3.5- Assessing competitiveness Flashcards
What is a profit and loss account
shows firms revenue for time period
-asw as costs associated with generating that revenue
What is a balance sheet
financial document showing businesses assets & liabilities
Name the 2 major documents all companies are required by law to publish
-statement of comprehensive income (profit and loss account) -> shows revenue generated & costs within revenue
-statement of financial position (balance sheet) -> details what business owes, owns, where money came from
What does a balance sheet list
long-term non-current assets
short-term (current) assets
total asset
What is an asset
item owned by a business
What is liquidity
ability of a firm to pay its bills and short-term spending
What are long-term assets
things used over and over again by a business to generate profit
Give 3 examples of long-term assets
-vehicles
-land, buildings
-machinery
Give 3 examples of current assets (short-term) assets
-stock -> value of any inventories of raw materials, partially finished ggods owned by business
-receivables -> money owed to business - by customers who have bought on credit
-cash -> money avaliable in bank -> easily accessed
Name the 3 sources of capital shown on balance sheet
-banks -> loans from banks carry interest - repaid
-shareholders -> when shares are sold -> share capital -> owed back to shareholders
-profits -> retained profit kept in business
Why is a balance sheet good for assessing long-term performance
as if reserves figure is rising over time it shows firm has been consistently profitable
Name the interests of stakeholders: bankers, suppliers, staff in a companies balance sheet
-bankers -> look at relationship between long-term borrowing, total equity
-suppiers -> interested in short-term financial health of business
-staff -> ‘wealth’ of business has ^/ decreased
What is cost of sales
shows cost of making/ buying products
Give the formula for gross profit
revenue - cost of sales = gp
What does gross profit tell us
what is left from revenue once cost of making/ buying goods has been deducted