Learn business.
Understand the decisions.

A person who organises resources to start or run a business and accepts the associated risks.

Example: A baker rents a unit, hires staff and tests whether local customers will buy her bread.

Watch out: Profit is a possible reward, not a guaranteed outcome.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Goods are physical products; services are activities performed for customers.

Example: A garage sells a tyre (a good) and fits it (a service).

Watch out: Many businesses provide both.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Needs are essentials; wants are things people would like beyond basic necessities.

Example: Food meets a basic need; a particular premium brand may meet a want.

Watch out: Customer preferences depend on the context.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Risk is the possibility of an adverse outcome; reward is a potential benefit from a business decision.

Example: A new shop may earn profit but could lose the owner’s investment if demand is too low.

Watch out: Do not describe every risk as certain to happen.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The difference between a product’s selling price and the cost of bought-in materials and components.

Example: A £12 handmade notebook uses £4 of bought-in materials: £8 added value before labour and other costs.

Watch out: Added value is not the same as profit.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The next best alternative forgone when choosing how to use scarce resources.

Example: Using a spare room as a shop means giving up the rent it could earn as the best alternative.

Watch out: It is the next best alternative, not the sum of every alternative.

GCSE core: AQA · A-level supporting foundation

Land, labour, capital and enterprise are resources used in production.

Example: A farm uses land, workers, machinery and the entrepreneur’s organisation.

Watch out: Capital here means produced resources such as machinery; it is not simply cash.

GCSE core: AQA · A-level supporting foundation

Primary activity obtains natural resources; secondary transforms materials; tertiary supplies services.

Example: A farm, food factory and restaurant operate in different sectors.

Watch out: The sectors describe activity, not whether ownership is public or private.

GCSE core: AQA · A-level supporting foundation

A business owned by one person, normally with unlimited liability.

Example: A sole-trader plumber controls the business but is personally responsible for its debts.

Watch out: A sole trader can employ staff.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A business owned by two or more partners who share responsibilities and returns under their agreement.

Example: Two designers combine skills and money to run a studio.

Watch out: An ordinary partnership normally has unlimited liability; do not confuse it with an LLP.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

An incorporated business whose shares are privately held and not offered to the general public.

Example: A family company can raise finance from agreed shareholders while keeping shares privately held.

Watch out: Private does not mean small, or owned by the government.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

An incorporated company permitted to offer its shares to the public, subject to the relevant rules.

Example: A growing company may access a wider pool of investors but face pressure from shareholders.

Watch out: A plc is not a public-sector organisation; not every plc is stock-exchange listed.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Shareholders’ responsibility for company debts is generally limited to their investment and any unpaid amount on shares.

Example: If a company fails, a fully paid shareholder normally loses the investment rather than having to pay all its debts.

Watch out: Personal guarantees and misconduct can create separate personal obligations.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

An agreement allowing a franchisee to use a franchisor’s brand and business system under specified conditions.

Example: A franchisee pays fees to operate a branded café using the established menu and methods.

Watch out: An established brand may reduce some risks but cannot guarantee success.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

An organisation whose primary purpose is a mission rather than distributing profits to owners.

Example: A charity shop uses its surplus to support its charitable purpose.

Watch out: Not-for-profit does not mean it cannot earn a surplus.

GCSE core: AQA · A-level supporting foundation

An aim is a broad intention; an objective is a more specific target used to guide and assess activity.

Example: A café aims to grow and sets an objective of increasing monthly sales by 10% within a year.

Watch out: Objectives can change with circumstances, such as shifting from growth to survival.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A person or group that affects, or is affected by, a business’s activities.

Example: Staff want secure pay while customers want good value; an owner may want higher profit.

Watch out: A shareholder is one type of stakeholder, not the whole group.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A document setting out a business idea, objectives, market, operations and expected finances.

Example: A start-up uses forecast cash flow and research to explain how it will fund its launch.

