Terms

Meaning

Acid Test Ratio

This ratio measures a business’s cash flow. Its formula is:

(Current Assets – Closing Stock) / Current Liabilities

Ideally, the ratio should be 1:1, indicating that for every euro due in the short term, there is one euro available to cover it.

Acquisition

The overall term for acquiring another business through purchase. For example, Lone Star Funds’ purchase of Jurys Inn for €911m.

Advertising

Communicating information about a product or service to the public to promote sales. It can inform, persuade, or remind potential customers.

Agenda

A list of topics to be discussed at a meeting, relevant to the attendees.

Agreement

The first element of contract law. One party makes an offer, and the other party accepts all terms without qualification, forming a binding agreement.

Arbitration

A conflict resolution method where an independent arbitrator listens to both sides and makes a binding decision. For example, the Association of Secondary Teachers of Ireland rejected an arbitrator’s solution as it offered less than their original pay claim.

Articles of Association

Internal rules and regulations of a company, including:

• Share capital breakdown
• Voting rights per share
• Meeting procedures

Batch Production

Manufacturing a limited group of identical goods in various sizes. Production is interrupted, and goods are stored as inventory, such as tins of beans.

Branding

Using a legally registered name as a trademark, granting exclusive rights to the owner. A brand creates a perception of superiority, allowing for premium pricing.

Break-Even

The production point where total costs equal total revenue, resulting in neither profit nor loss. It is a key factor in product pricing.

Business Plan

A document outlining a business’s future goals and strategies. It guides the firm and attracts investors.

Capacity to Contract

The legal ability to enter into a contract. Minors, individuals of unsound mind, or those under the influence of alcohol or drugs lack this capacity.

Cash Flow Forecasts

Cash flows track the difference between incoming and outgoing money. A forecast predicts a firm’s future cash position.

Categories of Industry

The industrial divisions in an economy: primary, secondary, and tertiary. In Ireland, the tertiary sector is dominant.

Channel of Distribution

The path goods take from producer to consumer. For example, direct selling from manufacturer to consumer is common for expensive, specialized products like fitted kitchens.

Community Enterprise

Promoting a proactive and entrepreneurial mindset in the local economy, reducing reliance on multinational investment. It uses a bottom-up, self-help approach with social and economic considerations.

Conciliation

A conflict resolution method where an independent third party, often an Industrial Relations Officer, works with both parties to find a mutually acceptable solution.

Consideration

The benefit exchanged between parties in a contract. For example, a consumer receives goods, and the retailer receives payment. It must be real and transferable but need not be of equal value.

Consumer

A person who uses goods for personal satisfaction, not resale. Consumers aim to fulfill needs and wants within a budget.

Controlling

Stock

Credit

Quality

Comparing results with plans and measuring performance. Corrective action is taken to address deviations affecting objectives. The firm must:

• Set standards
• Compare actual results with plans
• Correct deviations
• Learn from mistakes

Co-operative Relationship

Win-Win Situation

Joint action or effort for mutual benefit. For example, an entrepreneur with a well-researched idea and business plan secures funding from an impressed investor.

Co-operatives

7 Members Minimum

Unique, democratic ownership structures where members are workers, suppliers, or customers with a common interest. Introduced in Ireland for farm produce.

Co-ordination

Linking different departments within an organization to achieve shared objectives, avoiding duplication and conflict. It is part of the leadership process.

Council of Ministers

The main decision-making body of the EU, consisting of one government minister from each member state. Each council focuses on a specific topic, such as the Council of Agricultural Ministers.

Credit Control

Ensures the firm deals with reliable debtors and minimizes bad debts by setting credit limits and timeframes. Effective credit control improves cash flow.

Desk Research (Secondary)

A low-cost market research method using existing information from internal and external sources.

Electronic Data Interchange (EDI)

Using structured documents sent between computers via telephone systems. It requires compatible systems and can be expensive for small businesses. EDI has revolutionized stock control, improved speed and efficiency, reduced paperwork, and minimized overstocking costs. It is also used for electronic money transfers.

Empowerment

Transferring real responsibility to employees, giving them decision-making, control, and accountability. It is an advanced form of delegation.

Enterprise

One of the four factors of production, involving human initiative and moderate risk to combine resources into a business unit. Entrepreneurs identify and exploit niche markets.

Equity

The owner’s stake in a firm, consisting of ordinary shares and reserves.

