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IB Business Terms
IB Buisness Terms
276
Business
12th Grade
07/30/2009

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Term
Articles of Association
Definition
Is the name given to the document that sets out the internal organization and rules of a limited company. Deatils may include the powers of each director and voting rules. It is one of the compulsory documents needed to set up a company.
Term
Certificate of Incorporation
Definition
Is the name of the document issued ot a limited company to show that it has been legally formed and is therefore a sperate legal entity from its owners (who have limited liability). Possession of this certificate then allows the company to start trading.
Term
Charities
Definition
Are not-for-profit organizations that are established to support good causes from society's point of view. Exa,ples include the prevention of cruelty to animals, the preservation of cruelty to animals or providing assistance to the elderly.
Term
Company
Definition
Refers to a business that is owned by shareholders. It has been issued a certificate of incorporation, giving it a sperate legal identity from its owners.
Term
Deed of partnership
Definition
Is the legal contract signed by the owners of a partnership. The formal document will include the fundamental issues of the business, such as the name and responsibilites of each partner and their share of any profits or losses.
Term
Incorporation
Definition
Means that there is a legal differende between the owners of a company and the business itself. This ensures that the owners are safeguarded against any losses made by the company as the owners and protected by limited liability.
Term
Business Angel
Definition
Are wealthy and entrepreneurial investors who risk their own money in small to medium sized businesses that have high growth potential. Their hands-on approach, experience and financial investment can have a large impact on the success of business start-ups.
Term
Capital Expenditure
Definition
Is spending by businesses on fixed assets such as purchases of land and buildings. Such expenditure is seen as vital to the growth and survival of businesses in the long run. This type of expenditure is also known as investment expenditure.
Term
Creditors
Definition
Are individuals or organisations that the business owes money to that needs to be settled within the next 12 months. Examples include money owed to a bank for an overdraft or to suppliers for the purchase of stock brought on credit.
Term
Debentures
Definition
Are a type of long-term loan to a business with the promise of fixed annual interest payments to the debenture holders. The vast majority of these loans are also repayable on maturity, although some are indefinite so are classed as permanent capital to the firm as there is no maturity date.
Term
External Financing
Definition
Means getting sources of finance from outside the organisation, such as through dept (for example, overdraft, loans or debentures), share capital, or funding from the government.
Term
Factoring
Definition
Is a financial service whereby a factor (such as a bank) collects debts on behalf of the other business, in return for a fee. The factor will pay, in cash, most of the outstanding debts owed to the business and then chase its debtors for payment.
Term
Leasing
Definition
(or hiring) is suitable if a firm needs to use expensive assets such as equipment or vehicles. The leasing company owns the equipment and hires it out to the customer. As a result, lessees do not have to commit large amounts of their own capital.
Term
Non-recourse debt factoring
Definition
Refers to a financial service where a debt factor, such as a bank, protects its customer against bad debts that might occur.
Term
Overdrafts
Definition
Are a service offered by financial institutions that allow a business to spend in excess of the amount in its account, up to a predetermined limit. This is the cheapest and most flexible form of borrowing for most businesses.
Term
Revenue Expenditure
Definition
Refers to spending on the day-to-day running of a business, such as rent, wages and utility bills.
Term
Sources of Finance
Definition
Is the general term used to refer to where or how businesses obtain their funds, such as from working capital, commercial lenders and/or government assistance.
Term
Working Capital
Definition
Working Capital
Also known as net current assets, is the day-to-day money that is available to a business. It is calculated as the difference between a firm's liquid assets (the value of cash, stocks and debtors) and its short-term debts (such as creditors, tax and overdrafts).
Term
ARR
Definition
Accounting Rate of Return- An investment appraisal technique that calculates the average annual profit of an investment project andis expressed as a percentage of the initial sum of money invested.
Term
Discounted Cash Flow
Definition
An investment appraisal technique that reduces the value of the money that a business receives in future years.
Term
Investment Appraisal
Definition
A financial decision making tool that helps managers to assess whether certain investment projects should be undertaken based mainly on quantitative techniques.
Term
Net Present Value
Definition
An investment appraisal technique that calculates the total discounted cash flows minus the initial cost of an investment project.
Term
Payback Period
Definition
An investment appraisal technique which estimates the length of time that it will take to recoup the initial cash outflow of an investment project.
Term
Qualitative Investment Appraisal
Definition
Refers to judging whether an investment project is worthwhile based on non-numerical means, e.g. whether the project is in-line with corporate culture.
Term
Quantitative Investment
Definition
Refers to judging whether an investment project is worthwhile based on numerical (financial) means, e.g. payback period, accounting rate of return etc.
Term
Assets
Definition
Items owned by a business and have a monetary value. The y can either be fixed assets (owned and not intended for resale within the next 12 months) or current assets (owned and expected to be sued up within the next 12 months)
Term
Cash
Definition
The actual money a business has received from selling its products. It can exists in the form of cash in hand (cash held in the business) or cash at bank (cash held in a bank account). It is the most liquid of a firm's current assets.
Term
Cash Flow
Definition
The transfer or movement of money into and out of an organisation. Cash inflows mainly come from sales revenue whereas cash outflows are items of expenditure.
Term
Cash Flow Forecast
Definition
A financial document that records the actual cash inflows and cash outflows for a business over a specified trading period, usually 12 months. It is often used to prepare a cash flow forecast for the subsequent trading period.
