2.3 Managing Finance

Question 1

Gross profit and margin equation

Answer 1

GP = Revenue - cost of sales
GP/rev x100

Question 2

Operating Profit and margin equation

Answer 2

OP = Gross Profit - Operating expenses
OP/rev x100

Question 3

Net profit and margin equation

Answer 3

Operating profit - other expenses
NP/revenue x100

Question 4

How to improve profitability

Answer 4

Increase prices
reduce variable
reduce expenses

Question 5

Liquidity

Answer 5

A firms ability to pay off debts with its assets

Question 6

Current ratio equation

Answer 6

current assets/ current liabilities

Question 7

Acid test ratio equation

Answer 7

current assets- inventory/ current liabilities

Question 8

External reasons why firms fail 4

Answer 8

economic challenges (recession etc)
changes in consumer tastes
legal factors
technological changes

Question 9

What is the statement of comprehensive income

Answer 9

Shows a firms income and expenses over the last 12 months

Question 10

working capital equation

Answer 10

current assets - current liabilities