-price competition: Competing for customers by means other than price — quality, advertising and branding, celebrity endorsement, product placement and after-sales service are the spec-named forms. It raises a firm's own costs and can still cut into profit; it isn't a cost-free alternative to a price war.

O

online business: A business operating primarily or entirely over the internet rather than from physical premises — typically lower fixed overheads and a wider customer reach, in exchange for heavy reliance on digital marketing/logistics and intense, low-barrier-to-entry competition.
operating profit margin: Operating profit expressed as a percentage of revenue: operating profit ÷ revenue × 100. Sits between gross profit margin and profit for the year margin — reflects pricing, production cost AND overhead control, but still excludes interest and tax, which are financing and government decisions rather than operating ones.
overdraft: A flexible, short-term method of finance allowing a business to withdraw more than its account holds, up to an agreed limit — suited to smoothing short-term cash-flow gaps rather than funding a large one-off purchase, and priced at a higher interest rate than a loan because of that flexibility.
overtrading: A business expanding sales faster than its working capital can finance the resulting gap between paying suppliers and staff now and collecting from customers later — a genuinely profitable business can still run out of cash and fail this way, because growth itself consumes cash before that growth's own revenue is collected.
owner's capitalpersonal savings: An internal source of finance: the owner's own personal money invested in the business — mark-scheme definition: 'a source of (internal) finance provided by the owner of a business / personal money from the owner.'

P

partnership: A business owned by two or more people — mark-scheme definition, verbatim: 'a (type of) business/organisation owned by two or more people.' By default carries unlimited liability shared between the partners, each normally liable for the whole partnership's debts.
patent: A registered, time-limited legal monopoly over a genuinely new invention or process, letting the inventor be the sole legal seller for a fixed number of years so they can recover their research and development cost before competitors are legally permitted to copy it. Requires formal registration, unlike copyright.
peer-to-peer fundingP2P funding, P2P lending: External finance where an online platform matches individual lenders directly to a borrowing business without a bank acting as intermediary — each lender takes on a small slice of the risk a bank would otherwise underwrite alone.
predatory pricing: Pricing below cost specifically to force an existing rival out of the market — distinct from limit pricing, which targets a potential entrant that hasn't arrived yet rather than a rival that's already competing.
price competition: Competing for customers by changing the price itself — price wars, predatory pricing and limit pricing are the spec-named forms. A promotional discount still counts as price competition, even dressed up as an offer rather than a headline price cut, because the price paid per unit has changed.
price elasticity of demandPED, price elasticity: How responsive quantity demanded is to a change in a good's own price: %ΔQd ÷ %ΔP. Negative for any normal downward-sloping demand curve — elastic below −1, unit elastic at exactly −1, inelastic between −1 and 0 — and it changes continuously along a single straight-line demand curve; it isn't fixed for a good.
private limited companyLtd: A business incorporated as its own legal person, distinct from its owners (shareholders), who hold limited liability and can sell shares privately, to people the company invites, but not to the public.
product differentiationdifferentiated product, differentiation: Making a firm's output a distinct, not perfectly substitutable, alternative to its rivals' — the single assumption separating monopolistic competition from perfect competition. Spec-named as three types: physical (real feature differences), marketing (advertising, branding, packaging), and distribution (shop, online, telephone).
product lead-in timelead time, lead-in time: The time between deciding to produce a new or modified product and that product being ready for the customer. Firms using more flexible methods (job, cell) can typically cut lead-in times for a new design faster than a flow line built around one standardised product — a source of competitive advantage where customer trends move quickly.
productivitylabour productivity: Output per unit of input per time period — most commonly output per worker (or per worker-hour). The same ratio as average product of labour, so it moves average variable cost in the opposite direction: rising productivity divides a given wage bill across more output, lowering cost per unit and widening the price-or-margin room that drives competitiveness.
profit: Total revenue minus total costs for a period — the mark scheme requires both terms stated as TOTAL revenue and TOTAL costs, since 'revenue minus costs' alone is marked too vague. A distinct concept from cash flow: profit is recorded when a sale is made, not when the cash for it is received.
profit for the yearnet profit: The Pearson-spec label for the bottom line of the statement of comprehensive income: operating profit minus interest minus tax. Commonly called 'net profit' in everyday use — both terms describe the same absolute £ figure, not a percentage.
profit for the year marginnet profit margin: Profit for the year (net profit) expressed as a percentage of revenue — the narrowest and most complete profitability measure on the statement of comprehensive income, since it's the only one of the three margins that reflects interest and tax as well as trading performance.
public limited companyplc: A limited-liability company whose shares can be sold to the public on a stock exchange, not only to a private circle of invited investors — the change that lets a stock market flotation raise far more capital than a private share sale.

Q

quality assurance: Building quality checks into every stage of production itself, rather than only at the end — aims to prevent a defect occurring, or catch it before further value is added to a faulty unit. Shifts responsibility for quality onto whoever does each stage, not a separate inspection team.
quality circle: A small group of workers from the same part of a business who meet regularly, typically voluntarily, to identify problems and suggest quality improvements — a specific bottom-up mechanism that feeds a wider Total Quality Management culture, not a synonym for quality control or quality assurance.
quality control: Inspecting finished output for defects after production is complete, and rejecting anything that fails. Catches defects but doesn't prevent them — every rejected unit has already had all its materials and labour spent on it, for nothing.