Term
Closing Balance
Definition
The value of cash left in a business at the end of the month, as shown in its cash flow forecast or statement. It is worked out by the formula: Closing balance= Opening balance plus Net cash flow
Term
Current Assets
Definition
Resources that belong to a business that are intended to be used within the next 12 months, such as cash, debtors and stocks
Term
Creditors
Definition
Business that have sold goods or services on credit and will collect this money at a future date. Creditors are often referred to as accounts payable by accountants.
Term
Debtors
Definition
Private customers or commercial customers who have purchased goods or services on credit, so therefore owe the business money that must be paud at a later date. In accounting terms, 'debtors' are often recorded under the heading of accounts receivable
Term
Expenses
Definition
The spending in the working capital cycle of a business, i.e. costs of production such as salaries, raw materials, rent, advertising and distribution
Term
Liabilities
Definition
Debts owed by a business. Current liabilities are short- term debts, such as an overdraft, which need to be repaid within twelve months from the balance sheet date. Long term liabilities, such as mortgages and bank loans, are repayable over a longer period
Term
Liquidity
Definition
The ability of a business to convert assets into cash quickly and easily without a fall in its value
Term
Liquidity crisis
Definition
A cash flow emergency situation where a business does not have enough cash to pay its current liabilities (short- term debts)
Term
Net Cash Flow
Definition
The cash that is left over after cash outflows have been accounted for from the cash inflows. If it is positive, then this means that value of cash inflows exceeds that of cash outflows. Net cash flow can be negative, in which case a business may need to apply for an overdraft
Term
Overheads
Definition
The costs not directly associated with the production process but necessary for providing and maintaining business operations, e.g. lighting, rent, security, insurance and maintenance.
Term
Stocks
Definition
The physical goods that a business has in its possession for further production, (raw materials and unfinished goods) or for sale (finished goods)
Term
Inventories
Definition
The physical goods that a business has in its possession for further production, (raw materials and unfinished goods) or for sale (finished goods)
Term
Working Capital
Definition
The amount of finance available to a business for its daily operations, also known as net current assets, it is calculated as Current Assets minus Current Liabilities
Term
Depreciation
Definition
is the fall in the value of fixed assets over time, such as motor vehicles, computers or machinery. The main cause of depreciation is wear and tear (loss of value due to the asset being used) although some assets can become obsolete (outdated or out of fashion).
Term
Final Accounts
Definition
Also known as published accounts, are the annual financial statements that all limited companies are legally obliged by the authorities to report. These include the Balance Sheet and the Trading, Profit and Loss Accounts.
Term
Fixed Assets
Definition
Are items of monetary value that are owned by a business but are not intended to be sold within the next 12 months. They can be used repeatedly to generate revenue for the business. Examples include land, premises and machinery.
Term
Goodwill
Definition
Is when the value of a firm exceeds its book value (the value of the firm’s assets). It is an example of an intangible asset. Examples of goodwill include the value of a firm’s business contacts (customer base and suppliers) and its reputation. Goodwill therefore raises the value of a business.
Term
Gross Profit
Definition
Is the difference between the sales revenue of a business and its direct costs incurred in manufacturing or purchasing the products that have been sold to its customers. Gross profit is calculated by using sales revenue minus the cost of goods sold. Gross profit is also called trading profit.
Term
Intangible Assets
Definition
Are a type of fixed asset but do not exist in physical form. Examples include: goodwill, copyrights, brand names and registered trademarks.
Term
Net Assets
Definition
Show the value of a business by calculating the value of all its assets minus the long term liabilities. It is often referred to as assets employed and represents the use of funds.
Term
Net Profits
Definition
Is the surplus (if any) that a business makes after all expenses (indirect costs) have been paid for out of gross profit. It is therefore calculated by taking expenses away from the gross profit figure.
Term
Profit and loss account
Definition
Is a financial statement of a firm’s trading activity over a period of time (the balance sheet by contrast shows the financial position of the business at a specific point in time). The profit and loss account is split into three parts: the Trading Account, the Profit and Loss Account and the Appropriation Account.
Term
Shareholder's Fund
Definition
Show the sources of finance of a firm less its long-term liabilities. It includes the capital invested by shareholders (known as share capital), retained profit plus any reserves which it may have accumulated over time.
Term
Trading Account
Definition
Appears at the top section of Profit and Loss Account and shows the difference between a firm’s sales revenue and its direct costs of trading. In essence, the trading account is used to show the gross profit of a business.
Term
Window Dressing
Definition
Also known as creative accounting, refers to the legal act of manipulating financial information to make the results look more flattering.
Term
Acid Test Ratio
Definition
is a liquidity ration that measures the ability of a firm to meet its short-term debts. It differs from the current ratio in that stocks are ignored from the calculation. This is because not all stocks, such as supplies of Ferarri cars or Boeing jumbo jets, can be easily and quickly turned into cash.
Term
Creditor days ratio
Definition
is an efficiency ratio that measures the number of days it takes, on average for a business to pay its creditors. The higher its ratio is, the better it tends to be for the business.
Term
Current Ratio
Definition
is a short-term liquidity ratio that calculates the ability of a firm to meet its debts within the next twelve months. It is worked out by the formula: current assets divided by current liabilities.
Term
Debtor days ratio
Definition
is an efficiency ratio that measures the average number of days it takes for a business to collect the money owed from its debtors. The lower this ratio is, the better it tends to be for the business.
Term
Dividend yield
Definition
is a type of shareholders ratio which shows the dividends received as a percentage of the market price of the share. Investors often use this to compare the relative attractiveness of shares in different companies. They can also compare the ratio to interest rates that can be gained from a bank to assess the risks of investment.
