2.3 Flashcards
managing finance
what is a statement of comprehensive income?
companies publish their accounts to show their profits and losses
gross profit calculation
sales revenue - cost of sales (VC)
operating profit calculation
gross profit - expenses (FC)
net profit calculation
operating profit - interest
gross profit margin calculation
operating profit / revenue x100
net profit margin calculation
net profit / revenue x100
ways to improve profitability
have a sale, increase advertisement, reduce costs, automating production
liquidity definition
the ability of a business to turn its assets into cash to pay its current liabilities
what is a statement of financial position (balance sheet)
shows the assets and liabilities of a business
current ratio test
current assets/current liabilities
acid ratio test
current assets - inventory / current liabilities
how to improve liquidity
reduce amount of held stock, pay suppliers later, use retained profit
what is working capital
day to day finance needed in a business
working capital calculation
current assets - current liabilities
how to improve working capital cycle
reduce credit terms, hold less stock, increase credit terms with suppliers