CSEET · Business Communication

Common Business Terminologies: formula sheet

Full chapter guide

Key formulas

Memo: Memo = short internal written message within one organisation; Used for routine instructions, reminders and information. It is usually brief and needs no formal salutation.
Circular: Circular = one notice sent to many people; Same content goes to all readers. It can be internal or external.
Agenda and Minutes: Agenda = items to be discussed (before meeting); Minutes = record of discussion and decisions (after meeting); Agenda is prepared before the meeting, minutes after it.
Quotation and Tender: Quotation = seller's price offer on a buyer's enquiry; Tender = formal invitation for competitive bids on a large contract; Quotation is usually one-to-one. Tender is a public or wide call for offers.
Invoice: Seller → Buyer: details of goods + amount due; A bill for a completed sale.
Proforma invoice: Seller → Buyer: quotation before sale; Not a demand for payment.
Debit note: Issued by the party who debits the other's account: the seller for extra charges, or the buyer on returning goods; When the seller raises extra charges, the amount receivable from the buyer increases. When the buyer returns goods, its debit note debits the seller's account and reduces the buyer's payable.
Credit note: Issued when amount owed falls, such as returns or allowances; Reduces the amount the buyer owes.
Bill of lading: Carrier → Shipper: receipt + contract evidence + title document; Used for sea carriage.
Consignment: Consignor → Consignee: goods sent for sale on commission; Ownership stays with the consignor.
Letter of credit: Buyer's bank → Seller: promise to pay against documents; Payment depends on meeting its conditions.
Cheque vs draft: Cheque = order by account holder; Draft = order by bank; A draft is drawn by a bank on another branch after you pay the amount. A cheque is drawn by you on your own account.
Overdraft vs cash credit: Overdraft: account limit for general needs; Cash credit: limit against stock or receivables for working capital; In both, interest is charged only on the amount used. Exams usually check the purpose and the security.
Equity vs debt: Equity = owners, dividend, no fixed return; Debt = lenders, interest, fixed repayment; Equity holders bear more risk and rank after lenders when a company is wound up.
Interest vs dividend: Interest is paid on borrowing; dividend is paid out of profit; Interest must be paid whether or not there is profit. Dividend depends on profit and a decision of the company.
Liquidity order: Cash > bank balance > receivables > stock > land and buildings; A rough guide to how quickly each asset converts to cash.
Stakeholder: Stakeholder = any person or group affected by, or interested in, the company; Wider than shareholder. Every shareholder is a stakeholder, but not every stakeholder is a shareholder.
Quorum: Quorum = minimum number present for a meeting to be valid; The exact number depends on the law and the company's articles. Do not quote a number unless the question gives it.
Proxy: Proxy = person appointed to attend and vote on behalf of a member; The term is used for the person appointed and also for the authority given.
Merger vs acquisition: Merger = companies combine into one | Acquisition = one company takes control of another; Use 'takeover' as a clue for acquisition and 'combine' as a clue for merger.
Chain of command: Top management → middle management → supervisors → workers; Authority flows downward. Reporting flows upward.
Definition pattern: Term = category + what it does + example; Use this to write a one or two line definition for any term.
B2B vs B2C: B2B: seller and buyer are both businesses. B2C: buyer is the final consumer; Check who the buyer is, not what the product is.
Outsourcing vs offshoring: Outsourcing = who does the work (outside party). Offshoring = where the work is done (another country); A task can be one, the other, or both.

Quick revision

Know each term's meaning in one clear line and one example.
A quotation is an offer of price and terms by a seller; an invoice is the bill for goods already supplied.
A cheque is an order to a bank to pay money from the drawer's account; know the drawer, drawee and payee.
Know the difference between a debit note and a credit note by who issues it and why.
Shareholders own a company; directors manage it; the board of directors acts together.
Revise communication terms such as sender, receiver, message, channel, feedback and noise.
Formal communication follows official channels; informal communication does not.
Marketing terms to know include product, price, place and promotion.
Learn common office terms such as memo, circular, agenda and minutes.
Use each term in a sentence to check you can apply it correctly.
Revise your marked weak terms last.

Common mistakes

Treating memo and circular as the same thing. Fix: Link memo to internal routine messages and circular to one notice for many readers, inside or outside.
Saying minutes are prepared before the meeting. Fix: Agenda comes before; minutes are written after the meeting to record what happened.
Treating a proforma invoice as a demand for payment. Fix: Remember it is a quotation sent before the sale. The final invoice follows.
Mixing up debit note and credit note. Fix: Debit note raises the amount owed. Credit note lowers it. Always say who issues it and why.
Treating a cheque and a draft as the same thing. Fix: Remember who issues them. You issue a cheque. A bank issues a draft after you pay it.
Saying an overdraft is a loan with a fixed repayment schedule. Fix: Say it is a flexible facility up to a limit, with interest only on the amount used.
Treating stakeholder and shareholder as the same. Fix: Shareholders own shares. Stakeholders include shareholders plus employees, customers, lenders, suppliers and others affected.
Defining quorum as the majority needed to pass a decision. Fix: Quorum is the minimum attendance for a valid meeting. The majority needed to pass a resolution is a separate matter.
Treating outsourcing and offshoring as the same thing. Fix: Remember: outsourcing is about the outside party; offshoring is about a foreign location.
Calling a sale B2C because the product is a consumer product. Fix: Look at the buyer. A shop buying soap in bulk from a maker is B2B.

Exam tips

Learn terms in pairs, such as memo and circular, agenda and minutes, quotation and tender, because examiners often ask you to distinguish them.
In written answers, always add one workplace example; it shows understanding.
For distinguishing questions, give at least three clear points and keep each to one or two lines.
Use your 15 minutes of reading time to spot which terms the compulsory question asks about.
Write definitions in your own simple words; do not copy textbook sentences.
Learn each term as a three-part line: meaning, who issues it, purpose.
In difference questions, give at least three points of difference in neat pairs.
Always add a small example with a rupee amount. It shows understanding and takes only two lines.