Term
Earnings per share
Definition
is a shareholder ratio which shows the amount of money that stockholders could receive per share if the company is allocated all its after-tax profits to the shareholders. The higher the EPS, the higher the potential return to shareholders.
Term
Gearing
Definition
is a long-term liquidity ratio that measures the percentage of a firm’s capital employed that comes from long-term liabilities, such as debentures and mortgages. Firms that have at least 50% gearing are said to be highly geared.
Term
Gross profit margin
Definition
is a profitability ratio that shows the percentage of sales revenue that turns into gross profit, i.e. the proportion of sales revenue left over after all direct costs have been paid.
Term
Liquid Assets
Definition
refer to the assets of a business that can be turned into cash quickly, without losing their value, i.e. cash, stock and debtors.
Term
Liquidity crisis
Definition
refers to a situation where a firm is unable to pay its short-term debts, i.e. current liabilities exceed current assets and, therefore, the acid test ratio is less than 1:1
Term
Net Profit margin (NPM)
Definition
is a profitability ratio that shows the percentage of sales revenue that turns into net profit, i.e. the proportion of sales revenue left over after all direct and indirect costs have been paid. The difference between a firm’s GPM and its NPM indicates its ability to control business expenses.
Term
Ratio Analysis
Definition
is a management tool that compares different financial figures. It requires the application of figures found in the Balance Sheet and Profit and Loss account of a business. Ratios can be classified into five categories: profitability, efficiency, liquidity gearing and shareholders ratio.
Term
Return of captial employed
Definition
is an efficient ratio (although it also reveals the firm’s profitability). ROCE measures the profit of a business in relation to its size (as measured by capital employed). The higher the ROCE figure, the better it is for a business as it shows more profit being generated from the amount of money invested in the firm.
Term
Stock Turnover
Definition
is an efficiency ratio that measures the number of times a firm sells its stocks within a year. It can also be expressed as the number of days it takes, on average, for a firm to sell all of its stocks. In calculating the stock turnover, the cost of goods sold (rather than the selling price of the stocks) is used.
Term
Batch Production
Definition
Involves producing a collection of identical products (known as a batch). Work on each batch is fully completed before production switches to another batch. It is used where the level of demand for a product is frequent and stead.
Term
Capital Intensive
Definition
Means that the manufacturing or provision of a product relies heavily on machinery and equipment, such as automated production systems. Hence the cost of capital accounts for a higher proportion of a firm’s overall production.
Term
Cell Production
Definition
Is a production method that organises workers into independent ‘cells’ (team). Each cell comprises of multiskilled employees who have responsibility and autonomy in completing a whole unit in the production process.
Term
Flow Production
Definition
Is a form of mass production whereby different operations are continuously and progressively carried out in sequence.
Term
Line Production
Definition
Is a form of flow production whereby a product is assembled in various stages along a conveyor belt (or assembly line) until a finished product is made.
Term
Mass Production
Definition
Is the manufacturing of large amounts of homogeneous (standardized) product. Unit costs of production are relatively low when using mass production methods.
Term
Job Production
Definition
Is a method of production that involves the production of a unique or one-off job. The job is entirely completed by one person (such as a tailor) or by a team of people (such as architects).
Term
Productivity
Definition
Measures the level of labour and/or capital efficiency of a business by comparing its level of inputs with the level of its output.
Term
Production Process
Definition
Also known at the transformation process, refers to the method of turning inputs into outputs by adding value in a cost-effective way.
Term
Purchasing
Definition
Is the buying of raw materials, components and/or equipment needed for the production process. Large firms will often centralize this function to allow the business to negotiate better prices with suppliers in order to gain purchasing economics of scale.
Term
Specialization
Definition
Means the division of a large task or project into smaller tasks that allow individuals to concentrate on one or two areas of expertise. Specialization is an essential part of mass production.
Term
Standardization
Definition
Means producing an identical or homogeneous product in large quantities, such as printing a particular magazine, book or news paper.
Term
Average Cost
Definition
Refers to the amount a firm spend on producing one unit of output. It is calculated by dividing the total costs of production by the quantity produced, or by adding up the average fixed costs and the average variable costs.
Term
Average Revenue
Definition
Is found by dividing a firm’s total revenue by its level of output. It is the same as the price charged since average revenue is the amount of money received for each unit sold.
Term
Contribution
Definition
The difference between sales revenues and total variable costs. The difference is then used to contribute towards payment of fixed costs. Once all costs, fixed and variable, are covered then the firm has made a profit.
Term
Contribution per Unit
Definition
Is found by dividing the contribution of a firm by its sales level (or using the formula Price minus Average Variable Costs). It works out the contribution made by selling a single unit of a product.
Term
Cost Centres
Definition
Are clearly identifiable autonomous parts of an organisation for which costs can be attributed.
Term
Direct Costs
Definition
Are those that are directly linked to the production of a specific product.
Term
Fixed Costs
Definition
Are the costs that do not vary with the level of output. They exist even if there is no output, such as the cost of rent, management salaries and interest repayments on bank loans.
Term
Indirect Costs
Definition
Also known as overheads are costs which do not directly link to the production or sale of a specific product. Examples include rent, management salaries, cleaning staff and lighting.
Term
Profit Centres
Definition
Are clearly identifiable autonomous divisions of an organisation for which both costs and revenues can be worked out.
Term
Revenue
Definition
Refers to the money that a business collects from the sale of its goods and services. It is calculated by multiplying the unit price of each product by the quantity sold.
Term
Semi-variable costs
Definition
Are those that have an element of both fixed costs and variable costs, such as power and electricity.
