Analysing the strategic position of a business
- Created by: siangrace15
- Created on: 12-12-19 19:31
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Influences on the mission of a business
- Personal belief
- Business ownership
- Values and relative power of stakeholders
- Nature of the industry
- Degree of competition
Influences on corporate objectives and decisios
- Short termism - pressure on a business to perform in the short term
- Business ownership - objectives of a company will be heavily influenced by the objectives of the shareholder
Internal influences
- Mission statement
- Leaders' personal objectives and values
- Perfomance
- Organisational culture
- Internal stakeholders
External influences
- External environment - PESTEL
- Investors' objectives
- Competitive environment
- Global markets
- External stakeholders
Functional decision making
- Decisions made with a busines by managers of a specific funcational area
- Will impact; marketing, finance, operations, human resources
SWOT analysis
- A diognostic tool used to identify the internal strengths and weaknesses and the external opportunities and threats to a business
Assessing financial performance
- PLCs have a legal obligation to publish their annual accounts
- Financial data can be used to assess performance and potential
Published accounts
- The financial performance of a business can be assessed using two key financial reports
- Balance sheet
- Income statement
Balance sheet - the terminology
- Non-current assets - likely to be kept by the business for more than one year
- Current assets - likely to be turned into cash within a year
- Non-current liabilities - debts that the business has more than one year to repay
- Current liabilities - debts that the business may have to repay within one year
Income statement
- Sales revenue - money coming in from sales
- Cost of sales - costs directly linked to the production of the goods or services sold
- Gross profit
- Expenses - all other costs associated with the trading of the business
- Operating profit
- Interest - interest paid on debt or received on positive balances
- Profit for the year
Ratio analysis
- Allows for a more meaningful analysis of published accounts
Return on Capital Employed (ROCE)
- A measure of how efficiently a business is using capital employed to generate profits
Operating profit x 100
Total equit + non-current liabilities
Liquidity
- A measure of a business' ability to survive in the short term
- A business with a low liquidity is in danger if short term creditors demand payment quickly
Current assets
Current liabilities
Gearing
- Measures what proportion of a business' capital is funded through long term loans
Non-current liabilities x 100
Total equity + non-current liabilities
Efficiency ratio
- Asses the internal management of a business
- Payables days, recieveables days, inventory turnover
Payables days
- A meaure of how long it takes, on average, for the business to pay for supplies it has purchased on credit
Payables x 365
Cost of sales
Recievables days
- A measure of how long it takes, on averagge, for customers to pay the business for goods or services it has purchased on credit
Recievables x 365
Sales revenue
Inventory turnover
- Average inventory held can be calculated by finding the average of inventory at the start and end of the year
Cost of sales
Average inventory held
Value of assessing financial ratios when assessing performance
- Provides a…
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