Business Glossary

Contained in our glossary are all the main terms used by businesses and their employees on a daily basis. The guide lists the definitions alphabetically and is also useful for business studies students.

Many of these terms are not in a dictionary and below are the definitions and terminology of terms and acronyms that cover finance, marketing, management, internet, money, consulting and much more.

Glossary of Terms

A

Accounts Payable - is the function in an organisation that pays the invoices to suppliers. The accounts payable department was also called bought ledger or purchase ledger because ledgers or books were used before computers were invented.

Accounts Receivable - is the function in an organisation that collects payment of sales invoices from suppliers. The accounts receivable department was also known as the sales ledger department because ledgers were used before computers were around.

Assets - The assets of a company are items physically owned by the organisation and range in the form of liquidity. Physical cash or in a bank account is the most liquid while a building is the least liquid. Assets are typically broken down into fixed assets and current assets.

Examples of fixed assets include furniture, equipment and premises that have a useful life of more than one year. Current assets such as stock or a bank account are more liquid and can realise a cash amount faster.

B

Business Plan - A business plan is a document that shows how a business is going to achieve its objectives from a customer marketing viewpoint and the financial statements to back up the written plan. Typically a business plan contains top-level business strategy, research data, marketing plans, tactical plans and financial forecasts.

A standard business plan written for banks is no more than 20 pages, but a plan to put a company through an IPO might be 100-200 pages.

Bonus or bonuses - A bonus is an additional payment over and above a standard monthly or yearly salary. It can be a fixed amount or a percentage of salary based upon pre-determined targets that are met or exceeded at which point the bonus is triggered and paid.

Some companies such as banks are cancelling bonus schemes in the wake of the credit crunch. Many bonuses were being paid for meeting divisional targets while the overall company made losses.

C

Companies House - Companies House is the organisation within the UK government that hold all information on limited companies in the UK. Those companies inform them of changes to directors, shareholding, addresses and file their accounts each year. See more information on Companies House Direct in our comprehensive guide.

Cashflow or Cash Flow - Cash flow is a financial statement that shows the company's cash balance and movements in and out of its bank account or cash float in a given period. Many companies produce daily, weekly and monthly statements with yearly forecasts. These forecasts show how the business has enough cash to pay its suppliers over the medium to longer term from income earned.

Commission - Commission is an amount earned on the sale of a product. Normally commissions are paid to sales people who might earn a % or fixed element of the sales revenue or profits that make up their monthly salary.

G

Gross Profit - The gross profit is a simple calculation of turnover or sales less cost of goods sold. See more information on gross profit margin and the ratios you can develop.

H

Hits - Although the terms Hits is an outdated term, it's still used to describe how busy a website is. In the early days of the internet, hits were counted rather than unique visitors. A hit is a call to a server to load something to the website and includes every file requested to display a page.

If that page contains 20 images, one page file, three CSS style sheets and two javascript files, then that one page will have requested 26 files from the server resulting in 26 hits.

These days, many browsers cache files on the visitors computer, so next time they visit a page, not all the files are loaded. It's much better to talk about unique visitors and page views than hits.

I

IPO - An Initial Public Offering is the first time a company offers shares for public ownership and the first time it goes to the stock market. During the dot-com boom of the late 1990s, many, many new businesses had IPOs, particularly on the Nasdaq exchange.

L

LLP - The acronym LLP stands for Limited Liability Partnership and is a legal structure for partnerships in the UK. It's used mainly by professional companies, such as accountants or solicitors and means the partners' liability is limited. With an LLP, the liability is limited to the amount of money each partner has invested (whereas a sole trader has no limits, and Limited Companies hold the liability rather than the shareholders or directors).

Read more on Limited Liability Partnerships and LLP including how to set one up.

P

Profit - Profit is the amount expressed as a value that is left over from sales after the deduction of all costs. There are several profit numbers reported that include gross profit, net profit, net profit before income and tax often expressed as earnings before income and tax (EBIT).

PEST Analysis - The PEST acronym stands for political economic and social trends analysis and is used when developing external analysis and goes hand in hand with the SWOT analysis below.

S

SWOT Analysis - The SWOT acronym stands for strengths, weaknesses, opportunities, and threats. The resulting review is a summary of a company's internal and external analysis and used mainly when preparing a business plan or strategic review.

Internal strengths and weaknesses are in direct control of a company, and they can either develop their strengths or reduce their weaknesses.

Opportunities and threats are external forces that a company can only influence as they are not in direct control. Advance SWOT analysis has these shown relative to the competitors analysed. For example, if every company has a "strong sales force", then there is no competitive advantage and that strength would no be shown.

U

Unique Visitors - A unique visitor is one person who has come to a website in a specified period. If one person comes to a website five times during the day, they are only counted as one unique visitor for that day. In this example, total visitors are counted as five.