Term
Variable Costs
Definition
Are those that change in proportion to the level of output, such as raw materials and piece-rate earnings of production workers.
Term
Break Even Chart
Definition
the name given to the graph that shows a firm’s costs, revenues and profits (or losses) at various levels of output
Term
Break even point
Definition
refers to the position on a break-even chart where the total cost line intersects the total revenue line, i.e. where TC=TR
Term
Break-even quantity
Definition
refers to the level of output that generates neither any profit nor loss. It is shown on the x-axis on a break-even chart
Term
Contribution Per Unit
Definition
Is used to work out the break-even quantity. Unit contribution is the difference between the selling price of a product and its variable costs of production. The surplus then goes towards the fixed costs of production.
Term
Margin of Safety
Definition
Refers to the difference between a firm’s level of demand and its break-even quantity. A positive safety margin means the firm can decrease output (sales) by that amount without making a loss. A negative safety margin means that the firm is making a loss.
Term
Profit
Definition
Is the positive difference between a product’s revenue and its costs at each level of output. On a break-even chart, profit can be seen to the right of the break-even quantity.
Term
Special Order Decisions
Definition
Are unique and/or unusual orders for which a customer will pay a price that differs from the norm
Term
Benchmark
Definition
Is the process of identifying best practise in an industry, in relation to products, processes and operations. It sets the standards laid down by the best business in the industry for the organization to emulate.
Term
Computer aided design
Definition
Is the process of using dedicated computer hardware and software in the design process, such as three-dimensional designs of a product.
Term
Computer aided- manufacturing
Definition
Is the process of using sophisticated machinery and equipment in the production process.
Term
International Standards organization
Definition
Is the most prominent global organization for quality assurance. Founded in 1947, the ISO is made up of representatives from around 160 countries.
Term
Kaizen
Definition
Is the Japanese term for ‘continues improvement’. It is a philosophy followed by those who strive for a total quality culture.
Term
Lean Production
Definition
Refers to the approach used to eliminate waste (muda) in an organization. As a result, lean organization benefit from lower costs and higher productivity.
Term
Muda
Definition
Is the Japanese term for wastage. Businesses that strive to achieve lean production try to eliminate the cause of muda, such as time wasting, overproduction, defected products and excess stockpiling.
Term
Quality
Definition
Means that a good or service must be fit for its purpose by meeting or exceeding the exceptions of the consumers.
Term
Quality assurance
Definition
Refers to the method used by a business to reassure customers about the quality of their products in meeting certain quality standards, such as the ISO 9000.
Term
Quality Circles
Definition
Are groups of workers that meet on a regular basis to identify problems related to quality assurance. They then give consideration to alternative solutions to the identified problems, before finally making recommendations to management.
Term
Quality Control
Definition
Is the traditional way of quality management that involves checking and reviewing work process. This is usually carried out by quality controllers and inspectors.
Term
Total quality Culture
Definition
Is a philosophy which occurs in organizations the embed quality in all aspects of business activity, with every employee accustomed to being responsible for quality control and quality assurance.
Term
Total quality management
Definition
Is the process that attempts to encourage all employees to make quality assurance paramount to the various functions (production, finance marketing and personnel) of the organization.
Term
zero defects
Definition
Refers to the objective of producing each and every product with any defects (mistakes or imperfections). The benefits of such an approach are eliminating waste and reworking time (the time taken to correct faults). Achieving zero defects can also lead to be a better reputation for a business.
Term
Assisted areas & enterprise zones
Definition
Are those regions identified by governments to be suffering from a relatively high unemployment and low incomes. Hence, government assistance (thorough the use of financial incentives) is used to regenerate these areas.A
Term
Bulk-Increasing business & Weight-gaining business
Definition
Are those that need to locate near their customers to in order to reduce costs. This is because the products increase in weight during the production process.
Term
Bulk-reducing business
Definition
Are those that need to located near the source of the raw materials because they are heavier (and hence more costly) to transport than the final product
Term
Clustering
Definition
Clustering means that a business located near other organizations which operate in similar or complementary markets.
Term
Footloose corporation
Definition
Refers to a business that does not acquire any cost-reducing advantages apart from locating in a particular location. Therefore, the firm can locate in almost any area
Term
Industrial inertia
Definition
describes the reluctance to relocate due to the inconvenience of moving. Manages who hold this perception believe that the potential consequences and costs of relocation cancel out any end benefits.
Term
Infrastructure
Definition
Is the term used to describe the transportation, communication and support networks of one area.
Term
Location
Definition
refers to the geographical position of a business. The location is a crucial one, and well depend on both quantitative and qualitative factors
Term
Sunk costs
Definition
Are those that cannot be recovered if the business collapses ; such as purchasing the lease and licence fees for a commercial property
Term
Buffer Stack
Definition
Refers to the minimum stock level held by a business in case there are any unexpected occurrences, such as late deliveries of raw materials or a sudden increase in demand for the firm’s product.
Term
Capacity Utilization
Definition
Measures the existing level of output of a firm as a proportion of its total potential output. High capacity utilisation means that the output level is close to the firm’s maximum limit (productive capacity).
Term
Cost-benefit analysis
Definition
Is a financial decision making tool. It compares the financial costs of a decision with the quantitative benefit of that decision.
Term
Electronic Point of Sale
Definition
Is a computerised system that automatically keeps a running balance of stock level and reorders them as and when necessary.
Term
Just-in-case
Definition
Is the traditional stock management system that recognises the need to maintain large amount of stock in case there are any emergencies (such as delayed delivery of stocks) or supply and demand fluctuations.
