Every term, in one place

The same 71 definitions the lessons link to inline, wherever a sentence uses them — gathered here so a definition is never more than one page away.

A

absenteeismabsenteeism rate: Staff days lost to absence ÷ total staff days available (number of staff × contracted working days), × 100. Forces a real cost either way it's covered — understaffing (lost output) or paid cover (overtime, agency staff) — even on a day when the absent worker's own wage is already committed.
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 rate of returnARR: An investment appraisal method expressing a project's profitability as a single annual percentage: total profit over the project's life, averaged across its years, as a percentage of the initial investment. Unlike net present value, it takes no account of when within the project's life any given cash flow arrives.

B

business ethics: The study of the trade-off a firm faces between maximising profit and acting in line with moral or social values — e.g. paying more for an ethically-audited supply chain, or accepting a lower margin to pay above a legal minimum wage.

C

capital employed: Non-current liabilities + total equity — the whole permanent pool of capital (debt and equity together) funding a business's long-term assets and operations. The shared denominator for both the gearing ratio and ROCE, distinct from revenue, the denominator every profit margin uses instead.
Coase's make-vs-buy logictheory of the firm (Coase), make-or-buy decision, transaction cost theory of the firm: Ronald Coase's answer to why firms exist at all: using the market has its own costs — finding a supplier, negotiating and enforcing a contract — so a firm brings a transaction inside its own boundary (integrates) exactly when that's cheaper than repeatedly dealing with the market for it. The reasoning behind vertical integration being a genuine 'make vs buy' choice, not simply 'bigger is better.'
competitive environment: The specific set of rivals, potential entrants, suppliers, customers and substitute products a firm currently faces, and how that set is shifting over time — the object Porter's five forces and PESTLE both analyse, from different angles.
conglomerate integration: A merger or takeover between firms in genuinely unrelated markets, with no shared supply chain or product. Targets neither cost nor market share directly — the benefit is risk diversification, spreading revenue across markets that don't move together.
consultation: Asking staff for their input before a decision is made, without necessarily handing over the decision itself — the leader can still decide unilaterally after listening.
contributioncontribution per unit, unit contribution: Selling price minus variable cost per unit — the amount each unit sold puts toward covering fixed costs before any profit is made. Once fixed costs are fully covered (at the break-even point), every further unit's contribution becomes pure profit.
corporate culture: The shared values, beliefs, and expected behaviours that shape how decisions actually get made inside a firm day to day — distinct from what a firm's mission statement or org chart formally says should happen.
corporate objectives: The specific, often quantified targets a firm sets to work toward its mission statement — for example a stated market-share or profit target within a stated time frame — turning a broad purpose into something the firm can be held to.
corporate social responsibilityCSR: A firm voluntarily going beyond its legal minimum obligations to consider the impact of its decisions on stakeholders, society and the environment — distinct from business ethics generally, which covers any profit-vs-values trade-off, not only voluntary conduct beyond the legal floor.
corporate strategy: The medium-to-long-term plan a firm chooses to reach its corporate objectives — for example a specific Ansoff's Matrix quadrant or Porter generic strategy — distinct from the short-term tactics that implement it.
critical path analysisCPA, network analysis: A planning technique that sequences a project's activities into a network, calculates the earliest and latest time each stage can be reached, and identifies the minimum time the whole project can take — and which specific activities control that figure.
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

decision treedecision-tree analysis: A diagram that maps a single decision under uncertainty: a decision node (□) where the firm chooses between options, each leading to a chance node (○) where an uncertain outcome branches into weighted possibilities. Solved right to left by calculating each option's expected value, then subtracting its cost to find net gain — the actual figure the decision is made on.
discount factor: The multiplier applied to a future cash flow to convert it into its equivalent value in today's money, calculated as 1 ÷ (1+r)ⁿ for a sum arriving n years from now at discount rate r. Used to build up the present value figures summed in a net present value calculation.
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.