Watch out: A forecast is an estimate; planning reduces uncertainty but does not remove it.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The place a business operates, chosen by weighing access to customers, labour, supplies, costs and other needs.

Example: A bakery compares cheaper rent with the number of customers likely to pass each shop.

Watch out: The cheapest premises need not produce the highest profit.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Organic growth expands a business’s own activity; external growth combines with or acquires another business.

Example: Opening another branch is organic; taking over a rival is external.

Watch out: Faster growth may also create integration, funding and management problems.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Reductions in average cost as a business’s scale of operation increases.

Example: A larger bakery may buy flour at a lower price per kilogram.

Watch out: Lower average cost does not necessarily mean lower total cost.

GCSE core: AQA · A-level supporting foundation

Increases in average cost arising from problems associated with a larger scale of operation.

Example: More management layers may slow communication and increase waste.

Watch out: Growth does not automatically cause diseconomies.

GCSE core: AQA · A-level supporting foundation

Marketing, people, operations and finance affect one another rather than operating in isolation.

Example: A promotion raises demand, requiring more stock, staff capacity and cash to pay suppliers.

Watch out: A decision that benefits one function may create pressure in another.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Paying another organisation to carry out an activity that the business could do itself.

Example: A retailer uses a specialist company to operate its delivery service.

Watch out: Specialist expertise may help, but the business loses some direct control.

GCSE core: AQA · A-level supporting foundation

Horizontal integration combines firms at the same stage of production; vertical integration combines different stages of a supply chain.

Example: A bakery buying a rival is horizontal; buying its flour supplier is backward vertical integration.

Watch out: A deal may bring control or scale but creates funding and integration challenges.

GCSE core: OCR · A-level supporting foundation

Expanding into a different area of business activity.

Example: A clothing retailer buys a food business to reduce reliance on a single market.

Watch out: Operating in an unfamiliar market can create additional risk.

GCSE core: OCR · A-level supporting foundation

The features and benefits customers require or value, such as price, quality, convenience and choice.

Example: A commuter café offers quick service because customers have limited time.

Watch out: Different customer groups may value different features.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

New information collected first hand for the research purpose.

Example: A café interviews its customers about opening hours.

Watch out: A biased or small sample can make results misleading.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Information that already exists and is used for a new research purpose.

Example: A retailer reads a published market report before launching a product.

Watch out: Check whether it is recent, relevant and reliable.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Qualitative data describes views or qualities; quantitative data consists of numerical measures.

Example: Comments on packaging are qualitative; 60 of 100 respondents choosing it is quantitative.

Watch out: Numbers alone do not explain why customers made a choice.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Dividing a market into groups with similar characteristics or needs to target them more effectively.

Example: A clothing business targets customers by age, income and lifestyle.

Watch out: People within a segment are not identical.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Positioning competing products on a diagram using two characteristics to identify market positions.

Example: A map using price and quality may suggest a gap for a budget high-quality product.

Watch out: A gap is not proof that demand or profitable production is possible.

GCSE core: Pearson Edexcel · A-level supporting foundation

Rivalry between businesses seeking to attract customers.

Example: Two cafés compete through price, service and product range.

Watch out: A price cut may raise sales volume but reduce the profit earned per sale.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The coordinated decisions about product, price, promotion and place used to serve a target market.

Example: A premium product, price, advertising and distribution should send a consistent message.

Watch out: Place means distribution and customer access, not just the building’s address.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A feature or benefit that distinguishes a product from its competitors in customers’ eyes.

Example: A repair shop offers a same-day guarantee that local competitors do not offer.

Watch out: A difference creates value only if customers care about it.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

An identity and set of associations that help customers recognise and distinguish an offering.

Example: Reliable service can build trust in a delivery company’s brand.

Watch out: A recognisable logo alone does not ensure customer loyalty.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The balance of function, appearance and cost in designing a product.

Example: A reusable bottle must work well, appeal visually and cost an affordable amount to produce.