Term
Just-in-tim
Definition
Is a stock control system system that originated in Japan. Under a JIT system, materials and components are scheduled to arrive precisely when they are needed in the production process.
Term
Lead time
Definition
Measures the amount of time between placing an order and receiving the stock. The longer the lead time, the higher buffer stocks tend to be.
Term
Make-or-buy Decision
Definition
Refers to a situation where a firm has to decide between manufacturing a product and purchasing it from a supplier
Term
Maximum Stock Level
Definition
Refers to the upper limit of inventories that a business wishes to hold at any point in time.
Term
Minimum Stock Level
Definition
Refers to the least amount of inventories that a business wishes to hold. For most businesses this minimum is zero, as a precautionary measure.
Term
Offshoring
Definition
Is an extension of outsourcing by using an overseas firm in another country, as the subcontractor.
Term
Optimum stock level or the Economic Order Quanity
Definition
Refers to the best inventory level for a firm, which ensures that there are sufficient stocks for production to take place without any interruptions, yet also allows the firm to incur only minimal costs.
Term
Outsourcing
Definition
Refers to the practice of using external firms to provide goods or services as a method of reducing costs. Subcontracting should be able to carry out the work for less than the business would be able to, without compromising quality.
Term
Productive Capacity
Definition
Refers to the maximum output of a firm if all its resources were fully and efficiently employed.
Term
Reorder Level
Definition
Refers to the desired level of stock when a new order must be placed. Since there is a time lag between the firm placing an inventory order and it being delivered, the reorder level helps to prevent production problems arising from a lack of stock.
Term
Reorder Quantity
Definition
Refers to the amount of new stock ordered. It can be seen from a stock control chart and is calculated by the difference between the maximum and minimum stock levels.
Term
Copyrights
Definition
Provide legal protection, for a finite period of time, to artists and authors by preventing others from using or plagiarizing their published works without permission.
Term
Cost-Reducing Innovation
Definition
Refers to improved processes that reduce the costs of production for a business or industry.
Term
Diffusion of innovation
Definition
Is Everett Roger's theory that shows the various points at which individual groups of consumers will become involved with a technological innovation.
Term
Incremental innovation
Definition
Refers to minor improvements to products or work processes.
Term
Intellectual property rights
Definition
Are the legal rights to exclusive ownership of certain inventions or pieces of work. Examples include patents, copyrights and registered trademarks.
Term
Innovation
Definition
Means the commercial development, use and exploitation of an invention or creative idea that appeals to customers
Term
Patents
Definition
Provide legal protection, for finite period of time, to the registered producer or user of a newly invented product or process.
Term
Process Innovation
Definition
Refers to changes to the way production takes place.
Term
Product Innovation
Definition
Refers to new creations or the development and improvement of existing products.
Term
Radical innovation
Definition
Refers to rather major and disruptive innovations that tend to involve high risks
Term
Research and development
Definition
Is the technological and scientific research that helps to generate a flow of new ideas and processes
Term
Trademarks
Definition
Are a form of intellectual property right that uses signs or logos to represent a business or its brands and products.
Term
Critical path
Definition
Refers to the most efficient sequence of activities in a project which minimizes the time needed to complete a project. It is usually shown in a network diagram by double-striking (‘//’) the critical activities.
Term
Critical path analysis
Definition
Is a project management tool also known as network analysis which serves to improve the efficiency in the production process by systematically scheduling tasks and resources. The ultimate purpose of CPA is to identify the minimum amount of time needed to complete a project.
Term
Dummry activity
Definition
Also known as a dummy variable, refers to a logical dependency between two indirectly linked tasks in a project. It is used to prevent an illogical path from being followed and is shown by a dotted line on a network diagram.
Term
Earliest start time
Definition
Shows when a particular activity can begin. It is shown in the top right hand part of a node. The EST will depend on the duration of all previous activities.
Term
Float
Definition
Refers to the spare time (if any) that is available. It can be inferred by looking at the difference between the EST and LFT for each activity.
Term
Latest finishing time
Definition
Is the deadlines for a particular activity so that the entire project can be completed in the minimum time. It is shown in the bottom right-hand part of a network node.
Term
Nodes
Definition
Appear on a network diagram and show the start and finish times of each activity within a project. Each node is numbered to identify the sequences of activities in the project.
Term
Project management
Definition
Involves the planning and coordination of a variety of different jobs and tasks in a particular project. It is especially important when dealing with large assignments and jobs.
Term
Appraisal
Definition
Refers to the formal process of evaluating the contributions and performance of an employee, usually conducted through observations and an interview with the appraisee's line manager.
Term
Cascading
Definition
Is the vertical transfer of information in a hierarchy, via meetings between staff at different levels of the hierarchy.
Term
Contract of employment
Definition
Refers to the legal agreement between an employer and employee, detailing the terms and conditions of employment (such as job title, pay and responsibilities of the post holder).
Term
Employment legislation
Definition
Refers to the set of laws that govern employment practices, such as anti-discriminatory behaviour when recruiting, selecting, training and promoting workers.
Term
External recruitment
Definition
Involves recruiting staff from outside the organization to fill vacant posts. This can be done in various ways, such as by headhunting a suitable person or advertising the pos ton the firms own website.
Term
Flexible work patterns
Definition
Means the trend in using less core staff and more peripheral workers (such as part-time staff and consultants) and subcontractors. Such structures improve the flexibility of the workforce.
Term
Human Resource management
Definition
Refers to the role of managers in developing the organizations people ( or human resources). This will include tasks such as the recruitment, selection, dismissal and training and development of employees.
