A-Level Business · Topic 1
Business objectives, finance and decision-making: every key term you need (+ practice quiz)
16 flashcard terms for A-Level Business Topic 1, written to match the course framework. Study them here, then drill them as interactive flashcards, or test yourself with the 8-question quiz — free, no account needed.
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Stakeholder vs shareholder Shareholders own the business; stakeholders are anyone affected by it. The two groups' interests frequently conflict over strategy.
Limited liability Owners' losses are capped at their investment. It encourages risk-taking but requires public disclosure of accounts.
Contribution per unit Selling price minus variable cost per unit. Multiply by units sold and subtract fixed costs to get profit.
Break-even output Fixed costs divided by contribution per unit. The margin of safety is how far current output exceeds it.
Cash flow vs profit Profit is revenue minus costs over a period; cash flow is money actually moving. Profitable firms still fail when cash runs out.
Working capital Current assets minus current liabilities — the money available for day-to-day operations.
Gearing ratio Long-term debt as a share of capital employed. High gearing raises returns in good times and insolvency risk in bad ones.
Economies of scale Falling average cost as output rises. Diseconomies follow when coordination and communication costs outweigh the gains.
Market segmentation Dividing a market by demographics, geography, behaviour or psychographics so the marketing mix can be targeted precisely.
Product life cycle Development, introduction, growth, maturity and decline. Extension strategies delay decline through repositioning or modification.
Ansoff matrix Four growth routes by product and market novelty: market penetration, market development, product development and diversification — rising in risk.
Porter's generic strategies Compete on cost leadership or differentiation, either broadly or in a focused niche. Being stuck in the middle erodes advantage.
Lean production Systematically eliminating waste through just-in-time stock, continuous improvement and cell production, at the cost of low resilience to shocks.
Capacity utilisation Current output as a percentage of maximum output. High utilisation spreads fixed costs but leaves no slack for demand spikes.
Decision tree Maps options against probabilities and payoffs to give an expected value. Only as good as the probability estimates fed into it.
Corporate culture The shared values and norms that shape how decisions actually get made — often the decisive obstacle in a merger or restructuring.
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