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."
employee share ownershipESOP, employee share scheme: An HR strategy giving staff an equity stake in the business, making them residual claimants on the same capital-employed base ROCE measures — the same owner-manager incentive-alignment mechanism extended to the wider workforce. Linked in a real Pearson examiner-report exemplar (Lush, June 2023) to falling labour turnover.
empowerment: Giving staff ongoing authority to make decisions within their own area of work, rather than a single delegated task — the broadest of the three related non-financial methods.
expected valueEV: The probability-weighted average of a decision's possible payoffs — Σ(probability × payoff) — derived as the long-run average outcome if the same probabilistic choice were repeated many times. Used to solve a decision tree's chance nodes, but assumes the decision-maker is risk-neutral, indifferent between a certain amount and an uncertain gamble of equal expected value.
external stakeholder: A stakeholder affected by a firm's decisions from outside the organisation — customers, suppliers, the local community, government, and pressure groups — as distinct from an internal stakeholder, who is part of the firm itself.
extrapolation: Extending a line of best fit or a trend beyond the range of the data it was actually drawn from, to forecast a value outside that range. Reliability depends entirely on the assumption that the relationship observed within the data continues to hold beyond it — an assumption, not a calculated fact.

G

gearing ratiogearing: Non-current liabilities ÷ capital employed × 100 — the share of a business's permanent capital base financed by long-term debt rather than equity. Measures financial risk specifically, distinct from liquidity: interest on debt is a fixed, contractual obligation that must be paid regardless of trading performance, unlike a discretionary dividend that can be cut.
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

Handy's culture typologyHandy's four cultures, power/role/task/person culture: Charles Handy's classification of organisational culture into four types — power, role, task, person — derived from two questions: how centralised is decision-making authority, and how formally is that authority exercised (written rules vs personal or expert judgement).
Herzberg's two-factor theorytwo-factor theory: Herzberg's finding, from interviewing workers about their best and worst moments at work, that job satisfaction and dissatisfaction come from two separate sets of causes: hygiene factors, whose absence causes dissatisfaction but whose presence doesn't motivate, and motivators, which are the only factors that genuinely raise satisfaction.
horizontal integration: A merger or takeover between two firms making the same product at the same stage of the supply chain — usually direct competitors — which raises the combined firm's market share and moves it further along its LRAC curve toward minimum efficient scale, unlocking internal economies of scale. The integration type competition regulators scrutinise most heavily, since it directly reduces the number of independent competitors.
human relations theoryMayo's human relations theory: Mayo's conclusion from the Hawthorne studies that workers respond to social factors — being consulted, feeling valued, belonging to a group — as well as to pay, directly challenging scientific management's assumption that pay is the whole story.

I

internal stakeholder: A stakeholder who is part of the firm itself — employees, managers, and owners/shareholders — as distinct from an external stakeholder, who is affected by the firm from outside it.

L

labour retention rateretention rate: The number of staff still employed at the end of a period ÷ the number of staff employed at the start of that period, × 100. The complementary measure to labour turnover, though not its exact arithmetic mirror — the two use different denominators (starting headcount vs average headcount), and turnover also counts anyone who both joined and left within the period.
labour turnoverlabour turnover rate, staff turnover: The number of staff leaving over a period ÷ the average number of staff employed over that period, × 100. A high rate signals real, recurring costs — recruitment, training, a temporary productivity dip during onboarding — even though none of them appear as a distinct line on the statement of comprehensive income.
line of best fitbest-fit line, trend line (scatter graph): A single straight line drawn through a scatter graph, by eye rather than by formula on this qualification, positioned as close as possible to as many points as possible with roughly equal numbers above and below it. Used to read values from within the plotted data range (interpolation) or, more riskily, beyond it (extrapolation).
long-run average costLRAC, LRAC curve, long-run average cost curve: Average cost per unit in the long run, when every factor of production — including scale of plant — can be varied. Falls while economies of scale are being captured, reaches its minimum at minimum efficient scale, then rises again into diseconomies of scale: one curve, with economies and diseconomies of scale describing its two ends.