Term
Human Resource planning
Definition
Or work force planning is the management process of forecasting an organizations current and future staffing needs.
Term
Internal recruitment
Definition
Refers to the practice of hiring people who already work for the firm to fill a position, rather than recruiting someone new to the organization.
Term
Job description
Definition
Is a document that outlines the nature of a job i.e the roles, tasks and responsibilities involved in a particular job. It is used for the recruitment and performance appraisal of employees.
Term
Labout Productivity
Definition
Measures the output per worker. The level of labour productivity is an indicator of the current level of skills and motivation of the workforce.
Term
Labour Turnover
Definition
Measures the number of workers who leave a firm as a percentage of the workforce, per year. It is often used to gauge the level of motivation in an organization.
Term
Person Specification
Definition
Is a business document that gives the profile of the ideal candidate for a job, such as their skills, qualifications, experience and other attributes.
Term
Portfolio working
Definition
Means to simultaneously carry out a number of different jobs, often for various employers, usually on a part-time or temporary basis. Examples include freelance editors and management consultants.
Term
Recruitment
Definition
Refers to the process of hiring suitable workers. This will entail a thorough job analysis in order to ensure that the best candidate is hired.
Term
Shamrock organization
Definition
Refers to Charles Handy's idea that organizations are increasingly made up of core (vital) staff who are supported by in-sourced part-time workers and consultants and by outsourced staff and contractors.
Term
Short-listing
Definition
Refers to the process of sifting through applications to identify candidates who are suitable for the job. It is the stage that precedes the interview in the recruitment process.
Term
Teleworking
Definition
Is a method of workforce planning whereby employees work in a location away from the employers workplace, such as those working from home or at a call centre.
Term
Accountability
Definition
Describes the extent to which a person is held responsible for the success or failure of a task.
Term
Bureaucracy
Definition
Refers to the official administrative and formal rules of an organization that govern business activity.
Term
Centralization
Definition
Occurs when the vast majority of decision making is done by a very small number of people, usually the senior management team, who hold onto decision-making authority and responsibility.
Term
Chain of command
Definition
Refers to the formal line of authority, shown in a firm's organizational chart, through which orders are passed down in an organisation.
Term
Dencentralization
Definition
Occurs when some decision making authority and responsibility is passed onto others in the organisation.
Term
Delayering
Definition
The process of removing one of more levels in the hierarchy in order to flatten out the organizational structure.
Term
Delegation
Definition
Refers to the passing on of authority to a person lower down in the organizational structure.
Term
Directors
Definition
Are elected by the shareholders of a company to run the business on their behalf
Term
Flat organization structure
Definition
Means that there are only a few layers in the organizational hierarchy and hence managers have a wide span of control
Term
Flexible Structures
Definition
Are not based on the traditional hierarchical organization of human resources. Instead, such structures enable a business to adapt their human resources when there is a need to respond to rapid change
Term
Formal Groups
Definition
Refers to the official organisation of people based on the needs of the business, such as by function or department
Term
Informal Groups
Definition
Consist of people at work who have formed their own associations based on friendship and/or common interests
Term
Span of Control
Definition
Refers to the number of subordinates that are controlled by a manager ie the number of people who are directly accountable to the manager
Term
Tall Organizational structures
Definition
Means that there are many layers in the organizational hierarchy and hence managers have a narrow span of control.
Term
Communication
Definition
The transfer of information between different people and between business organisations.
Term
Communication Channels
Definition
The methods or routes through which information is passed from the sender to the recipient.
Term
Open Channels of Communication
Definition
Used when information is not confidential and can be shared by anyone.
Term
Restricted channels of Communication
Definition
Used when information is confidential and is directed only to those who need to know.
Term
Communication Network
Definition
A diagram representing the communication structure within an organisation e.g. the wheel, the chain, the Y-chain and the circle.
Term
Formal Communication
Definition
The official channels of communication that are established by an organisation.
Term
Informal Communication
Definition
The unofficial channels of communication naturally established by people from within an organisation, often based on their common interests.
Term
Minutes
Definition
A written record of the issues discussed in a business meeting.
Term
Noise
Definition
Barriers to effective communication causing communication breakdown. e.e.jargon, ignorance, computer failure.
Term
Noise
Definition
Barriers to effective communication causing communication breakdown. e.e.jargon, ignorance, computer failure.
Term
Non-verbal communication
Definition
Any form of communication other than oral communication. E.g. Written, email, body language.
Term
Verbal Communication
Definition
Communication via the use of spoken words such as meetings, interviews and appraisals.
Term
Video-conferencing
Definition
A communication method that allows meetings or conferences via telecommunication networks. The parties can see and hear each other via electronic equipment.
Term
Visual communication
Definition
Communication methods that use visual images and stimuli, such as poster displays and a person’s body language.
Term
Autocratic
Definition
Refers to managers and leaders that adopt an authoritarian style by making all the decisions rather than delegating any responsibility to their subordinates. Instead, the autocratic simply tells others what to do.
Term
Contingency Theory
Definition
Is a leadership model based on the belief that the ‘best’ leadership style for a business depends on a range of interconnected factors, such as the size, skills and abilities of the workforces. There is no single style that suits all business and all employees all of the time.
Term
Democratic leader
Definition
Refers to a decision-maker who takes into account the views of employees. Decision making can therefore be decentralised.
Term
Fayol's Theory of management
Definition
Approaches the study of management by looking at the functions of management. Henri Fayol’s research found that the main functions of management include planning, organising , commanding, coordinate and controlling.