Watch out: Changing one element can affect the others.

GCSE core: Pearson Edexcel · A-level supporting foundation

A model of how a product’s sales can change through introduction, growth, maturity and decline.

Example: A mature product might be refreshed with new packaging to extend demand.

Watch out: Stages and their duration are not inevitable or identical for every product.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

An action intended to prolong demand for a product rather than let it decline.

Example: A manufacturer adds features or reaches a new customer group.

Watch out: Extra promotion or redesign costs must be considered against likely additional sales.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A portfolio model classifying products by market growth and relative market share.

Example: A cash cow has high relative share in a low-growth market; a star has high share in a high-growth market.

Watch out: Question marks have low share in high-growth markets; dogs have low share in low-growth markets. The model is not a complete investment decision.

GCSE core: AQA · A-level supporting foundation

Setting a price by adding a mark-up to a chosen measure of unit cost.

Example: A £10 cost plus a 20% mark-up produces a £12 selling price.

Watch out: Mark-up on cost is different from profit margin on revenue.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Using a relatively low initial price to attract customers and build market presence.

Example: A new subscription service offers a low launch price in a competitive market.

Watch out: Sales growth may come with low margins and resistance to later price increases.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Charging a relatively high initial price, then potentially reducing it as the market develops.

Example: An innovative product targets early buyers willing to pay more.

Watch out: It depends on differentiation and customer willingness to pay.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Setting prices with reference to competitors’ prices.

Example: A petrol station compares nearby prices when setting its own.

Watch out: A rival’s price may be unprofitable for a business with higher costs.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A product priced below its cost to attract customers who may also buy other products.

Example: A shop discounts a staple below cost hoping customers buy profitable items alongside it.

Watch out: Higher footfall does not ensure the overall basket is profitable.

GCSE core: AQA, OCR · A-level supporting foundation

Communication and incentives intended to inform, persuade or remind customers about an offering.

Example: A local event uses targeted advertising, sponsorship and a sample offer.

Watch out: Choose methods that fit the audience and available budget.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The route through which a product or service reaches customers.

Example: A manufacturer may sell directly online or through wholesalers and retailers.

Watch out: Intermediaries can extend reach but take a margin and reduce control.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Buying and selling goods or services electronically, usually over the internet.

Example: A shop sells online to customers beyond its local area.

Watch out: Wider reach brings delivery costs, competition and service demands.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Percentage change in quantity demanded divided by percentage change in price.

Example: A 10% price increase and 20% quantity decrease give PED = −2, using the stated percentage changes.

Watch out: Use the absolute magnitude to distinguish elastic from inelastic demand; other influences complicate predictions.

A-level foundation · A-level supporting foundation

Percentage change in quantity demanded divided by percentage change in income.

Example: Demand rising 5% as income rises 10% gives YED = 0.5.

Watch out: An estimate can differ across customer groups and periods.

A-level foundation · A-level supporting foundation

A business’s sales divided by total market sales, multiplied by 100 on a consistent value or volume basis.

Example: £2 million sales in a £10 million market gives 20% market share.

Watch out: A growing business can lose share if the total market grows faster.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Tall structures have more management layers; flat structures have fewer layers, often with wider spans of control.

Example: Delayering may speed communication but increase each manager’s workload.

Watch out: Neither structure is always best.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The number of employees directly supervised by a manager.

Example: A supervisor with eight direct reports has a span of control of eight.

Watch out: Do not count everyone in the whole organisation.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The route through which authority and instructions pass in a hierarchy.

Example: Instructions may travel from a director through a manager to a supervisor.

Watch out: More layers can make communication slower.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Assigning authority to carry out a task or make a decision to another person.

Example: A manager lets a supervisor arrange the team’s rota.

Watch out: The delegating manager retains overall responsibility.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Centralisation keeps decision authority near the top; decentralisation gives more authority to lower levels or local units.

Example: Local shop managers choose products suited to their own customers.