Ethical Business Practice

Adhering to moral principles that guide actions. Ethics involve value judgments on right and wrong.

EU Directive

Part of the EU’s decision-making process, suggesting law changes but leaving implementation to member states. For example, the Irish government introduced the plastic bag tax in response to an EU directive on waste reduction.

EU Policy

An agreed-upon approach to achieve specific objectives. For example, the Social Policy aims to improve individuals’ lives.

European Commission

Composed of 27 Commissioners, one from each member state. It initiates EU legislation and ensures its application by all member states.

European Parliament

An elected body of 705 members with the power to amend certain laws. It oversees EU activities and establishes committees to investigate problems.

European Union

A group of 27 member states with close economic and political ties. It is a trading bloc with common policies to achieve shared goals.

Exchange Rate

The price of one currency in terms of another. For example, in April 2021, the exchange rate was €1 = 87p sterling.

Exporting

Sending goods and services abroad. Due to Ireland’s small economy, Irish firms often seek overseas markets.

Feasibility Study

An investigative report assessing the viability of a product or project, considering costs, revenues, profits, sales forecasts, contribution, break-even point, and environmental effects.

Global Marketing

Know Standardized and Adapted

Identifying and anticipating consumer needs and wants in a single worldwide marketplace. It includes global product, price, promotion, and place strategies, as exemplified by Coca-Cola.

Goals

An entrepreneur’s objectives, typically focused on maximizing profits.

Grants and Subsidies

A grant is a non-repayable financial aid, usually from the government, to encourage enterprise and initiative, such as feasibility studies and employment grants. A subsidy is a payment to producers to reduce production costs, boosting employment and exports.

Gross Margin

Gross profit as a percentage of sales. The formula is:

(Gross Profit / Sales) x 100

It measures the profit from buying and selling and varies across industries.

Gross Pay

An employee’s pay before statutory deductions (e.g., PAYE, PRSI) and voluntary deductions (e.g., VHI, Christmas club).

Gross Profit

A firm’s profit from buying and selling, excluding expenses. The formula is:

Sales – Cost of Sales

Human Relations

Building positive relationships with people by understanding their needs and behaviors. Courses in communications and psychology can enhance these skills.

Imports

Know Both Visible and Invisible

Goods and services produced in foreign countries and brought into Ireland to meet domestic consumer demand, such as French wine.

Indemnity

The principle that insurance should not result in profit. The insurer aims to restore the insured to their pre-loss position. For example, if a stolen second-hand car is destroyed, the owner does not receive a brand new one.

Indigenous Firms

Native Firms

Businesses established in Ireland by Irish people. Enterprise Ireland supports these firms with employment grants. They are not foreign multinationals but wholly owned Irish companies.

Industrial Policy

A strategy to promote business and employment in the economy, developed in consultation with social partners, such as the National Development Plan.

Industrial Relations

The relationship between employers and employees, including their history of disputes. Good industrial relations are associated with high morale and productivity, while poor relations lead to conflicts and strikes.

Inflation

Know the Consumer Price Index

A sustained rise in the general price level, measured by the Consumer Price Index (CPI). In March 2021, inflation was 0%. It affects employee purchasing power and firm competitiveness.

Innovation

Creating something original to avoid direct competition and establish a unique product offering.

Insurable Interest

The requirement that the insured party have a direct financial interest in the insured item, benefiting from its existence and suffering from its loss. For example, you can insure your own home but not your neighbor’s.

Interest Rates

The cost of borrowing, determined by the supply and demand for money. In the Eurozone, interest rates are set at 0% for all member states and are measured as a percentage.

International Trade

The exchange of goods and services between countries. International trade is crucial for Ireland’s economic development due to its small, open economy.

Internet

A vast network of networks containing information on various topics, including text, images, and diagrams, accessible through websites. The World Wide Web (www) is a subset of the internet and a major information source.

Intrapreneurship

Person Inside the Business and Not the Owner

Acting like an entrepreneur within an existing business. Intrapreneurs develop new ideas, products, and services or improve existing ones, risking their reputation and job security but not their own money.

Investor

A person who provides funding for a project after reviewing the business plan, expecting an adequate return, such as dividends from company profits.

Job Description

Outlines the duties and responsibilities of a job, including title, location, employment conditions, and rewards.

Job Production

Manufacturing a single, unique, expensive product using highly skilled labor. No inventory is kept, as with a designer wedding dress.