Term
Functions of management
Definition
Refers to the tasks of managers, such as the planning, organizing, directing and controlling of business operations.
Term
Leadership
Definition
Is the skill of getting things done through other people but inspiring, influencing and motivating them.
Term
mangement
Definition
Is the practice of achieving an organisation’s objectives by using the available resources of te business, including its human resources.
Term
Mangement by objectives
Definition
Is a management technique whereby employees set their own objectives, with the help and advice of their manager. Subordinates then decide how they will achieve these targets. Progress towards meeting these objectives is then tracked with follow-up meetings with the manager.
Term
Mangement Style
Definition
Refers to the way in which managers tend to operate, such as in an autocratic, paternalistic, democratic or laissez-faire manner.
Term
Paternalistic
Definition
Managers and leaders treat their employees as if they were family members by guiding them through a process of consultation. In their opinion, they act in the best interest of their workers.
Term
Situation leadership
Definition
Refers to the belief that there is no distinct or unique approach to leadership and management which suits all organisations and all employees. The ‘best’ style depends on different situations, such as the culture and attitudes of managers and workers.
Term
Absenteeism
Definition
Measures the percentage of the workforce not present at work in a given period of time. A high level of absenteeism is a possible sign that there are low levels of motivation and job satisfaction.
Term
Content theories
Definition
Content theories of motivation explain the actual factors that motivated people, i.e. what motivates workers. Herzberg, for example, looked at hygiene factors and motivators, whilst McClelland studied the need for achievement, affiliation and power.
Term
Delegation
Definition
Refers to managers passing on tasks or responsibilities to their subordinates. This can motivate workers who wish to be entrusted with assigned tasks and recognized for their abilities.
Term
Empowerment
Definition
Is a form of non-financial motivator which involves a line manager giving his or her subordinates some autonomy in their job and the authority to make various decision.
Term
Fringe benefits
Definition
Benefits received in addition to a worker's wages or salaries, such as free uniforms, subsidized meals, housing benefit, pension fund contributions and company cars.
Term
Herzberg Theory
Definition
Looked at the factors that motivate employees, namely motivators and maintenance (hygiene) factors.
Term
Hygiene Factors
Definition
Are parts of a job that Herzberg referred to that do not increase job satisfaction but help to remove dissatisfaction, such as reasonable wages and working conditions.
Term
Mayo's Hawthorne effect
Definition
(experiments) found that workers are most motivated and productive when they are able to have some social interaction with their fellow workers and when management take an interest in their well-being. This philosophy formed the basis of the human relations management school of thought and motivation.
Term
Motivators
Definition
Are the factors that Herzberg considered to increase job satisfaction and motivation levels, such as praise, recognition and responsibility.
Term
Job Enlargement
Definition
Refers to increasing the number of tasks that an employee performs, thereby reducing or eliminating the monotony of repetitive tasks.
Term
Job Enrichment
Definition
Form of job enlargement that involves giving workers more challenging jobs with more responsibility. Therefore, workers have better opportunities to express and develop their own ideas.
Term
Job Rotation
Definition
Another form of job enlargement that entails giving workers a number of different tasks of the same level of complexity in a prescribed order. This helps to reduce the problems caused by performing repetitive tasks.
Term
Maslow's hierarchy of needs
Definition
Is a motivation theory that outlines the five levels of needs, from the requirement to satisfy basic physiological needs through to self-actualization. Maslow argued that until a lower order need is met, people cannot progress onto the next level of needs.
Term
McGregor's theory
Definition
Is a theory based on management perceptions of worker attitudes in the workplace. Theory X managers are authoritarian and assume that employees need to be supervised. Theory Y managers assume that employees seek recognition and praise for their contribution and achievements.
Term
Per-formance related pay
Definition
Is a payment system that rewards people who meet set targets over a period of time. The targets can be on an individual, team or organisational basis.
Term
Piece rate
Definition
Is a payment system that rewards employees based on the amount that he or she produces or sells. Pay is therefore directly linked to the productivity level of staff, such as sales people.
Term
Process theories
Definition
Process theories of motivation look at why people behave in a certain manner and how motivation can be maintained or stimulated. These theories look at what people think about when deciding whether or not to put in the effort to complete a task.
Term
Productivity
Definition
Measure the level of output per worker. It is a measure of motivation because employees tend to be more productive with increased levels of motivation.
Term
Remuneration
Definition
The overall package of pay and benefits offered to an employee.
Term
Scientific management
Definition
Was developed by F.W. Taylor who believed that specialization and division of labour would generate greater levels of productivity. Taylor introduced a piece-rate payment system to link pay with productivity levels.
Term
Theory X
Definition
Is McGregor's term for describing managers that perceive their employees in a pessimistic way, i.e. Subordinates need constant supervision, prefer to be told what to do, avoid work if they can, and do not seek any responsibility.
Term
Theory Y
Definition
Is an optimistic management stance towards worker attitudes, as described by McGregor. Theory Y managers believe that employees do have initiative, want praise and recognition for their achievements, and like taking on responsibility at work.
Term
Time Rate
Definition
Is a payment system that rewards employees for the time (rather than output or productivity) that they put into work. Payment is expressed per period of time, e.g. $10 per hour or $5,000 per month.
Term
Adaptive Cultures
Definition
Exist in organizations that receptive to change. Such organization tend to be innovative and are able to foster change.
Term
Corporate culture/organizational cultures
Definition
Describe the traditions and norms within an organization such as: dress code, work ethos and attitude towards punctuality.