Watch out: Local responsiveness must be weighed against coordination and consistency.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

Sharing information so that the intended recipient understands it and can act appropriately.

Example: A shift handover records an unresolved customer issue so the next team can help.

Watch out: Noise, unclear language, wrong channels and too much information can reduce effectiveness.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A job description sets out duties; a person specification sets out the skills and attributes sought.

Example: The description says handle customer orders; the specification asks for relevant communication skills.

Watch out: Do not confuse the role’s tasks with the candidate’s qualities.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Internal recruitment fills a vacancy from existing staff; external recruitment seeks people outside the business.

Example: Promoting an experienced team member is internal; advertising publicly is external.

Watch out: Internal recruitment may motivate staff but leaves another vacancy and offers a narrower pool.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Businesses use arrangements such as full-time, part-time, temporary and flexible work to match needs.

Example: Part-time staff cover busy weekends while permanent staff provide continuity.

Watch out: Flexibility can reduce spare capacity but complicate coordination and training.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The forces that influence an employee’s willingness to work towards goals.

Example: Recognition, responsibility or a bonus may encourage effort in different circumstances.

Watch out: A payment method does not motivate every person in the same way.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Monetary or financially valuable benefits used to reward employees.

Example: Commission links pay to sales; a salary is a regular agreed payment.

Watch out: Commission can encourage sales but may encourage pressure selling if badly designed.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Methods such as recognition, responsibility and varied work intended to make work more satisfying.

Example: An employee helps decide how to organise a project and gains greater autonomy.

Watch out: Responsibility requires suitable support and skills.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Induction introduces new staff to the organisation; on-the-job develops skills while working; off-the-job takes place away from normal duties.

Example: A new recruit learns safety rules, then shadows an experienced colleague.

Watch out: Training costs time and money but may reduce errors and improve retention.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Keeping employees in the business over time.

Example: Better development opportunities may reduce departures and repeated recruitment costs.

Watch out: Keeping every employee is not necessarily the most suitable goal.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Approaches to influencing people, including autocratic direction and democratic participation.

Example: An urgent safety incident may need quick direction; product improvement may benefit from team input.

Watch out: Suitability depends on people, urgency and the decision; no style is universally best.

A-level foundation · A-level supporting foundation

A motivation theory grouping needs from basic and safety needs through social and esteem needs to self-actualisation.

Example: Development opportunities may appeal to an employee seeking achievement.

Watch out: The proposed order is a model, not a rule about every employee.

A-level foundation · A-level supporting foundation

A model separating hygiene factors that can reduce dissatisfaction from motivators such as achievement and responsibility.

Example: Improving poor working conditions may reduce dissatisfaction; meaningful responsibility may build satisfaction.

Watch out: The theory does not imply pay never matters.

A-level foundation · A-level supporting foundation

An approach seeking efficient work methods through task analysis, standardisation and incentives.

Example: A factory studies a repetitive task and links pay to measured output.

Watch out: An approach suited to measurable tasks can neglect autonomy, teamwork and quality.

A-level foundation · A-level supporting foundation

Job production makes a one-off or customised item; flow production makes standardised items in a continuous sequence.

Example: A bespoke table uses job production; a large bottling line uses flow.

Watch out: Flow can lower unit costs at scale but is less flexible and can be disrupted by breakdowns.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Making a group of identical items before changing to another group.

Example: A bakery makes a batch of wholemeal loaves followed by white loaves.

Watch out: Changing batches takes time and can require stock storage.

GCSE core: Pearson Edexcel, OCR · A-level supporting foundation

Output produced per unit of input over a stated period.

Example: 1,000 units made by 10 workers in one week gives 100 units per worker per week.

Watch out: Higher output is not necessarily higher productivity if inputs rise faster.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Using technology to perform tasks with reduced direct human intervention.

Example: A factory uses robots for repetitive assembly.

Watch out: Initial cost, maintenance and the need for training can offset efficiency gains.

