3.5 Assessing Competitiveness Flashcards
What is the statement of comprehensive income (profit and loss account)?
Shows the income and expenditure of a business over a period of time and calculates the amount of profit made
What is ratio analysis?
Ratio analysis involves extracting information from financial account to assess business performance and answer key questions
What is gearing ratio?
The gearing ratio shows the long term financial structure of the businesss
What is the formula for gearing ratio?
Gearing ratio = (non current liabilities / capital employed) x100
What is return on capital employed (ROCE)?
ROCE is a measure of how effectively a business uses the capital invested in the business to generate profit
What is the formula for return on capital employed?
RoCE = (operating profit / capital employed) x100
What defines a high gearing ratio?
Over 50%
What defines a low gearing ratio?
Under 50%
What are the limitations of ratio analysis?
- Making comparisons
- Quality of accounts
- Balance sheet limitations
- Qualitative information
What is labour productivity ?
Labour productivity is a measure of output per employee
What is the formula for labour productivity?
Labour productivity = total output / average number of employees
What is labour turnover?
Labour turnover measure the proportion of employees leaving a business during a specific time period
What is the formula for labour turnover?
Labour turnover = (number of staff leaving/ average number of staff) x100
What are the problems of high labour turnover?
- Increased recruitment and selection costs
- Increased induction and training costs
- Lower productivity levels as workers settle into new roles
What are the opportunities of high labour turnover?
- Workers with existing skills can be recruited to reduce the need for training
- New ideas and creativity introduced to the business
- New perspective and approaches to problem solving can improved business performance
