3.5 Flashcards
what is a profit and loss statement
a financial document showing the company revenue or income over a year and their costs and expenditure
why are profit and loss statements useful
legal requirement
sums up performance for stakeholders
can be compared to previous years
investors and lenders need to see one before making deals
can help with forecasting
what is sales revenue
money obtained by the sale of goods or services
what is cost of goods
costs that are directly attributed to sales, vary depending on sales
how do you calculate gross profit
sales-cost of sales
what are expenses
other costs a business has that are not directly associated with sales or production
what is operating profit
profit after all expanses have been taken off
what is capital employed
measure of the value of assets minus current liabilities
what is a balance sheet
shows how much a business is worth, shows a businesses assets & liabilities
what are non current assets
long term assets of a business which are not expected to be sold within the next year of trading
what are intangible assets
copyright, trademarks, patents
what are tangible assets
property, equipment
what are current assets
short term assets of the business which are likely to be turned into cash within the next year of trading
what are inventories
stocks of raw materials
what are non current liabilities
debts which are not expected to be paid off within the next year of trading
give some examples of non current liabilities
pensions
money set aside for future expenses
what are current liabilities
debts which are expected to be paid within the next year of trading
give some examples of current liabilities
corporation tax
short term loans
what are the uses of a balance sheet
evaluate performance of the business
evaluate potential of a business to an investor
summary valuation of the business
what are the limitations of a balance sheet
value of assets stated may not be the same as the amount they will sell for
intangible may not include other non monetary value
why do the government have an interest in a businesses balance sheet
they will use the financial information to calculate the amount of tax that a company has to pay
why do shareholders have an interest in a businesses balance sheet
analyse the accounts and decide whether their investment capital is being used effectively
why do directors & senior managers have an interest in a businesses balance sheet
use accounts to assist their medium & long term planning
what is the equation for current ratio
current assets/current liabilities
what is the equation for the acid test ratio
current assets - stock/current liabilities
what is the equation for gearing ratio
loan capital/capital employed X100
what is the equation for ROCE
operating profit/capital employed X100
what is operating profit
profit before interest & taxes
what is the equation for capital employed
fixed assets + current assets - current liabilities
what are the limitations of using ratio analysis
based on a snapshot of the business - markets are dynamic figures could quickly change
only as reliable as the information provided
needs to be compared against other figures
must be kept in context of the industry
if a business wishes to achieve their objectives it is important that the workers:
know the objectives
agree with these aims
work towards objectives
what could happen to organization whose employees do not work towards the businesses objectives
progress is slow
strategic achievement suffer
uncoordinated
projects don’t get delivered
operational performance declines
giving up productivity gain of up to 25%
what are employee contributions
training & skills - a better trained workforce is generally more motivated, flexible & productive
empowerment - allowing workers to contribute ideas & allow decision making to increase moral
leadership - style of leadership must be appropriate to the business circumstances
how can you measure workforce moral
surveys
appraisals
waste levels
reject rates
consumer complaints
industrial relations record
what are the reasons for poor motivation
employees feel the job or workplace is not what they expected
there is mismatch between job & person
too little coaching & feedback
too few growth & advancement opportunities
feel devalued & unrecognized
feels stress from overwork & have bad work/life balance
loss of trust & confidence in senior leaders
how can workforce morale be calculated
labor productivity
labor turnover
absenteeism rate
what is the equation for labor productivity
output per time period/average number of employees
how can labor productivity be improved
kaizen, TQM, lean production
what is absenteeism rate
measures the proportion of the total workforce who are absent over a particular period of time
what is the equation for absenteeism rate
number of working days lost/total number of working days available X100
what causes high absenteeism rates
poor recruitment, weak induction, lack of challenge, low pay rates
what is the equation for labor turnover
number of employees leaving/average number of employees X100
what is low staff morale or job satisfaction caused by
poor management, stress, role overload or underload, lack of recognition, poor working conditions
how could low staff morale and job satisfaction be improved
job enlargement, job rotation, incentive schemes
how could a business reduce absenteeism
introducing more flexible working practices, ensuring jobs are interesting & challenging, improving working conditions & reducing dissatisfaction, improving relations between employers & employees
introducing attendance bonuses as an incentive to attend regularly
