Unit 7H Glossary
BTEC Level 3 Business Studies. Unit 7: Business Decision Making
'What if' Scenarios - A method of future planning by speculating about possible outcomes and solutions.
Acid test ratio - (current assets - inventories) / current liabilities
Contingency plan - Planned sets of actions that a business will take in the event of a crisis.
Current ratio - current assets/current liabilities
Economic factors - Economic growth (GDP), inflation, unemployment, interest rates, exchange rates, fiscal policy, monetary policy, supply side policy etc
Environmental factors - The physical surroundings of an organisation that can affect its operations. E.g. climate, climate change, availability of resources and pollution.
Fixed asset turnover - Sales revenue / fixed assets Gross profit margin - (Gross profit/sales revenue) x 100
Legal factors - The framework of rules that organisations in an economy must adhere to in order to comply with the law. E.g. consumer protection laws and employment law.
Liquidity ratios - Calculations to measure how well a business can pay their short term debts (liabilities).
Net profit margin - (net profit/revenue) × 100
Opportunities - Features of the external environment that the business can exploit for it's benefit.
Performance ratios - Calculations to measure how well a business converts its assets into revenue.
PESTLE analysis - A method of analysing an external environment by breaking it down into political, economic, social, technological, legal and ethical factors.
Political factors - Government decisions that can have an impact on individuals and organisations. E.g. Tax rates, legislation, membership of trade blocs and war.
Profitability ratios - Calculation to measure an organisation's ability to make a profit in comparison to a range of factors.
Ratio analysis - Methods of measuring a businesses financial performance using calculations.
Return on capital employed = (profit/capital employed) × 100
Sales revenue per employee = Sales revenue / number of employees
Social factors - Factors affecting habits and spending of members of the community such as attitudes to spending and saving, demographics, fashions and trends and attitudes towards ethics.
Strengths - The characteristics of a business that give it an advantage over competitors.
SWOT Analysis - A tool used to analyse both the internal and external environment of a business. It examines the strengths, weaknesses, opportunities and threats.
Technological factors - Innovations in practices, processes and equipment in society that can affect the way in which businesses operate and the types of products customer desire. E.g. automation, e-commerce, mobile communications and social media.
Threats - Features in the external environment that can have a negative impact on the business. Threats - Features in the external environment that can have a negative impact on the business.
Weaknesses - The characteristics of a business that give them a disadvantage compared to competitors.
