Business

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• Publisher: Collins
• Year: 2010
• Print ISBN: 9780007205837
• eBook ISBN: 9780007395637
• Topic: Business
• Subtopic: Business General
• Index: Business

The third revised and expanded edition of this clear, comprehensive guide to the essential terms of modern business for students, professionals and business managers.

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CAD see COMPUTER-AIDED DESIGN.

Cadbury Committee Report see CORPORATE GOVERNANCE.

CAE (computer-aided engineering) See COMPUTER-AIDED DESIGN.

c&f see COST AND FREIGHT.

cafeteria benefits a PAY system where employees are able to design their own remuneration package selecting from a menu of pay and FRINGE BENEFIT items up to a value stipulated by the employer.

call centre a location where CUSTOMER SERVICE employees handle customer queries by phone and e-mail.

called-up capital the amount of issued share capital which shareholders have been called upon to subscribe to date, where a JOINT-STOCK COMPANY issues shares with phased payment terms. For example, a company may issue £1 shares with 50p payable immediately upon application by intending share-holders, a further 25p upon ALLOTMENT of the shares to shareholders and the final 25p three months later. Here the called-up capital at the time of allotment of shares would be 75p times the number of shares allotted. Called-up capital is usually equal to PAID-UP CAPITAL unless there are any calls in arrears – shares on which subsequent instalments are owing. See SHARE ISSUE.

call option see OPTION.

call reports reports completed by sales representatives after visiting customers and potential customers as a basis for compiling MARKETING INTELLIGENCE and monitoring representatives’ performance. The reports may include information about new customers, reasons why particular customers have been lost and creditworthiness of buyers. See CALLS.

calls visits by SALES REPRESENTATIVES to customers and potential customers as a means of securing SALES and maintaining customer contact. Calls provide a useful opportunity for sales persons to inform customers about the firm’s product offerings and promotions. Additionally, calls may be used to obtain data about customer needs for SALES FORECASTING and NEW PRODUCT DEVELOPMENT purposes. See CALL REPORTS, COLD CALL.

CAM see COMPUTER-AIDED MANUFACTURING.

campaign a planned marketing or advertising activity designed to increase a firm’s sales. See ADVERTISING CAMPAIGN, PROMOTION, PROMOTIONAL MIX. campaigning a technique for manufacture where product set up costs are high or considered to be difficult. Items are manufactured to stock possibly to meet a 12 month period of demand.

campaign objectives goals set by an organization for a promotional campaign in terms of e.g. sales, profits, customers won or retained or awareness creation. See PROMOTION.

cannibalization a situation where a new brand gains sales at the expense of another of the company’s brands.

capacity the maximum amount of output that a firm is physically capable of producing, at a point in time, given the fullest and most efficient use of its existing plant or plants.

Over time, a firm may adjust its capacity to meet changes in demand and the competitive situation facing it, investing in new plant or extending existing plant to meet an increase in demand, or closing down plant, permanently or temporarily (‘MOTHBALLING’), to meet a situation of OVERCAPACITY.

When preparing a PRODUCTION BUDGET, it is necessary to ensure that the firm has sufficient production capacity to meet planned output levels. A firm’s capacity or the capacity of industry in general may be limited by the availability of capital equipment and labour.

The maximum rate of output which the firm can produce will depend upon the capacity of its individual factories which in turn depends upon the capacity of various departments and work stations within each factory. See INPUT-OUTPUT CONTROL, PRODUCTION SCHEDULING, PRODUCTION-LINE BALANCING. See CAPACITY UTILIZATION, LIMITING FACTOR, RATIONALIZATION, INDIVISIBILITIES, CAPACITY CONSTRAINED RESOURCE, CAPACITY CONTROL, CAPACITY CUSHION, CAPACITY PLANNING, CAPACITY REQUIREMENTS PLANNING.

capacity constrained resource the identification of a resource within manufacture or service provision which limits the total output, the constraining resource acting as a bottleneck.

capacity control the management of resource, so that utilization approaches the maximum possible without straining the whole system. See CAPACITY UTILIZATION.

capacity cushion the amount of capacity commonly available within a working period. See CAPACITY UTILIZATION.

capacity planning the management of available resource over a planned time period. See CAPACITY UTILIZATION.

capacity requirements planning the management of resource over a planned time period when related to manufacturing planning. See MATERIALS REQUIREMENT PLANNING, MANUFACTURING RESOURCE PLANNING. (See MRP and MRP II).

capacity utilization the proportion of a firm’s available CAPACITY which is currently being employed in producing output. This depends to a great extent on the state of demand and a firm’s competitive abilities. A fall in demand, or a failure to win orders against competition, may force a firm to operate at below BREAK-EVEN levels of capacity utilization. See INDIVISIBILITIES, BUSINESS CYCLE, MACHINE UTILIZATION.

capacity utilization rate the ratio of designed CAPACITY to used capacity.

capital 1 the funds invested in a BUSINESS in order to acquire the ASSETS which the business needs to trade. Capital can consist of SHARE CAPITAL subscribed by SHAREHOLDERS or LOAN CAPITAL provided by lenders.