Term
Corporate culture/organizational cultures
Definition
Describe the traditions and norms within an organization such as: dress code, work ethos and attitude towards punctuality.
Term
Cultural quotient
Definition
Also known as cultural intelligence, measures the ability of an individual to blend into occupational, organizational and national cultures. CQ is important in a business context as it measures the ability of workers to cope with change.
Term
Culture clash
Definition
Occurs when there is conflict between two or more cultures within an organization. This may exist, for example, when two firms integrate via a merger or a takeover.
Term
Culture clash
Definition
Occurs when there is conflict between two or more cultures within an organization. This may exist, for example, when two firms integrate via a merger or a takeover.
Term
Culture Gap
Definition
Refers to the difference between the existing cultures of an organization and its desired culture. Management will use different strategies to reduce this gap.
Term
Inert Cultures
Definition
Are the opposite of adaptive cultures. As it name suggest inertia is present in such cultures where people are negative about and resistant to change.
Term
Innovative cultures
Definition
Exists in organizations that empower workers to make important decisions and to act on their own initiative.
Term
Person Cultures
Definition
Exist in organizations when staff in similar positions, with similar expertise and training forms groups to share their knowledge and to enhance their own skills.
Term
Power cultures
Definition
Exist when there is one dominant individual or group who hold decision making power. Hence the organizational structure is likely to be flat with a relatively wide span of control for the decision-makers.
Term
Roles
Definition
Exist highly structured organizations with formal rules, policies and procedures. Job roles are clearly stated in formal job descriptions and power is devolved to middle managers.
Term
Task Cultures
Definition
Exist in organizations where the focus is on getting results from the work done. Individuals and teams are empowered and have some discretion over their responsibility.
Term
Arbitration
Definition
Exist in organizations where the focus is on getting results from the work done. Individuals and teams are empowered and have some discretion over their responsibility.
Term
Collective bargaining
Definition
Is the negotiation process whereby trade union representatives and employer representatives discuss issues with the intention of reaching a mutually acceptable agreement.
Term
Concilliation
Definition
Is a process whereby the two parties involved in a dispute agree to use the services of an independent mediator to help in the negotiation process.
Term
Conflict
Definition
Refers to disagreements that result from differences in the attitudes beliefs, values or needs of people. It can also arise from past rivalries and personality clashes (collectively known as internal politics)
Term
Conflict Resolution
Definition
Refers to the course of action taken to resolve conflict and differences in opinion.
Term
Dead lock
Definition
Refers to a situation when there has been a failure to reach a satisfactory compromise in the negotiation process. Hence, deadlocks will tend to lead to industrial disputes.
Term
Employer's associations
Definition
Are organisations that represent the general views and interests of al business within a certain industry by influencing government action and negotiating with trade unions.
Term
Go-slow
Definition
Is a form of industrial action that involves employees working at the minimum pace allowable under their employment contract.
Term
Industrial action
Definition
Refers to the activities taken by employees who are disgruntled by working go-slow, work-to-rule, strike actions and overtime bans. Industrial action is a result of poor employer-employer relationships
Term
Industrial democracy
Definition
Means that employees are given responsibilities and authority to complete tasks, i.e. they have opportunities to be involved in the decision-making process.
Term
Negotiation
Definition
Is a bargaining process whereby separate parties attempt to achieve a mutually acceptable outcome, i.e. a ‘win-win’ situation for those involved.
Term
Single-union agreement
Definition
Refers to an organisation agreeing to participate in the collective bargaining process with single trade union that represents the workers.
Term
Staff associations
Definition
Have a similar role to trade unions (upholding the welfare of their staff members) except that they operate only within an organisation. Hence, the issues dealt with are more relevant to the staff, although their bargaining strength is weaker than that of a trade union.
Term
Strikes
Definition
Are a form of industrial action that involves employees refusing to work. This is usually the result of major industrial unrest such as pay disputes or serious grievances.
Term
Trade Union
Definition
Is an organisation that consists of worker members who unite to protect their rights and well-being in the workplace.
Term
Trade Union
Definition
Is an organisation that consists of worker members who unite to protect their rights and well-being in the workplace.
Term
Walk-out
Definition
Is a form of industrial action that happens when employees independently or collectively leave their place of work as a sign of protest or disapproval of management decisions and actions.
Term
Walk-out
Definition
Is a form of industrial action that happens when employees independently or collectively leave their place of work as a sign of protest or disapproval of management decisions and actions.
Term
Work to rule
Definition
Occurs when employees do the absolute minimum required, as stated in their contracts of employment, i.e. they adhere precisely to all rules and regulations in order to reduce productivity.
Term
Business continuity plans
Definition
Are plans used as part of crisis management in order to minimize the disruptions and damages (physical, psychological and financial) caused by a catastrophe in order for the firm to retain its core operations.
Term
Contingency planning
Definition
Looks at how to deal with a crisis to ensure the continuity of the business. It is about being proactive to change by using 'what if?' questions to identify probable threats.
Term
crisis mangement
Definition
Refers to the response of an organization's management team to a crisis situation. It involves setting up measures to allow instantaneous and constructive actions to be taken in the event of a crisis.
Term
Personal liability
Definition
Means that directors, managers or employees of an organization can be held legally responsible for any catastrophic loss if certain laws and guidelines are not followed, such as ignoring health and safety legislation in the workplace.
Term
Quantifiable risks
Definition
Often referred to as insurable risks, are definite and financially measurable threats to a business, such as fire damage to an organization.
Term
Unquantifiable risks
Definition
Often referred to as uninsurable risks, are threats to a business that are impossible or prohibitively expensive to examine and measure
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