3. Using financial data to measure and assess performance Flashcards
Income statement
A financial document that summarises a businesses trading activity and expenses to show whether it has made a profit or loss.
Gross profit
Profit after the cost of sales has been deducted.
Revenue - cost of sales
Net profit/Operating profit
Profit after all other expenses have been deducted
Gross profit margin
Gross profit expressed as a percentage of sales revenue
Gross profit/Sales Revenue X 100
Operating profit margin
Operating profit as a percentage of sales revenue.
Operating profit/Sales revenue X 100
Profit quality
The sustainability of profit
Profit utilisation
How profit is being used. (EG. Paid as dividends or spent on investment)
Balance sheet
A financial document that summarises the net worth of a business - it balances total assets with total equity and liabilities.
Inventories
The IFRS term for stock
Total Equity
The total amount of money being utilised in the business from the share capital and retained profits
Non-current assets (Fixed assets)
Items of value owned by the business that are likely to be kept for more than one year.
Current assets
Resources owned by the business who’s value varies as a result of daily business activities (EG cash, stock)
Intangible assets
Assets without physical form such as goodwill or brand names
Current liabilities
Financial obligations of the business payable within 12 months
Non-current liabilities (Long term liabilities)
Debts that the business has more than one year to pay.
Net current liabilities
Current liabilities - Current assets
Net assets
Total assets - Total liabilities
Net current assets
Current assets - Current liabilities
Working capital
A measure of a firms ability to meet day to day expenses.
Current assets - Current liabilities
Depreciation
An accounting practise which allows the real value of a fixed asset to be spread over its useful life
Trade recievables
Amounts owed by debtors to the business
Debtor
Someone who owes money to the business
Trade payables
The amount owed by the business to creditors
Creditors
Someone the business owes money too
