end of topic test 25/09/21

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what are strategic decsions
Strategic decisions are judgements made by senior managers that are long term, involve a major commitment of resources and are difficult to reverse.
1 of 50
what are tactical decisions
short-term decisions, usually involving relatively few resources, that are made to implement a strategy
2 of 50
profit formula
total revenue - total cost
3 of 50
what is an income statement
a firm's revenues and costs within a past trading period
4 of 50
what is a balance sheet
a businesses assets and liabilities at a precise point in time
5 of 50
why is profit important
it can help a business grow, attract new investors and funding
6 of 50
high quality profit
likely to continue into the future e.g launching a new product
7 of 50
low quality profit
selling assets will generate profit but that will not continue into the future
8 of 50
why are shareholders interested in profit quality
indicates the level of dividends in the future
9 of 50
what is operating profit a good indicator of
underlying performance
10 of 50
gross profit formula
revenue - cost of sales
11 of 50
what are current assets
assets that can be turned into cash quickly
12 of 50
what are non current assets
assets that are expected to be held for over a year
13 of 50
what are tangible assets
physical (land and equipment)
14 of 50
what are intangible assets
don't have a physical presence (brands/goodwill)
15 of 50
what are current liabilities
payments due within a year (tax, overdrafts)
16 of 50
what are non current liabilities
debts that aren't expected to be paid in a year like bank loans and mortgages
17 of 50
what is total equity
money invested in business by shareholders
18 of 50
total assets formula
currents assets + non current assets
19 of 50
total liabilities formula
current liabilities + non current liabilities
20 of 50
net assets formula
total assets - total liabilities
21 of 50
what are reserves
reserves are profit accumulated during previous years trading (retained profit) and not paid out to the owners
22 of 50
working capital formula
current assets - current liabilities
23 of 50
why do assets depreciate
wear and tear, modern equipment, poor maintenance
24 of 50
what does income sheets, balance sheets and ratio analysis enable a business to do
keep financial control, plan, assign accountability
25 of 50
what does profitability show
measure of the success of the business
26 of 50
what is the purpose of liquidity
assess ability to pay immediate debts
27 of 50
what is the purpose of gearing
assess the extent of borrowed money
28 of 50
what is the purpose of efficiency
assess how well the managers have controlled the business
29 of 50
gross profit margin %
gross profit/revenue x 100
30 of 50
operating profit margin %
operating profit/revenue x100
31 of 50
operating profit formula
revenue - cost of sales and overheads
32 of 50
net profit formula
revenue - total costs (including tax)
33 of 50
net profit margin %
net profit/revenue x 100
34 of 50
return on capital employed ROCE
operating profit/capital employed x 100
35 of 50
capital employed formula
total equity + non current liabilities
36 of 50
liquidity ratios CURRENT RATIOS
current assets/current liabilities
37 of 50
how would a business increase its ROCE
increase operating profit without raising further capital, reduce the amount of capital employed maybe repay some long term borrowing
38 of 50
gearing
non current liabilities/capital employed x 100
39 of 50
inventory/stock turnover
cost of goods sold/average inventories
40 of 50
average number of days it takes to sell inventory
inventory/cost of sales x 365
41 of 50
what are debtors
customers who are granted credit and will pay the business what they owe in 30/60/90 days
42 of 50
how does credit periods effect cash flow
allowing a long credit period means that the cash will not come into the business immediately but later so if the business needs the cash in the meantime they may face cash flow/liquidity problems
43 of 50
what are creditors
people/organizations that are owed money by the business
44 of 50
how can a business avoid cash flow problems
they could delay payments by paying on credit
45 of 50
payable formula
payables (creditors)/ cost of sales x 365
46 of 50
receivable formula
receivables/revenue x 365
47 of 50
labour productivity formula
total output/number of employees
48 of 50
unit cost formula
total cost of production/number of units
49 of 50
how would you measure a business quality
customer loyalty, customer satisfaction, faulty products response times
50 of 50

Other cards in this set

Card 2

Front

what are tactical decisions

Back

short-term decisions, usually involving relatively few resources, that are made to implement a strategy

Card 3

Front

profit formula

Back

Preview of the front of card 3

Card 4

Front

what is an income statement

Back

Preview of the front of card 4

Card 5

Front

what is a balance sheet

Back

Preview of the front of card 5
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