GCSE core: Pearson Edexcel, OCR · A-level supporting foundation

An approach that aims to reduce waste while meeting customer needs.

Example: A factory reduces unnecessary movement and overproduction.

Watch out: Reducing waste must not undermine quality or resilience.

GCSE core: AQA · A-level supporting foundation

Obtaining or producing stock close to when it is needed, to reduce inventory held.

Example: A manufacturer schedules components to arrive shortly before assembly.

Watch out: Delivery delays can halt production; reliable suppliers are essential.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

Holding spare or buffer stock to reduce the impact of supply or demand surprises.

Example: A retailer keeps extra stock of a crucial product in case deliveries are late.

Watch out: Buffer stock ties up cash and raises storage or obsolescence costs.

GCSE core: AQA · A-level supporting foundation

A diagram showing stock levels through time, including delivery, usage and buffer levels.

Example: A falling line represents usage; a delivery raises stock.

Watch out: Allow for the time between ordering and receiving stock.

GCSE core: Pearson Edexcel · A-level supporting foundation

Procurement obtains goods and services; logistics manages their movement and storage.

Example: A café chooses reliable milk suppliers and arranges chilled deliveries.

Watch out: Lowest price alone ignores quality, timing and the cost of failures.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Checking output to identify defects or failures to meet required standards.

Example: A producer inspects a sample of finished goods and rejects defects.

Watch out: Inspection finds problems but does not by itself prevent their causes.

GCSE core: Pearson Edexcel, OCR · A-level supporting foundation

Designing and monitoring processes to help prevent defects and achieve consistent standards.

Example: A factory sets process standards and trains staff to follow them.

Watch out: Prevention and inspection can be used together.

GCSE core: Pearson Edexcel, OCR · A-level supporting foundation

An organisation-wide approach in which everyone contributes to meeting quality standards and improving processes.

Example: Teams investigate causes of complaints rather than leaving quality to a final inspector.

Watch out: Training and commitment across the business are needed.

GCSE core: AQA · A-level supporting foundation

Support and interactions before, during and after a purchase that help meet customer needs.

Example: A shop explains product choices clearly and resolves faults promptly.

Watch out: Good service can encourage repeat sales but incurs costs.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Actual output as a percentage of maximum possible output over the same period.

Example: 800 units from a 1,000-unit monthly capacity means 80% utilisation.

Watch out: High utilisation spreads fixed costs but can leave little room for demand surges.

A-level foundation · A-level supporting foundation

Total costs divided by the number of units of output.

Example: £12,000 total costs for 3,000 units gives £4 per unit.

Watch out: Cost reductions must be checked against quality and future capacity.

GCSE core: AQA · A-level supporting foundation

Income from selling goods or services, before subtracting costs.

Example: Selling 200 items at £5 each produces £1,000 revenue.

Watch out: Revenue is not profit or necessarily cash received immediately.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Fixed costs do not change with output within a relevant period and range; variable costs change with output; total costs combine both.

Example: Rent of £500 plus £2 materials per unit gives £900 total cost at 200 units.

Watch out: Fixed does not mean unchanged forever.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Profit occurs when revenue exceeds costs for the period; a loss occurs when costs exceed revenue.

Example: £2,000 revenue less £1,700 total costs gives £300 profit in a simplified example.

Watch out: Profit differs from the cash balance because payment timing and some costs differ.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Revenue minus cost of sales.

Example: £10,000 revenue less £6,000 cost of sales gives £4,000 gross profit.

Watch out: Other expenses still have to be covered.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The profit remaining after cost of sales and the other costs specified in the question are deducted.

Example: At GCSE, follow the question’s expenses: £4,000 gross profit less £2,500 other costs gives £1,500 net profit.

Watch out: Pearson explicitly includes other operating expenses and interest. A-level questions may instead distinguish operating profit and profit for the year.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A profit measure divided by revenue, multiplied by 100 to express it as a percentage.