M

Maslow's hierarchy of needshierarchy of needs, Maslow's hierarchy: Maslow's model of five tiers of human need — physiological, safety, social, esteem, self-actualisation — in which a tier only starts motivating behaviour once every tier below it is substantially satisfied.
mission statement: A broad, often aspirational statement of why an organisation exists and what it's ultimately trying to achieve — the starting point corporate objectives are set to work toward, not itself a measurable target.
moral hazardmoral-hazard problem: A change in behaviour that occurs after a contract is signed, because the contract has shifted the cost of a risk onto someone else — an insurer, a deposit guarantee, a taxpayer. Requires no hidden information at the point of signing at all, which is what distinguishes it from adverse selection.
moving averagetime-series analysis, 3-year moving average, 4-quarter moving average, centred moving average: A forecasting technique that smooths a run of past data into a single trend line by averaging consecutive periods, so that random period-to-period fluctuation partially cancels out while the slower-moving underlying trend survives largely intact. A 4-quarter (or any even-period) moving average additionally needs centring — averaging two consecutive uncentred averages — because an even number of periods produces a value that falls between two actual periods, not on one.

N

net present valueNPV, discounted cash flow: An investment appraisal method that converts every future cash flow into today's money using a discount factor, sums the results, and subtracts the initial investment. A positive NPV means the project is worth more, in today's money, than it costs today, after accounting for the return that money could otherwise have earned elsewhere; a negative NPV means the opposite.

O

opportunity cost: The value of the next-best alternative given up by a choice. Baked directly into how economic cost is defined here: total cost already includes the opportunity cost of the owner's capital and effort, which is exactly why breaking even on the accounting numbers (AR = AC) still counts as an acceptable outcome rather than a warning sign.
organic growthinorganic growth, internal growth, external growth: A firm expanding using its own resources and retained profit — new stores, products or markets — without acquiring another company. Slower and lower-risk than growth by merger or takeover (sometimes called inorganic or external growth), and often the only realistic route for a firm that can't access external finance.

P

person culture: A culture where authority sits fully with each individual member, and the organisation exists mainly to support them rather than to direct them — e.g. a barristers' chambers or small professional partnership. The most fully decentralised of Handy's four types.
PESTLE analysisPESTLE, PEST analysis: A scan of six categories of external, industry-wide factor — political, economic, social, technological, legal and environmental — that affect every firm in an industry alike, and say nothing about any one firm's internal position.
power culture: A culture where authority is concentrated in one central figure or small group (often the founder) and exercised informally, through personal judgement and relationships rather than written rules — fast decisions, few procedures, common in small entrepreneurial firms.
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 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.

R

resistance to changeemployee resistance to change, resisting change: Employee or stakeholder opposition to an organisational change, produced by any of several structurally different causes — losing something familiar and valued, fearing a skill will become obsolete, genuinely disagreeing with the change's merits, or simple inertia — each of which needs a different management response (education, participation, negotiation or force), not one universal fix.
ROCEreturn on capital employed: Operating profit ÷ capital employed × 100 — the return a business generates on the whole capital base (debt plus equity) tied up in it, independent of how that return is split between margin per sale and how many times the capital is turned over in a year. Answers a genuinely different question from a profit margin, which divides by revenue rather than capital employed.
role culture: A culture where authority still flows down a defined hierarchy, but is attached to a job's ROLE rather than the person holding it — governed by job descriptions, procedures and rules. Common in large, established bureaucracies; consistent and predictable, but slow to adapt to anything the rulebook didn't anticipate.

