Many Business mistakes are vocabulary mistakes in disguise. Two words sound close, the question uses one, and the answer needs the other. This glossary gives 17 terms, each with a plain meaning, a small example, the word it is most easily confused with and a lesson to open.
The English, Malay and Chinese concept bridge shows the same terms in all three languages with example sentences. The exam is written in English, so the English word is always the one to write in your answer.
Purpose, growth and people
1. Need and demand. A need is something a person must have. Demand is a want that the person can pay for. A student may need a RM3,500 laptop, but if only RM1,500 is available, there is no demand for that model. Confused with: need versus want. Wants without the means to pay do not create demand. See distinguishing a need from a demand.
2. Opportunity cost. The most valuable alternative given up when you choose. Nadia has RM10,000 and chooses a coffee machine over an advertising campaign, so the opportunity cost is the campaign, not both. Confused with: the money spent. The cost of a choice is what you lose by not choosing the most valuable other option. See opportunity cost in a start-up choice.
3. Primary sector and primary data. The primary sector extracts natural resources, such as farming and mining. Primary data is information a business collects first-hand, such as its own survey. Confused with: the two uses of “primary”. One describes an industry, the other describes how information was gathered. See classifying an activity by sector and primary and secondary data.
4. Ownership and management. Owners hold the legal claim on a business. Managers run it day to day. In a small shop the owner often does both. In a large company, shareholders may own it while employed managers run it. Confused with: owner versus manager in the same person. See distinguishing ownership from management.
5. Internal and external growth. Internal growth expands using the business’s own resources, such as opening a second branch. External growth joins with or buys another firm. Confused with: big versus fast. Both can be large, but the route differs. See comparing internal and external growth.
6. Stakeholder and shareholder. A stakeholder is anyone affected by or interested in a business. A shareholder owns part of a company through shares. Residents near a factory are stakeholders, not shareholders. Confused with: all shareholders are stakeholders, but most stakeholders are not shareholders. See a stakeholder’s specific interest.
7. Objective and strategy. An objective is what the business aims to achieve, such as 10% more sales this year. A strategy is the plan to achieve it, such as opening for evening orders. Confused with: objective versus action. A conclusion should test a strategy against the objective. See using case evidence to prioritise an objective.
Marketing and operations
8. Market segment and target market. A segment is a group with shared needs, such as students who want a cheap lunch. The target market is the segment, or segments, the business chooses to sell to. Confused with: every segment versus the chosen one. See defining a target segment from stated needs.
9. Production and productivity. Production is the total output, for example 240 units a day. Productivity is output per unit of input. With 4 workers, 240 ÷ 4 = 60 units per worker per day. Confused with: more output versus more efficient. Output can rise while productivity falls if more workers were added. See operations and productivity.
Costs, finance and statements
10. Fixed and variable costs. Fixed costs do not change with output in the short run, such as rent. Variable costs change with output, such as ingredients. Confused with: regular payment versus fixed cost. Electricity may be paid every month but can be partly variable. See classifying fixed and variable costs.
11. Contribution and profit. Contribution per unit is the price minus the variable cost. Profit is total contribution minus fixed costs. At RM12 price and RM7.50 variable cost, contribution is RM4.50. At 260 units with RM900 fixed costs, total contribution is 260 × 4.50 = RM1,170, and profit is 1,170 − 900 = RM270. Confused with: contribution versus profit. See calculating contribution.
12. Break-even and margin of safety. Break-even is the output where total contribution just covers fixed costs: 900 ÷ 4.50 = 200 units. Margin of safety is how far sales are above that: 260 − 200 = 60 units. Confused with: break-even versus target sales. See reading a break-even chart and explaining a margin of safety.
13. Revenue, gross profit and net profit. Revenue is sales income. Gross profit is revenue minus cost of sales. Net profit is gross profit minus other expenses. With revenue RM80,000, cost of sales RM52,000 and other expenses RM20,000, gross profit is RM28,000 and net profit is RM8,000. Confused with: revenue versus profit. See revenue, gross profit and net profit.
14. Profit and cash. Profit compares income and costs for a period. Cash is the money actually moving in and out. A credit sale of RM500 with recognised cost of RM300 gives a profit of RM200, but cash received today is RM0. Confused with: profit versus cash in the bank. See profitable trading versus a cash shortage and use the cash versus profit bridge.
15. Gross margin and mark-up. Margin compares profit with revenue, and mark-up compares profit with cost. If an item costs RM60 and sells for RM100, profit is RM40, margin is 40 ÷ 100 = 40%, and mark-up is 40 ÷ 60 = 66.67%. Confused with: the same profit, two percentages. See calculating a relevant ratio and the ratio tool.
16. Capital. In business, capital usually means money put in by owners or lenders, such as RM50,000 of share capital. A machine bought with it is capital equipment. Other subjects may use the word differently. Confused with: capital versus capital equipment. Check which meaning the question uses. See comparing finance sources.
Answering
17. Explain and evaluate. To explain, give a reason and show the cause and effect. To evaluate, weigh up the points and reach a judgement that depends on the case. Confused with: explain versus evaluate. A longer explanation is not an evaluation. Check Cambridge’s command word list in your syllabus. See writing a conclusion tied to the objective.
Where next?
Use the Business learning guide for the full topic order and the original practice page to test the terms on cases. If your school or exam centre uses a different syllabus label, the assessment guide shows what to confirm.
Some students know every definition and still lose marks when a question asks them to apply it. That is the kind of gap a teacher can find in online one-to-one Business tuition.