Financial and non-finacial methods of analysis

These cards includes: profit and loss account, balance sheet, ratios, non-finacial analysis and window dressing. 

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  • Created by: tcrj
  • Created on: 09-09-14 20:08
Name three things seen on a profit and loss account?
Turnover, Cost or sales, Gross profit, expenses, exceptional items, net profit, tax, dividens or retained profit.
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What can decrease profit quality?
High exceptional items. This is because profit quality shows how likely the profit can be repeated the next. Therefore a one off sale probably wouldn't be repeated.
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Define fixed assets on a balance sheet?
Things a company will own for at least another year.
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What is the difference between creditors and debtors?
Creditors is people we owe money to. Debtors is people who owe us money.
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What is share capital?
Money put into the business by shareholders.
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On a balance sheet what is capital and shares alway equal to?
Net assets.
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What does the gross profit margin show and what is the equation?
It is the value added by a firm from the raw materials. GROSS PROFIT / SALES X 100.
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What ratio is this equation for? NET PROFIT / CAPITAL EMPLOYED
Return on capital employed. Shows how efficiently the firm is using its capital.
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Work out the net profit margin from - Gross profit (7) Net profit (4) Sales (8)?
50% as the equation is NET PROFIT / SALES X 100
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What is the definition of liquidity?
The ability for a business to pay its debts on time.
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Gearing is how dependant a business is on borrowing. What is the equation?
LONG TERM LIABILITIES / TOTAL CAPITAL EMPLOYED X 100
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Which values would be highly geared? 10% , 48%, 50%, 90%?
50% and 90% because highly geared company have a percentage of over 50%.
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What is the equation and what is the ideal (apart from retailers)
CURRENT ASSETS / CURRENT LIABILITIES. 1.5 - 2. Retailers can have lower current ratios due to being able to shift stock quickly.
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What is the equation for the acid test ratio?
CURRENT ASSETS - STOCK / CURRENT LIABILITIES.
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Why is the acid test ratio seen as more accurate than the current ratio?
Because stock might not be sold.
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Other cards in this set

Card 2

Front

What can decrease profit quality?

Back

High exceptional items. This is because profit quality shows how likely the profit can be repeated the next. Therefore a one off sale probably wouldn't be repeated.

Card 3

Front

Define fixed assets on a balance sheet?

Back

Preview of the front of card 3

Card 4

Front

What is the difference between creditors and debtors?

Back

Preview of the front of card 4

Card 5

Front

What is share capital?

Back

Preview of the front of card 5
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