Leadership

Know the Styles

The ability to influence and guide others towards achieving goals. Effective leaders positively impact behavior, have recognized authority, and share common objectives with their team.

Limited Liability

Legal protection for company shareholders, limiting their losses to the value of their investment in case of bankruptcy. Personal assets are protected.

Market Research

Primary

Secondary

Gathering, recording, and analyzing information related to the transfer of goods from producer to consumer. It reduces the risk of business failure.

Marketing Mix

The combination of product, price, promotion, and place strategies used by a firm to achieve its targets.

Mass Production

A continuous production method for manufacturing large quantities of cheap goods, such as biros, which are kept in stock.

Memorandum of Association

Used by Designated Activity Companies

A document governing a company’s relationship with the public, containing its name, objectives, share capital details, and director information.

Minutes

A written record of discussions at a meeting, read and voted upon at the next meeting.

Motivation

Recognizing factors that drive people to put energy and effort into their work. Rewards, not necessarily monetary, are essential. Motivation is a management skill influenced by Maslow’s hierarchy of needs and McGregor’s Theory X and Theory Y.

Multiples

Chains of retail outlets, such as Eason’s, that rent or buy space at prime locations. They benefit from cost savings through central bulk purchasing.

Negotiation

Both parties discuss and present their arguments to reach a compromise. If talks fail, alternative conflict resolution methods like arbitration or conciliation may be used.

Net Margin

Net profit as a percentage of sales. The formula is:

(Net Profit / Sales) x 100

It measures efficiency and profitability, as expenses like wages, rent, and advertising are deducted to calculate net profit. Remember: Gross Profit – Expenses = Net Profit.

Net Pay

The amount an employee receives after all deductions from gross pay, paid in cash, check, or electronically.

Networking

Utilizing business contacts to advance one’s business. Sharing ideas and information fosters collaboration and is more effective for survival and expansion than secrecy.

Organization Structure

Arranging a firm’s resources to achieve objectives. Modern structures are flatter with fewer hierarchical layers, such as the matrix structure.

Own Brands

Private label brands produced for large retailers, often using cheaper packaging. For example, Tesco’s Finest and Sainsbury’s Irish whiskey (produced by Cooley distillery).

P21 End-of-Year Statement

Also known as the Balancing Statement, used for claiming tax rebates. It compares the employee’s actual tax paid with the amount they should have paid, revealing underpayments or overpayments.

Performance Appraisal

A systematic evaluation of an employee’s progress, contribution, and effectiveness over a specific period. It assesses current performance and future potential, aiding promotion decisions.

Personal Selling

Typically used for high-quality, expensive items like industrial machines. Face-to-face meetings allow salespeople to present, persuade, and close deals, highlighting product benefits.

Planning

Know the Types

Setting organizational goals and choosing the best course of action to achieve them. It maps out a successful path to targets. For example, Virgin Media’s strategic (long-term) plan is to gain viewers, while Guinness aims to regain the 18-30-year-old market.

Privatisation

Transferring ownership of state bodies to private hands, such as the partial sale of Aer Lingus. It reduces government involvement in commerce.

Proactive People

Enterprising individuals with a go-ahead attitude and willingness to take risks.

Producer

Combines machinery and labor to transform raw materials into finished products for consumers or other producers. For example, McCain frozen foods.

Product Life Cycle

Always Label Diagram Fully

The level of unit sales over time. Product life cycles vary; Guinness stout has a prolonged cycle, while the Walkman in Japan had a three-month cycle.

Proposal Form

An insurance application form containing relevant questions. Applicants must disclose all material facts, such as a thatched roof on a house, to determine the premium.

Prototype Development

A stage in new product development where a mock-up is created for testing to ensure suitability for full-scale production.

Public Limited Company

A company listed on the Stock Exchange, such as Kerry Group, with a minimum of 7 shareholders and transferable shares. It must meet strict Stock Exchange standards for profit levels.

Public Relations

Managing a firm’s relationship with the public and communicating its policies, ideals, products, and services. Publicity, the unpaid mention in media, generates goodwill. Public relations addresses complaints and enhances the firm’s image.

Quality Control

Eliminates rejects early in the production process, reducing waste, satisfying customers, and eliminating defect causes. Firms may earn quality marks for consistent excellence.

Questionnaire

A document used in primary market research to gather information through a series of questions.