Example: £4,000 gross profit on £10,000 revenue gives a 40% gross profit margin.

Watch out: Use the stated profit measure, not cost, as the numerator; do not divide by cost.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The output or sales level at which total revenue equals total costs, so profit is zero.

Example: On a break-even chart, find where the total revenue and total cost lines intersect.

Watch out: AQA GCSE requires interpretation, not drawing the chart or using the formula. Assumptions limit the model.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Actual or forecast output minus break-even output.

Example: Sales of 800 units with break-even at 600 give a margin of safety of 200 units.

Watch out: Use the same units and period for both figures.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

Selling price per unit minus variable cost per unit; it helps cover fixed costs and then profit.

Example: £8 price minus £3 variable cost gives £5 contribution per unit.

Watch out: Break-even quantity is fixed costs divided by contribution per unit only when contribution is positive.

GCSE core: Pearson Edexcel, OCR · A-level supporting foundation

Net cash flow is inflows minus outflows; closing balance is opening balance plus net cash flow.

Example: £1,000 opening cash plus £3,000 inflows less £3,500 outflows gives £500 closing cash.

Watch out: Negative net cash flow does not necessarily mean a negative closing balance.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Profit measures revenue less costs; cash flow records money entering and leaving the business.

Example: A profitable credit sale can be recorded before the customer pays.

Watch out: A loan adds cash but is not sales revenue or profit.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Ways of obtaining funds, chosen to fit purpose, duration, cost, control and ability to repay.

Example: Retained profit may fund growth without new debt; it is unavailable if sufficient profit has not been retained.

Watch out: Internal finance is not free of opportunity cost.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A loan provides agreed funds with repayment terms; an overdraft lets an account borrow up to an agreed limit.

Example: A loan may suit equipment; an overdraft may help a temporary cash shortage.

Watch out: Overdraft availability and charges depend on terms; it is not permanent free finance.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

An agreement to receive goods or services now and pay the supplier later.

Example: A retailer buys inventory on 30-day payment terms.

Watch out: Later payment improves immediate cash flow but does not reduce the purchase cost.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Share capital comes from issuing shares; retained profit is profit kept in the business rather than distributed.

Example: New shares raise funds but may dilute existing ownership; retained profit keeps the same owners.

Watch out: A business can earn profit and still lack cash to spend immediately.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Average annual profit from an investment divided by its initial cost, multiplied by 100.

Example: £12,000 total profit over three years on a £20,000 investment gives (£12,000 ÷ 3) ÷ £20,000 × 100 = 20%.

Watch out: If a question gives cash inflows rather than profit, do not assume the same figure: follow its treatment of the initial cost and any residual value.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The income statement reports performance over a period; the statement of financial position reports assets, liabilities and equity at a date.

Example: A lender considers both trading profit and outstanding obligations.

Watch out: Past financial figures do not guarantee future performance.

GCSE core: AQA · A-level supporting foundation

Assets are resources controlled by a business; liabilities are its obligations to others.

Example: Equipment is an asset; a loan owed is a liability.

Watch out: Sales revenue is a flow over a period, not an asset category.

GCSE core: AQA · A-level supporting foundation

Using numerical and non-numerical evidence to compare performance and support decisions.

Example: Compare margins over time and against relevant competitors, alongside customer and staff evidence.

Watch out: Different periods, definitions, scales and samples can make comparisons misleading.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The difference between actual and budgeted figures, interpreted as favourable or adverse for performance.

Example: Costs of £8,000 against £7,000 budget are £1,000 adverse, other things equal.

Watch out: A favourable cost variance may reflect under-spending that harms quality; explain the context.

A-level foundation · A-level supporting foundation

Gross profit minus operating expenses.

Example: £40,000 gross profit less £25,000 operating expenses gives £15,000 operating profit.

Watch out: Interest and tax are not operating expenses in this definition.

