2.3 Managing Finance Flashcards
Equation: gross profit
revenue - cost of Sales
operating profit.
Gross Profit - fixed overheads
profit for the year
Operating profit - financing/ tax
Gross profit Margin
Gross Profit
—————— x 100
sales revenue
operating profit Margin
Operating profit
———————— x 100
Sales revenue
profit for the year margin
Profit of the year
———————— x 100
Sales revenue
corporation tax
A tax on the profits of companies
Dividends
Annual payment made to shareholders
fixed overheads
Indirect costs theo have to be payedhowever the business is performing
Current ratio
Current liabilities
Acid test ratio
Current liabilities
Liquidity
The ability of a business to pay its bills on time Which required having sufficient cash in the bank / working capital
working Capital cycle
Length of timefrom buying, stock to turning a profit
Administration
when directors feel forced by threat of insolvency to hand over managment controll to an administrator to try and Sell the business
