UNIT 4a

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What is the current ratio?
Shows the relationship between current assets and current liabilities. The ability to pay back short term liabilities. Safe ratio is between 1.5 and 2.
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What is return on capital employed?
How efficiently a company generates profits from its capital employed. How many £'s in profit is generated from £'s employed.
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What is the acid test ratio?
Shows if a firm has the right balance between current assets which are stock and current assets which are cash.
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What is the gearing ratio?
Shows the percentage of capital employed which is financed through borrowing, rather than internal sources. Higher the ratio, higher the dependency on borrowing.
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What is the formula for the current ratio?
Current assets/Current liabilities.
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What is the formula for return on capital employed?
Net profit / Capital employed x 100.
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What is the formula for the acid test ratio?
Current assets - Stock / Current liabilities.
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What is the formula for the gearing ratio?
Non current liabilities (L/T) / Equity + non current liabilities.
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What is the gross profit margin?
Shows the relationship between profits made on trading activities (gross profit) against revenue. The higher the better.
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What is the net profit margin?
Shows the relationship between net profit (profit after all costs deducted) and revenue.
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What is the formula for the gross profit margin?
Gross profit / Revenue x 100.
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What is the formula for the net profit margin?
Net profit / Revenue x 100.
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What is the formula for gross profit?
Revenue - Cost of goods sold.
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What is the formula for net profit?
Gross profit - Expenses.
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What are the advantages of Corporate Social Responsibility?
Quality reputation attracts customers, staff benefits encourage motivation, satisfies stakeholders.
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What are the disadvantages of Corporate Social Responsibility?
Can be expensive, may cause stakeholder conflict, may not be genuine, may lose sight of objectives if too focused.
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Example of Center Parcs positive CSR policies?
Green cars, wildlife & environment awards, staff benefits.
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Example of Center Parcs poor CSR contribution?
Considering unpaid breaks, TV advert, electricity decreased but gas increased as a result, may charge high prices to compensate for expense of CSR.
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How do stakeholder objectives conflict?
Shareholders want good dividends, whereas workers want higher wages.
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How do business objectives conflict?
If short term objective is to survive, risks may be avoided.. but if long term is to grow then risks must be taken.
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What is a mission statement?
Written statement of the business' long term intentions, expressing their values and beliefs.
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What are the problems with a mission statement?
No real meaning, may be for PR, may annoy staff is doesn't align to reality.
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What is power culture?
Control radiates from central management, do right by bosses despite being unethical.
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what is role culture?
Authority depends on role, based on rules and procedures.
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What is task culture?
Project orientated, work as a team to solve a task.
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What is person culture?
Powers lies in individuals with expertise.
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What are the advantages of a contingency plan?
Improves staff motivation, good for brand image, save money on damages.
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What are the disadvantages of a contingency plan?
Time consuming, can be expensive, can't predict everything, focuses solely on risks.
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What is the formula for labour productivity?
Output per period / Staff per period.
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What is the formula for labour turnover?
Staff leaving per period / Staff employed per period x 100.
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What is organic growth?
Using internal sources of finance to grow, eg retained profit.
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What is external growth?
Using external sources of finance to grow, through mergers, takeovers and acquisitions.
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What can result from diseconomies of scale?
Poor motivation, poor communication, poor co-ordination.
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What are the advantages of critical path analysis?
Compare what is happening to what should be, plan ahead, use resources in float time elsewhere.
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What are the disadvantages of critical path analysis?
Difficult to estimate, new ones may be needed if delays, time consuming, depends on reliability of suppliers.
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What are the advantages of decision trees?
Set out problems clearly, shows potential money involved, easy to understand.
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What are the disadvantages of decision trees?
No account of time or objectives, doesn't consider qualitative factors, must be used with other tools.
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What are the advantages of payback period?
Short term so reliable, easily calculated, considers cash flow.
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What are the disadvantages of payback period?
Ignores cash flow after payback, ignores time value of money, may lead to excessive S/T investment.
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What are the advantages of average rate of return?
Quick and easy, easy to compare, considers all projects cash flows.
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What are the disadvantages of average rate of return?
Ignores time value of money, doesn't allow for inflation.
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What are the advantages of net present value?
Considers time value of money, allows for inflation, considers cash flows.
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What are the disadvantages of net present value?
Time consuming, can be difficult to understand.
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Card 2

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What is return on capital employed?

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How efficiently a company generates profits from its capital employed. How many £'s in profit is generated from £'s employed.

Card 3

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What is the acid test ratio?

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Card 4

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What is the gearing ratio?

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Card 5

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What is the formula for the current ratio?

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