A-level foundation · A-level supporting foundation

Liquidity is the ability to meet short-term obligations; current ratio is current assets divided by current liabilities.

Example: £60,000 current assets divided by £40,000 current liabilities gives 1.5:1.

Watch out: Inventory may be hard to sell and receivables may be late; a ratio is not a guarantee.

A-level foundation · A-level supporting foundation

Current assets excluding inventories, divided by current liabilities.

Example: (£60,000 current assets − £20,000 inventory) ÷ £40,000 current liabilities gives 1:1.

Watch out: Interpret with the business model, timing and quality of assets.

A-level foundation · A-level supporting foundation

The time taken for cumulative net cash inflows to recover the initial investment.

Example: A £12,000 investment earning £4,000 net cash each year pays back in three years.

Watch out: Payback ignores later cash flows and, in its simple form, the time value of money.

A-level foundation · A-level supporting foundation

The sum of discounted future net cash flows less the initial investment.

Example: £24,000 total present value less a £20,000 investment gives £4,000 NPV.

Watch out: A positive NPV depends on forecasts and the chosen discount rate.

A-level foundation · A-level supporting foundation

Raising finance through contributions from many people, usually via an online platform.

Example: A start-up raises money from supporters who receive a reward, equity or other agreed return.

Watch out: Funding types differ; reaching a target and satisfying supporters are not guaranteed.

GCSE core: Pearson Edexcel, OCR · A-level supporting foundation

Investment, usually in return for an ownership stake, in businesses with potential for growth.

Example: An investor funds a young company and may provide expertise while seeking a future return.

Watch out: Existing owners may give up part of ownership and control.

GCSE core: Pearson Edexcel · A-level supporting foundation

Obtaining use of an asset through instalment payments, with ownership transferring after the agreed final payment.

Example: A business pays for equipment over time rather than paying the full price immediately.

Watch out: Compare total payments and terms with other ways to obtain the asset.

GCSE core: AQA · A-level supporting foundation

Funds provided for an eligible purpose that normally do not need repayment when conditions are met.

Example: A business applies for support for an eligible project.

Watch out: Eligibility, restrictions and compliance with conditions matter.

GCSE core: AQA · A-level supporting foundation

The change in a figure divided by its original value, multiplied by 100.

Example: Sales rising from £8,000 to £10,000 increase by £2,000 ÷ £8,000 × 100 = 25%.

Watch out: Use the original value as the denominator. A zero original value needs different treatment.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

New or changing technology can alter products, costs, working methods and how customers are reached.

Example: Online ordering may expand reach but require systems, delivery and staff training.

Watch out: Technology creates costs and risks as well as benefits.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Principles about fair and responsible behaviour that shape decisions beyond merely meeting legal requirements.

Example: A business may choose a higher-cost supplier because of better worker treatment.

Watch out: Ethics and short-term profit can conflict; reputation benefits are not guaranteed.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Operating in ways that limit harm and help preserve resources and environmental conditions for the future.

Example: Reducing energy use and waste may lower environmental impact and operating costs.

Watch out: A single environmental claim does not establish the whole business’s sustainability.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The cost of borrowing or reward for lending, usually expressed as a percentage over a specified period.

Example: A higher rate can increase variable-rate loan costs and reduce spending on credit.

Watch out: The effect depends on existing loan terms and the business’s customers.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

An increase over time in the general price level.

Example: Rising input prices may pressure a business’s margin if it cannot raise selling prices.

Watch out: Lower inflation means prices rise more slowly, not necessarily that they fall.

GCSE core: Pearson Edexcel · A-level supporting foundation

Employment and income affect spending power and the labour market from which a business recruits.

Example: Lower local incomes may reduce demand for discretionary purchases.

Watch out: The effects vary by product, location and customer group.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The price of one currency in terms of another.

Example: A stronger pound can make imports cheaper in pounds and UK exports more expensive to foreign buyers, other things equal.