S

scientific managementTaylorism, Taylor's scientific management: Taylor's early-20th-century view that workers are motivated by pay alone ('economic man'): management's job is to find the single most efficient way to do a task through time-and-motion study, then pay strictly by output (piecework) so a worker's own self-interest drives them toward the business's desired output.
seasonal variationcyclical variation, average variation: The recurring, period-specific gap between an actual data value and its centred moving-average trend value (actual − trend), calculated for every period a trend value exists for and then averaged across every matching period (e.g. every Q1) so one-off shocks cancel out and a stable seasonal pattern is left. Adding that average variation to an extrapolated trend value turns a general 'the trend is rising' into a forecast for one specific future period — the spec's own wording (3.3.3.1b) calls this the calculation of 'cyclical and average variations.'
shareholder influence: The power shareholders have over a firm specifically because they own it — voting rights at the AGM, the ability to replace directors, and the effect of selling shares on the share price. Formal and backed by ownership, unlike the situational pressure of stakeholder influence.
shareholder theoryshareholder primacy: The view that a firm exists to maximise the return of the people who own it, and that other groups' interests matter only to the extent they affect that return. Associated with Milton Friedman's 1970 argument that a firm's only social responsibility is to increase its profits, within the law.
simple payback periodpayback period, payback: The time taken for a project's cumulative net cash inflow to first equal or exceed its initial investment, found by running a cumulative total year by year and, where the crossing falls partway through a year, interpolating the fraction of that year needed. Ignores everything earned after the payback point and treats every pound the same regardless of when it arrives — it does not account for the time value of money.
SMART objectivesSMART, SMART objective: The test a target has to pass to count as a genuine corporate objective rather than a vague aspiration: Specific, Measurable, Achievable, Realistic, Time-bound. "Grow the business" fails it; "grow UK market share from 12% to 15% within three years" passes.
stakeholder: Any individual or group affected by, or able to affect, a firm's decisions — employees, customers, suppliers, the local community, government and pressure groups, as well as shareholders. Every shareholder is a stakeholder, but not every stakeholder is a shareholder.
stakeholder influence: The power any stakeholder group has to affect a firm's decisions even without an ownership stake — a union's strike threat, a pressure group's boycott, a major customer's threat to switch supplier — informal and situational, not backed by a legal ownership right.
stakeholder theory: The view that a firm exists to balance the interests of everyone its decisions affect — employees, customers, suppliers, the local community, government — not only the people who own it. A genuine theory of the firm's purpose that changes what decision it should make, not just how the decision is described.
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.
strategic decisionstrategic decisions: A long-term, whole-organisation, hard-to-reverse decision typically made at board or senior-management level, and typically requiring a large commitment of financial, physical and human resources.
strong culture: A culture where values and norms are widely shared and deeply held enough that they govern behaviour without needing constant formal rules or supervision — makes behaviour consistent, but also makes the culture harder to change once the environment that built it moves on.
SWOT analysisSWOT: A firm-specific audit combining two internal categories (strengths, weaknesses) with two external categories (opportunities, threats) — unlike PESTLE, which covers external factors only, SWOT deliberately puts a firm's own internal position alongside the environment it operates in.

T

tactical decisiontactical decisions: A short-term, department- or function-level decision that is easily reversed, typically made by a manager running day-to-day operations, and requiring only a small resource commitment.
task culture: A culture where authority shifts to whoever has the relevant expertise for a given project — temporary teams are formed around a task and disbanded once it's complete. A confirmed real exam trap: task culture is not simply 'organising work into tasks' — it specifically means pulling people from different departments for a one-off project, then returning them afterward.
transformative leadershiptransformational leadership: A leadership approach built around articulating a compelling vision and connecting it to what people themselves value, aiming to shift what staff genuinely want rather than merely what they are compensated or compelled to do — the academic literature (Burns, 1978; Bass, 1985) more often calls the same underlying idea 'transformational leadership'.

V

vertical integrationbackward vertical integration, forward vertical integration: A merger or takeover between firms at different stages of the same supply chain — backward (acquiring a supplier, moving upstream) or forward (acquiring a distributor/retailer, moving downstream) — which replaces a market transaction with an internal one, securing an input's cost, quality or supply, or a guaranteed route to the customer.

W

weak culture: A culture where values and norms are not widely or deeply shared, so behaviour is inconsistent and depends heavily on formal rules or direct supervision to stay aligned — a different state from a strong culture, not simply a worse version of one.