20 Terms Every Business Student Should Know
The world of business is a broad and constantly evolving one, especially as globalisation has allowed in recent years for rapid international market advancement and growth. But with this growth also means that there are a whole range of tricky business terms and acronyms for individuals to grasp, which can be particularly daunting for students who are new to the subject.
When you pursue your studies as a business student, you’ll develop a strong understanding of business, finance, and marketing. But you’ll also be expected to understand and use the types of business vocabulary associated with these sectors interchangeably.
Familiarise yourself with our list of 20 business key terms and their definitions so you have an all-round understanding of the most important concepts ahead of your future studies.
Let’s begin our list by thinking about where businesses operate; the place where businesses and buyers come together. We’re talking about the market. Quite simply, a market is anywhere where these two come together to transact with each other.
Traditionally, we think of a market as a physical setting where buyers and sellers interact in one place. And it’s important to note that this does still happen, of course. However, more recently, the term ‘market’ has come to have a much wider relevance. For example, a market could be online, on a company’s site, or even on their eBay store. Just remember that it’s anywhere where the brands come to sell their products or services, and the audience are carrying out that transaction.
2. Target Market
As the name suggests, a target market is the group of customers or consumers that a company believes will target their selling efforts - that is, the primary audience/buyers for its goods or services. Once a target market has been identified, a company will then direct their marketing efforts towards those people to sell the product or service.
A target market is usually chosen after identifying a company’s current customer base. This may be quite a diverse group of people, especially if a company operates internationally. However, there’s usually at least one or two common characteristics that unify those customers, such as their age group, interests, education levels, or gender.
3. Brand Awareness
In terms of business vocabulary, the phrase brand awareness is commonly used amongst marketing teams, which is used to describe how well a company’s target market knows a company by its product or name.
If someone asked you to think about buying a new pair of trainers, what brand would you think of? Brand awareness is all about companies making sure consumers think about their brand when thinking about where to make a purchase or use a service.
Creating brand awareness is a key step in business, helping companies to be the leaders in the market and sell more products and services. Ideally, this is usually achieved through brands highlighting the qualities that distinguish them from their competitors.
Students who are passionate about starting their own company in the future should ensure they are familiar with the business term, entrepreneurship.
You may already have an insight into what it means, as the term ‘entrepreneur’ is commonly used today to describe individuals who are passionate about creating new business opportunities for themselves and their companies.
Entrepreneurship is a very easy piece of business vocabulary to familiarise yourself with, referring to the courageous act of developing and managing a new business venture. Essentially, the term is used to describe anyone who starts a new business, which are commonly referred to as ‘start-ups.’
In its broadest sense the business term ‘marketing’ refers to activities a company carries out to promote the buying or selling of their brand and products or services. At its core, marketing looks to take a company’s goods and services, identify its target market, and then draw the customers’ attention to that product or service.
Marketing is a very broad business term in that it can refer to almost any activity that is used to promote that company and their products. For example, marketing can encompass everything from billboard advertising and physical flyers, to social media posts, customer emails, influencer collaborations, and other types of digital marketing.
As an aspiring business student, get ready to familiarise yourself with lots of acronyms, as they float up everywhere. One of the most popular shortened business terms is ‘USP’ which stands for ‘unique selling proposition.’ In other words, a USP is what makes a company’s particular product or service unique from their competitors.
Usually, USPs are decided on in the initial stages of a business being set up, with business owners looking to see where their product stands out for their target market - that is, what is going to make them buy their product above the next competitor. USPs are commonly used by marketing teams, who work hard to highlight the reasons why customers should choose them over another company.
7. Balance sheet
In business terms, a balance sheet is a financial statement that reports any assets or liabilities a company has, as well as a shareholder’s equity at a specific point in time. Essentially, it provides a snapshot of what a company owns and owes, as well as the amount invested by any shareholders.
A balance sheet is used alongside other important financial statements, such as ‘profit & loss’ and ‘cash flow’ statements to help understand a company’s financial position and make future decisions about budgets, investments, and pricing.
When we think of the word ‘forecast,’ most people think about weather forecasts which look ahead to predict what the weather will be like in the future. Similarly, in business terms, forecast is used to predict various aspects of a company’s future based on its current situation and plans for product development, marketing efforts, and many other aspects.
However, unlike the weather, business forecasts are usually over a much longer period of time, over months even several years. It really does depend on what a company is trying to predict. Business forecasts can take many different forms, such as sales forecasts or cashflow - all critical predictions to ensure business owners can take the necessary steps to ensure their company is successful.
9. Consumer Law
Moving into the legalities surrounding companies, the business term ‘consumer law’ is one that every student needs to understand. Mainly consumer law exists to provide protection to the consumer against issues such as fraud or mis-selling when they purchase a product or services. However, it also protects organisations from issues such as copyright infringement or intellectual property rights theft.
Consumer law is one of the business key terms students should familiarise themselves with. Whether you’re working in a business and need to abide by certain rules and regulations of this directive, or are a frustrated customer wanting to know your rights to credit after a transaction, consumer law can be and should be known by every person in the world.
Procurement is a key business term for product-based businesses, referring to the act of obtaining goods or services for business purposes. This could be anything from purchasing raw materials to make goods, or arranging contracts with hauliers to mass transit items to international markets.
In terms of business success, procurement is a key part of a company’s strategy, because the ability to purchase certain services or materials can determine if company operations will be profitable.
The process can fall into several different categories, depending on its stage or requirements. From start to finish, the process requires preparation, solicitation, and payment processing, which usually involves more than one area of a company.
Typically, procurement budgets are given to managers with a specific value they can spend on the goods and services they need. However, for some larger companies that require significant procurement, they can even hire a specific individual to fulfil the role.
Does the type of business you want to work in supply goods or services to other businesses? If so, you will be operating a business-to-business (B2B) organisation. This means all business transactions are conducted between companies, rather than between a company and an individual customer.
B2B transactions tend to make up part of a supply chain, where one company will purchase materials or services from one company which are used to manufacture a product or service that they will then go on to sell to other businesses or even consumers.
Alternatively, if you are a B2C business, this means you supply goods and services directly to an end-user or consumer. B2C companies have grown significantly since the internet boom of the 1990s, when online shopping became far easier to access by people all over the world.
In business vocabulary, an asset refers to an item of value which is owned by a company. Business assets span many categories and can be classified as anything including; physical, tangible goods, such as vehicles, office equipment, office furniture, computers, and real estate; or intangible assets, such as intellectual property, patents, copyrights, licences, and trademarks.
Generally, assets can be categorised depending on their type and convertibility into cash:
- Current assets - those with a shorter lifespan and easily transferable into cash - also known as tangible assets which are physical or material goods
- Fixed assets - which are intended for long-term use and are unlikely to convert quickly into cash - also commonly referred to as intangible assets due to their non-material substance but clear value to businesses.
Over time, any fixed assets a company owns will slowly decrease in value due to wear and tear, and eventually, cease to be useful or operational. In business terms, depreciation is the tool used by companies to record the reduction in the original value of an asset.
Depreciation is recorded every year on a company’s profit and loss sheet until it becomes unusable. On a balance sheet, the original cost of the fixed asset is shown to reduce by the amount of depreciation each year.
There are two main types of depreciation:
- Straight line depreciation- where the same amount is deducted every year, e.g. £20 per year
- Reducing balance depreciation - where the same percentage of an asset’s value is taken off each year, e.g. 20%
Most businesses tend to record asset depreciation as straight line depreciation, however many argue that the reducing method is more appropriate as it reflects the fact that most assets will lose most of their value within the first few years of use.
You may already be familiar with or have at least heard of an audit before, particularly because it is so often used within the financial and accounting worlds. However, for those looking to study business, audits are one of the business key terms, referring to a company’s financial statement.
For businesses, a financial audit is an objective examination and evaluation of the financial statements of an organisation to ensure that all records are a fair and accurate reflection of the transactions they claim to represent.
Audits can be conducted either internally, by a company’s in-house financial team, or externally by auditors from a certified public accountancy firm. Usually, external audits will include a review of both financial statements and the internal controls of a company. Meanwhile, internal audits are often used as a managerial tool to improve internal processes and controls within an organisation.
