3.5/3.6

Question 1

statement of comprehensive income

Answer 1

shows a firms, revenue, costs and profit.

Question 2

who looks at Statement of comprehensive income

Answer 2

• Shareholders, see how profitable it is, look at trends
  -managers, can compare different departments to see where costs can be saved
  -loan providers, interested to see operating profit as this is how they pay their loan back
  -suppliers, check if they have enough to pay the supplier
  -employees, check profits for any bonuses etc

Question 3

statement of financial position
3 reasons why its useful

Answer 3

shows assets and liabilities at a particular point
-pick out trends by comparing previous SOFP
-keeps shareholders happy if they know profitability of business
-managers can see how flexible the business capital is

Question 4

liquidity

Answer 4

ability to turn assets into cash

Question 5

solvency

Answer 5

ability to pay debts

Question 6

what does gearing ratio show

Answer 6

the proportion of a firm’s finance that’s from non-current liabilities rather than share capital or reserves

Question 7

capital employed (eq)

Answer 7

capital employed = non-current liabilities + total equity

Question 8

gearing ratio (eq)

Answer 8

non -current liabilities / capital employed x100

Question 9

does a business want to be highly or lowly geared?

Answer 9

lowly geared as majority of their finances is not from long term debt.

Question 10

ROCE (eq)

Answer 10

operating profit / capital employed x100

Question 11

What does ROCE tell you?

Answer 11

how much money is being made by a firm compared to the amount put into the business

Question 12

Benefits of ratio analysis

Answer 12

• good way of looking at business performance over a time period
  -used to make business decisions e.g decide how to finance their growth
  -comparison with other firms ratios

Question 13

drawbacks of ratio analysis

Answer 13

• only as good as the data that it is based on
  -doesn’t account for internal strength e.g quality of staff
  -doesn’t account for the external climate
  -future changes like tech cannot be considered

Question 14

Labour productivity (eq)

Answer 14

output per period / number of employees

Question 15

Labour turnover (eq)

Answer 15

number of staff leaving / average number of staff employed x100

Question 16

Labour retention (eq)

Answer 16

number of staff employed at the start of period -number of leavers / number of staff employed at start of period x100

Question 17

absenteeism

Answer 17

No. work days lost through absence / total possible days worked x100

Question 18

Strategies to improve human resource figures

Answer 18

• financial rewards can be a motivator to work harder and increase staff retention
  -employee state ownership, reward staff with shares e.g save as you earn scheme (reduces absenteeism)
  -consultation strategies, I love employees in decision making
  -empowerment

Question 19

4 internal factors that can lead to change

Answer 19

• change in size
  -new ownership
  -poor business performance
  -transformational leadership

Question 20

Affects of change in size on a business 2 P 2 N

Answer 20

P- benefit from economies of scale
P-rapid growth means more dividends to shareholders
N-more workers= harder to communicate
N- changes to production methods such as new tech so productivity doesn’t fall as the business grows

Question 21

Affects of change in ownership on a business 2 p 2 N

Answer 21

P-new owners may want to grow the business and benefit from economies of scale
P- new ideas being incorporated may end up in a better quality of product
N- stakeholders may raisin change
N- if growth isn’t managed properly diseconomies of scale occur

Question 22

Affects of poor business performance on the business 2 p 2 N

Answer 22

p- can lead to new managers in place to improve quality
p- quick and extensive changes can reduce costs
N- staff made redundant
N- reduce competitiveness

Question 23

Transformational leader and their affects

Answer 23

Owner or manager makes large, innovative changes

-recruited after poor performance period to turn things around
-improves competitive changes
-motivate employees

Question 24

What is PESTLE analysis

Answer 24

Look at external factors that may cause change for a business.
Political
Economic
Social trends
Technological
Legal
Environmental

Question 25

Organisational culture’s reaction to change

Answer 25

• open cultures welcome change as they can easily adapt to changing markets
  -changing management may be resisted by a resistant culture
• can be difficult as it means changing attitudes and behaviour

Question 26

Scenario planning

Answer 26

Where a business consider specific events that may happen in the future and plan how they would operate

Question 27

Reasons for scenario planning

Answer 27

• natural disaster e.g storm can mean delays to raw materials
  -Failure of IT e.g damages operations, stakeholders and reputation
• losing a staff member e.g lose staff member and another member can’t do the same quality of work

Question 28

Risk mitigation

Answer 28

Reduces probability of a risk to a business occurring.

Question 29

4 forms of risk mitigation

Answer 29

Risk acceptance- decide to take the risk without a plan
Risk avoidance- avoid the risk
Risk limitation - reduces impact of risk e.g back up generator on site if lots of power losses
Risk transference- transferred to a third party e.g insurance

Question 30

Continuity planning

Answer 30

Plan of how to keep going after a major incident

Question 31

Succession planning

Answer 31

Involves the identification and development of staff members that would be able to fill key roles.

Question 32

total equity

Answer 32

total assets - total liabilities