2 GOODS such as plant, machinery and equipment which are used to produce other goods and services. See CAPITAL STOCK, INVESTMENT.

capital accumulation see CAPITAL FORMATION.

capital allowances standard allowances, for TAXATION purposes, against expenditure on FIXED ASSETS by a firm in lieu of DEPRECIATION. In the UK currently (as at 2004/05) a 25% ‘writing-down allowance’ against tax is available for firms which invest in new plant and equipment. Additionally in the case of small and medium-sized firms a 40% ‘first year allowance’ is available for INVESTMENT in new plant and equipment and a 100% tax write-off (for the three year period 2000/03) for investment in computers and e-commerce. A business may choose its own rates of depreciation for fixed assets which may differ from the statutory capital allowances. Capital allowances may also be varied by the government to encourage or discourage capital INVESTMENT. See DEPRECIATION, CORPORATION TAX.

capital appreciation see APPRECIATION.

capital-asset pricing model a share-price valuation model in which the major factors of short-term share-price determination are explained. The capital-asset pricing model provides a method of computing the return on a FINANCIAL SECURITY which specifically identifies and measures the risk factor within a PORTFOLIO holding. The expected rate of return on a particular investment has two components:

(a) the risk-free percentage return which could be obtained from, say, a gilt-edged, government financial security;

(b) the risk return associated with the investment.

(Risk itself can be split into market or nondiversifiable risk and specific or diversifiable risk.) This relationship between risk and return is shown in Fig. 15.

The total expected return on an investment is orm, but risk only attaches to non gilt-edged securities which is why the capital market line intercepts the vertical axis at rf. The capital market line shows how, in a competitive market, the additional risk premium varies in direct proportion to 6. known as the BETA COEFFICIENT. At point M in the figure there is perfect correlation between movements in the market generally, as detailed by an all-share index, and a particular investment. Therefore 6 = 1 at point M. Where there is no risk, as in Treasury bills, 6 = 0.6 is a measure of market risk because investors have it within their power to diversify away specific risk to almost zero by holding a broad portfolio of shares. It is possible to estimate the beta coefficient of a security from published information.

See also EFFICIENT MARKETS HYPOTHESIS, PORTFOLIO THEORY.

capital budgeting the process of planning and controlling CAPITAL expenditure within a firm. Capital budgeting involves the search for suitable investment opportunities; evaluating particular investment projects; raising LONG-TERM CAPITAL to finance investments; assessing the COST OF CAPITAL; applying suitable expenditure controls to ensure that investment outlays conform with the expenditures authorized; and ensuring that adequate cash is available when required for investments. See INVESTMENT APPRAISAL, BUDGETING.

capital employed the total funds invested in a business made up of SHAREHOLDERS’ funds and long-term LOAN CAPITAL. It is equivalent in value to the company’s NET ASSETS in its BALANCE SHEET. See SHAREHOLDER’S CAPITAL EMPLOYED, LONG-TERM CAPITAL EMPLOYED.

capital expenditure expenditure on the acquisition or improvement of FIXED ASSETS that is subsequently written off against profits over several ACCOUNTING PERIODS. Contrast with REVENUE EXPENDITURE. See INVESTMENT, CAPITAL BUDGETING.

capital export see EXPORT, BALANCE OF PAYMENTS

capital formation or capital accumulation 1 the process of increasing the internally available CAPITAL of a business by retaining earnings to add to RESERVES.

2 the process of adding to the net physical CAPITAL STOCK of an economy as a means of increasing the economy’s capacity to produce goods and services, INVESTMENT by businesses in new plant and equipment is one important source of capital formation, as is investment by the government in INFRASTRUCTURE (roads, railways, etc.). capital gain the surplus realized when an ASSET (house, SHARE, etc.) is sold at a higher price than was originally paid for it. However, because of INFLATION it is important to distinguish between NOMINAL VALUES and REAL VALUES. Thus what appears to be a large nominal gain may, after allowing for the effects of inflation, turn out to be a very small real gain. Furthermore, in an ongoing business, provision has to be made for the REPLACEMENT COST of assets, which can be much higher than the HISTORIC COST of these assets being sold. See CAPITAL GAINS TAX, CAPITAL LOSS, REVALUATION PROVISION, APPRECIATION, definition 1.

capital gains tax a TAX on the surplus obtained from the sale of an ASSET for more than was originally paid for i...

Table of contents

• Cover
• Title Page
• Contents
• Preface
• a
• b
• c
• d
• e
• f
• g
• h
• i
• j
• k
• l
• m
• n
• o
• p
• q
• r
• s
• t
• u
• v
• w
• y
• z
• Internet Links
• Acknowledgements
• About the Author
• Copyright
• About the Publisher