Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Buisness > 3.5- Assessing competitiveness > Flashcards

3.5- Assessing competitiveness Flashcards

1
Q

What is a profit and loss account

A

shows firms revenue for time period

-asw as costs associated with generating that revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a balance sheet

A

financial document showing businesses assets & liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Name the 2 major documents all companies are required by law to publish

A

-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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does a balance sheet list

A

long-term non-current assets

short-term (current) assets

total asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is an asset

A

item owned by a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is liquidity

A

ability of a firm to pay its bills and short-term spending

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are long-term assets

A

things used over and over again by a business to generate profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Give 3 examples of long-term assets

A

-vehicles

-land, buildings

-machinery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Give 3 examples of current assets (short-term) assets

A

-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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Name the 3 sources of capital shown on balance sheet

A

-banks -> loans from banks carry interest - repaid

-shareholders -> when shares are sold -> share capital -> owed back to shareholders

-profits -> retained profit kept in business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Why is a balance sheet good for assessing long-term performance

A

as if reserves figure is rising over time it shows firm has been consistently profitable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Name the interests of stakeholders: bankers, suppliers, staff in a companies balance sheet

A

-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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is cost of sales

A

shows cost of making/ buying products

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Give the formula for gross profit

A

revenue - cost of sales = gp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does gross profit tell us

A

what is left from revenue once cost of making/ buying goods has been deducted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is operating profit

A

shows amount of profit left after deducting normal costs of operating the business

17
Q

What is the formula or operating profit

A

gross profit - expenses = op

18
Q

What is ratio analysis

A
19
Q

Name the 3 types of ratio

A

-profitability -> shows relationship between gp/op/np & rev, assets, capital

-liquidity -> shows ability of a firm to meet its short-term debts

-gearing -> shows proportion of long-term finance in a business that has come from loans

20
Q

Name the 2 ratios used to work out liquidity

A

-current ratio -> current assets/ current liabilities

-acid test ratio ->current assets - stock/ current liabilites

shows balance between companies short-term debts and the assets it can use to meet that debt

21
Q

What is the ideal value for current ratio and why

A

1.5

-this means business would have £1.50 current assets for every £1 short-term debt -> so enough to cover debts

-if ratio = too low -> firm suffering liquidity crisis -> can’t pay off debts

22
Q

What is acid test ratio formula

A

current assets - stock/ current liabilities

23
Q

What is the ideal value for acid test ratio

A

1

would mean £1 of cash to cover every £1 of short-term debt

24
Q

What is capital employed

A

adds shareholders capital (total equity) to loan capital (long-term liabilities) to work out total long-term finance in business

25
Q

What is the formula for gearing ratio

A

long-term liabilities/ capital employed x100

26
Q

What does gearing ratio tell us

A

the proportion of assets invested in a business that are financed by long-term borrowing

27
Q

Why is it bad for a business to have high gearing

A

higher the gearing means the more a business is borrowing -> ^ risk

28
Q

Name 3 ways a business could reduce high gearing

A

-issue more shares

-retain more profits

-repay some loans

29
Q

Name the 4 profitability ratios

A

-gross profit margin

-operating profit margin

-net profit margin

-return on capital employed

30
Q

What is the formula for capital employed

A

Capital employed = Share capital + retained earnings + long-term liabilities

31
Q

What is suggested as low gearing

A

gearing lower than 25%

Buisness (22 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions