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Above the line promotion
Promotion that is carried out through independent media that enable a firm to reach a wide audience easily. These might include newspapers and television.
Absorption cost pricing
\"A good is priced according to the proportion of direct and indirect costs used in the production of the good. The production of the good is costed using absorption costing and then priced accordingly. For example
Absorption costing
\"A method of costing where all the fixed costs (overheads) generated by the production of the good are \'absorbed\' into an individual cost centre. For example
Acid test ratio
Current assets less stock divided by current liabilities.
Activity ratios
Ratios that measure how efficiently a business is using the resources that it has. The most common are stock turnover and the debtor days ratio.
Added value
The difference between the price of the good or service and the total cost of the inputs that went into making it.
Advertising
\"A way of trying to increase the level of demand for a good or service
Alienation
The process where workers become dissatisfied with the work they are doing. This is particularly likely where the tasks are monotonous in nature.
Ansoff matrix
\"A Matrix looking at growth potential of a firms products. It classifies strategies into market penetration
Appreciation
An increase in the value of an asset.
Asset stripping
The process of buying a firm with the intention of splitting all the assets up and selling them. It is most likely where the value of the assets is greater than the market value of the firm.
Assets
Something which a person or firm owns that is of value. Split into fixed and current.
Auditing
The process of checking the financial statements of a firm to see that they give a \'true and fair\' view of the state of the company\'s finances.
Average cost
The amount spent on producing each unit of output. Calculated by dividing the total cost by the level of output.
Average cost pricing
A method of pricing where the firm finds the unit cost of the product and then sets their price by adding a mark-up.
Average earnings
Total earnings divided by those in employment. Usually expressed as an index.
Average rate of return
A technique used for looking at the viability of an investment project. The average annual profit less the capital cost divided by the capital cost expressed as a percentage.
Average revenue
Total revenue divided by the level of output.
Backward integration
A situation when a company merges with or takes over a firm at an earlier stage of the chain of production.
Balance of payments
A record of transactions between a country and their overseas trading partners.
Balance sheet
A financial snapshot of the firm\'s financial situation at a given moment in time (usually the firm\'s year-end).
Bankruptcy
\"A situation where a firms is unable to meet its liabilities
Barriers to entry
\"Barriers that prevent new firms joining into a market. They may be technical
Batch production
\"A method of production where a limited number of identical goods are produced
Below the line promotion
\"Promotion over which the firm has direct control. It includes methods like direct mailing
Benchmarking
A technique used by businesses to try to identify the best practice for production being used in the industry so that they can adopt this method as standard practice for themselves within their own firm.
Book value
The value of assets on the balance sheet. It is the value of assets (generally fixed assets) that the firm has after any depreciation of those assets has been deducted.
Book-keeping
A technique that is used by firms to help them analyse their overall product portfolio and product mix. A grid with market growth and market share on the two axes.
Boston matrix
A technique that is used by firms to help them analyse their overall product portfolio and product mix. A grid with market growth and market share on the two axes.
Bottom line
The actual profit or return that a firm makes on the goods and services it produces.
Brand
The name given by the firm to its product or service.
Brand building
The process of strengthening and developing the brand name of the good or service that the firm is producing to boost demand for it.
Brand image
The impression that consumers have about a particular brand of a good or service.
Brand loyalty
A situation where consumers stick with the purchase of their favourite brand of a particular good or service through choice as they prefer that particular variety.
Branding
The process of developing brand names for a good or service.
Break-even
The level of output where the firm\'s revenues are equal to their costs. Below this point the firm will be making a loss and above it revenue will be greater than costs and they will be making a profit.
Break-even charts
A diagram showing the total revenue and the total cost curves for a business and the level of output where the firm is making neither a profit nor a loss. Below this level of output the firm will be making a loss and above it revenue will be greater than costs and they will be making a profit.
Break-even pricing
A situation where the firm will make neither a loss nor a profit. The price will be set equal to the unit cost of production of the good or service.
Budget
A plan which the firm aims to achieve.
Budget deficit
A situation where the level of spending by the government (public expenditure) is greater than the level of revenue they receive from taxation.
Budget surplus
A situation where the level of spending by the government (public expenditure) is less than the level of revenue they receive from taxation.
Business cycle
\"Shows the movement of the economy over time
Buying economies of scale
A situation where a firm is able to gain from lower average costs at higher levels of output because of the market power they have. An example would be the buying power that supermarkets have over their suppliers.
Capacity
A measure of the maximum amount a firm can produce with the inputs they have.
Capital
One of the four factors of production (an input into the production process) and refers to man made resources.
Capital employed
The total amount of capital that the firm has and is using to produce their goods and services. It is the total figure on the balance sheet.
Capital expenditure
\"Expenditure by firms on machinery
Capital intensive
A production technique is one that uses a high proportion of capital to labour.
Cash
\"One of the current assets of the firm. When added to stocks and debtors
Cash cow
A term given to a product that produces significant revenue because it has a large share of an existing market which is only expanding slowly. One of the four product types in the Boston Matrix.
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