R

reorder level: The stock level that triggers a new order, set so the order arrives just as stock reaches buffer inventory: reorder level = buffer inventory + (usage rate × lead time). Set it lower and stock runs below the safety margin before delivery; set it higher and stock is ordered earlier than it needs to be.
reorder quantity: The fixed amount of stock ordered each time the reorder level is reached. Together with buffer inventory it sets the maximum stock level on the inventory control diagram: maximum stock = buffer inventory + reorder quantity.
retained profit: Profit a business earned in a previous period and chose to keep rather than distribute, held back specifically to fund future spending — an internal source of finance.

S

sale of assets: Selling something a business already owns and no longer needs — old equipment, an unused building, a vehicle — converting it directly back into cash as an internal source of finance.
sales forecastingsales forecast: Predicting future sales volume or revenue, used to plan production, staffing, cash flow and finance needs — made harder by unpredictable consumer trends, economic shocks and competitor actions, and least reliable for genuinely new products with no sales history.
share capital: Finance raised by selling shares — ownership stakes — in a company; only available to a business that has incorporated as a private limited company or plc, since a sole trader or partnership has no separate legal entity for a share to represent.
social enterprise: A business with mainly welfare or environmental objectives rather than profit maximisation as its main aim — mark-scheme definition, verbatim: 'a business with mainly welfare or environmental objectives rather than maximising profit.' Not the same as a charity, and can be highly profitable.
sole trader: A business owned and run by one person with no formal incorporation required — full control and simplicity in exchange for unlimited liability, since the business has no legal identity separate from its owner.
statement of comprehensive incomeprofit and loss account, income statement: The financial statement that measures a business's profit over a period of time — revenue minus cost of sales minus expenses minus interest minus tax, in stages, ending at profit for the year. Distinct from the statement of financial position, which is a snapshot at a single moment rather than a measure over a period.
statement of financial positionbalance sheet: The financial statement that shows what a business owns and owes at a single moment in time — assets, liabilities and capital — rather than its performance over a period. Current ratio and acid test ratio are both calculated from figures on this statement, not from the statement of comprehensive income.
stock market flotationflotation, IPO: The process of listing a company's shares on a public stock exchange for the first time, converting it from a private to a public limited company — unlocks a far larger pool of potential investors, at the cost of heavier disclosure requirements and exposure to takeover.

T

Total Quality ManagementTQM: A whole-organisation philosophy that every employee, not just an inspection or assurance department, is responsible for quality at every stage — the culture that quality circles feed into and that Kaizen is TQM's specific practice of pursuing.
trade credit: A supplier allowing a business to receive goods now and pay for them later (typically 30, 60 or 90 days) — an automatic, interest-free cash-flow cushion whose real cost is usually the early-payment discount given up.
trademark: A registered brand identifier — a name, symbol, logo or slogan — that legally stops a rival marketing a confusingly similar identifier for a similar product. Protects a brand's identity, not the content of a product itself.

U

unique selling pointUSP, unique selling proposition: A genuine, distinct feature of a product that competitors cannot immediately copy — the same USPs that determine whether price skimming (many USPs, weak competition) or competitive/cost-plus pricing (few USPs, strong competition) is the rational pricing strategy for a firm to choose.
unlimited liability: An owner's personal responsibility, without limit, for every debt their business owes — the default for a sole trader and an ordinary partnership, since neither has a separate legal identity from its owner(s).

V

variable costvariable costs, total variable cost, TVC: A cost that rises directly with the level of output — e.g. raw materials, piece-rate labour, packaging — zero at zero output and rising roughly in proportion to units produced.
variance analysisbudget variance: Comparing a budgeted figure against the actual figure for the same line and period. The variance is favourable if it raises actual profit above the budgeted figure and adverse if it lowers actual profit below it — the same underlying question (impact on profit) landing on opposite-looking verdicts for a revenue line and a cost line.
venture capitalVC: A method of external finance where an investor buys an equity stake in a business in exchange for accepting a higher risk than a bank would — mark-scheme definition: 'a method/source of finance to fund a business where the risk is greater for the investor.' Suits a business with real growth potential but no trading history or collateral to offer a bank.

W

waste minimisation: Reducing the resources (materials, energy, time) used or wasted in production without cutting output — a spec-named source of competitive advantage from lower unit costs, though the waste-reduction method itself is rarely free (giving away near-expiry stock still means forgone revenue, a confirmed real exam misconception).
working capitalnet working capital: Current assets minus current liabilities — the pool of short-term resources a business has to fund its day-to-day operations. Too little risks being unable to pay bills as they fall due; too much means cash is sitting idle rather than earning a return elsewhere in the business.

Z

zero-based budgetingzero-based budget: A budgeting method that starts every line at £0 each period and requires it to be justified fresh from first principles, rather than adjusting the previous period's figure — catches unjustified spending a historical-figures budget would silently carry forward, at the cost of taking far longer to prepare.