Watch out: Contracts, currency pricing and competitors affect the actual outcome.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

Increasing connections and integration between economies and businesses across countries.

Example: A business sources abroad, sells internationally and faces overseas competition.

Watch out: It brings opportunities as well as supply, ethical and competitive risks.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Imports are purchases from abroad; exports are sales to customers abroad.

Example: A UK retailer imports shoes and a UK manufacturer exports machines.

Watch out: Perspective matters: the same shipment is an export for the seller’s country and an import for the buyer’s.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

A tariff is a tax on imports; a trade bloc is a group of countries with agreements that reduce selected trade barriers.

Example: A tariff can raise an importer’s cost; a bloc may ease trade between its members.

Watch out: Trade agreements differ; membership does not remove all costs or rules.

GCSE core: Pearson Edexcel · A-level supporting foundation

Legal requirements that affect decisions, including consumer protection, employment and health and safety.

Example: Product-safety checks and staff safety training can raise costs but help protect people and reputation.

Watch out: This is syllabus-level learning. For exact current legal duties, use official guidance, not a simplified revision definition.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

The conditions created by rivals and customer choice that influence business decisions.

Example: A new rival encourages a café to review service, price and differentiation.

Watch out: Copying every competitor decision may undermine the business’s own positioning.

GCSE core: AQA, Pearson Edexcel · A-level supporting foundation

Rules intended to protect customers, including product quality and safety and fair treatment.

Example: Meeting relevant quality requirements can reduce complaints and protect the business’s reputation.

Watch out: Exact rights depend on current law and the situation; revision examples do not establish legal duties.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Rules affecting recruitment and employment, such as discrimination, pay, working conditions and safety.

Example: Fair recruitment criteria and safe working arrangements affect staffing and costs.

Watch out: Do not infer current legal thresholds from a general business-study definition.

GCSE core: AQA, Pearson Edexcel, OCR · A-level supporting foundation

Compulsory payments to government that can affect business costs, profits and customers’ disposable income.

Example: Higher taxes on consumer income may reduce demand for some discretionary products.

Watch out: The effect depends on the type of tax and the business; no current tax rate is assumed.

GCSE core: Pearson Edexcel · A-level supporting foundation

An organised group seeking to influence decisions on a particular issue.

Example: A campaign about packaging waste may encourage a brand to change materials.

Watch out: Campaign effects depend on influence, publicity and the business’s response.

GCSE core: Pearson Edexcel · A-level supporting foundation

A framework distinguishing internal strengths and weaknesses from external opportunities and threats.

Example: Experienced staff are a strength; a growing external market is an opportunity.

Watch out: Listing factors is not enough: assess their significance and likely effects.

A-level foundation · A-level supporting foundation

A framework for growth through existing or new products in existing or new markets.

Example: An existing product sold in a new country is market development.

Watch out: Diversification involves new products and new markets; risk depends on the actual context.

A-level foundation · A-level supporting foundation

A framework examining rivalry, entrants, substitutes, buyer power and supplier power in an industry.

Example: A business with few alternative suppliers may face high supplier bargaining power.

Watch out: The framework examines industry pressures, not a guaranteed measure of an individual firm’s profit.

A-level foundation · A-level supporting foundation

Shared values, assumptions and norms that influence how people behave at work.

Example: A business that openly discusses mistakes may encourage learning and improvement.

Watch out: Stated values and actual behaviour can differ.

A-level foundation · A-level supporting foundation

Opposition or reluctance arising from factors such as uncertainty, loss of status, disagreement or self-interest.

Example: Staff may resist automation if they fear job loss or lack training.

Watch out: Communication helps but cannot resolve every conflict or remove every cost.

A-level foundation · A-level supporting foundation

Preparing responses to possible disruptions so the business can act if they occur.

Example: A retailer prepares an alternative supplier if its main supplier cannot deliver.

Watch out: Planning is useful only if people can carry it out and resources are available.

A-level foundation · A-level supporting foundation