Reactive People

Individuals who prefer to wait and see, avoiding risks.

Recruitment

The process of attracting suitable candidates with the necessary skills and personalities to fill vacancies in a flexible firm.

Retailer

A business specializing in a particular trade, directly selling to customers and providing feedback to producers. For example, Smyths toy stores.

Return on Investment (ROI)

Also known as Return on Capital Employed (ROCE), it measures a firm’s overall profitability and efficiency. The formula is:

(Net Profit / (Issued Ordinary Share Capital + Reserves + Long-Term Debt)) x 100

The answer, expressed as a percentage, should be at least 2%, representing the return from a risk-free investment like a bank deposit account.

Risk Management

A planned approach to gather information about uncertain situations, minimize risks, and eliminate them where possible. For example, installing smoke alarms or conducting market research. Once identified, risks can be managed effectively.

Sales Promotion

Gimmicks

Using attention-grabbing methods to attract customers, often in conjunction with advertising. It provides short-term attention through product-related bonuses or incentives.

Selection

The process of choosing the most suitable applicant from a pool of candidates attracted during recruitment. Interviews are the most common selection technique in Ireland.

Service Industry

A sector that provides essential support services to other sectors, such as accounting, legal advice, information technology, distribution, and financial services.

Single Market

A market without barriers and with harmonized rules and policies, such as the Single European Market.

Sole Trader

A person who owns and controls their own business, such as farmers, retailers, hairdressers, plumbers, and carpenters. They do not have limited liability.

Span of Control

The ideal number of subordinates reporting to a superior, typically around 7, but it depends on employee abilities, the nature of the work, and the superior’s capabilities.

Spreadsheet

Software like Excel used for preparing budgets, accounts, payslips, and break-even analysis. Spreadsheets improve speed, accuracy, efficiency, decision-making, and data storage and presentation.

State Enterprise

Government involvement in commerce to provide essential services with a social objective, not primarily for profit. For example, free travel for people over 66 on Bus Eireann.

Stock Control

A system to maintain optimal inventory levels, including buffer stock for emergencies. Electronic Data Interchange (EDI) and Just-in-Time systems improve efficiency and release cash for daily operations.

SWOT Analysis

A pre-planning tool that categorizes a business’s strengths, weaknesses (internal), opportunities, and threats (external), providing structure and improving the planning and organizing processes.

Takeover

When one company acquires a majority stake in another, assuming complete control. For example, IAG’s takeover of Aer Lingus.

Teamwork

An advanced form of delegative participation where workers make key decisions. Employers often initiate teamwork, flattening the organizational structure and giving each member input in decision-making.

Terms of Reference

The purpose and scope of a commissioned report. For example, the Hanley report focused on medical staffing in Irish hospitals. Writers should adhere to these terms for accuracy.

Time Management

Carrying out tasks efficiently within the available time. It involves quantifying tasks, delegating, monitoring, and maintaining discipline.

Total Quality Management

A continuous improvement philosophy and set of practices to enhance customer satisfaction by providing higher quality products and services in a dynamic environment. It strives for zero defects.

Trading Bloc

A group of countries with free trade among themselves and common external tariffs on non-member countries, such as the European Union.

Transnational Company

A company owned by its parent and operating in at least six countries worldwide, such as Dell. They seek cheap labor and raw materials globally. There are 1550 transnational companies in Ireland.

Utmost Good Faith

The requirement for both parties in an insurance contract to disclose all material facts that could influence the insurer’s decision to accept or reject the application or adjust the premium. Examples include a thatched roof on a house, a drunk driving conviction, or heart problems.

Videoconferencing

A system enabling live, virtual meetings via satellite, eliminating travel costs and time. Meetings can be held at short notice, information exchanged, and proceedings recorded.

Wholesaler

A firm that buys in bulk from producers and sells in smaller quantities to retailers, acting as a middleman and providing feedback to manufacturers.

Working Capital

Short-term funding for daily operations, calculated as Current Assets – Current Liabilities. All firms aim for positive working capital.

Working Capital Management

Managing a firm’s cash flow to meet short-term debts and manage stock, debtors, and creditors.

Working Capital Ratio (Current Ratio)

A ratio measuring a firm’s liquidity. The formula is:

Current Assets / Current Liabilities

Ideally, it should be 2:1, indicating that the firm has €2 available for every euro due in the short term.