15. Return on Investment (ROI)
When launching a new product or service, or even when trialling a new marketing technique, businesses want to know whether there is an opportunity to make a profit. Essentially, return on investment (ROI) helps companies to know whether an activity is profitable enough to continue.
ROI is a performance measure, used to evaluate the efficiency or profitability of an investment, or, to compare the effectiveness of a number of different investments. Based on an investment’s cost, ROI tries to directly measure the amount of return from that particular investment.
To calculate ROI, the benefit (or guaranteed return) of an investment is divided by the cost of the investment. The result is usually expressed as a percentage or ratio.
While ROI is a simple and straightforward calculation, making it easy for businesses to make quicker, more informed decisions, it doesn’t account for the holding period or passage of time, and so can miss opportunities to invest a company’s money elsewhere.
16. Price Elasticity of Demand (PED)
Price elasticity of demand is a type of business vocabulary which economists and product-focused organisations will be familiar with. It’s used to understand how supply and demand for a product changes as a result of a change in its price.
To put it simply, price elasticity of demand is a measurement of the change in consumption of a product in relation to a change in price. Mathematically, it’s expressed as:
PED = % change in quantity demanded / % change in price
It’s important to note that prices of some goods are very inelastic. That is, a reduction in price does not increase demand, neither does it negatively impact demand either. This can include products such as; university textbooks, concert tickets, and car petrol. Some examples of elastic demand - that is, products that have a change in demand based on price include, airline tickets, technology products, and soft drinks.
17. Key Performance Indicator (KPI)
Also referred to as key success indicators (KSI) a key performance indicator (KPI) is a measure of performance to assess the overall long-term success of a company, versus a set of targets, objectives, or industry peers. These KPIs vary from company to company, as well as between industries - depending on an individual organisation's performance criteria.
Specifically, the business term KPI is used to help determine a company’s strategic, financial, and operational achievements, especially when compared against their competitors within the same sector. As such, KPIs can be financial (such as the net profit of a company, or revenue-based), or more anecdotal (such as quality of customer experience or repeat customer loyalty).
18. Fiscal Year
Also referred to as the financial year, a company’s fiscal year is a set period of time used to calculate financial statements and file their taxes. Most commonly, a fiscal year is used for accounting purposes to generate financial reports and prepare budgets.
The period used differs between countries and businesses, although in the UK, the year between 6th April and 5th April is most often used as the official period for personal taxation. The ‘official’ period for corporation tax runs from 1st April to 31st March, however companies can adopt any yearly period in-house.
Fiscal years are particularly important for publicly-traded companies and their investors, who are able to make year-to-year comparisons on revenue and earnings.
19. Human Resources (HR)
Whether you choose to pursue a career in business or end up working in a completely different sector - as long as you work for a registered company you will no doubt encounter Human Resources. But what is human resources? And what does the role of someone in HR entail on a day-to-day basis?
In its simplest form, the business term Human Resources (HR) refers to a group of people who are responsible for managing the employee life cycle, including recruitment, onboarding, training, and firing employees, as well as administering employee benefits and dealing with personal issues and requests.
Of course, the roles and responsibilities of different HR teams will vary depending on the company you work for. For example, many new start-ups and forward-thinking organisations have begun to prioritise wellbeing roles within their HR teams to maximise employee satisfaction, while others will have a more traditional approach to looking after the team.
20. Public Relations (PR)
We all read or hear things about individuals and brands which determine the way we see and feel about them. And we no doubt form judgements on whether we want to engage with that brand or individual in the future based on the information we’ve heard.
Public relations (PR) is the act of managing how information about an individual or company is disseminated to the public.
Every individual or company operating in the eye of the public can face the spread of information about them or their practices to the public. The role of someone who works in PR is to manage a company or individual’s ‘image’ and ensure they are portrayed in a particular way.
For businesses, PR will focus on maintaining a positive corporate image while handling media requests. This is especially important for large, publicly-traded companies, where the role of PR is to defray public or investor outcry following any potential negative news announcements and publicity.
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Business terms and acronyms can be daunting for new students. Familiarise yourself with 20 key terms, including market, target market, brand awareness, entrepreneurship, marketing, USP, balance sheet, forecast, consumer law, procurement, B2B/B2C, asset, depreciation, audit, ROI, PED, and KPI.