3.5 Assessing Competitiveness Flashcards
What is the statement of comprehensive income
shows a firms incomes and outgoings in a time period
Gross Profit equation
revenue-cost of sales
operating profit equation
gross profit- other expenses
net profit equation
operating profit- interest and other costs
what is the statement of financial position (aka balance sheet)
shows the liquidity of a firm
what is liquidity
a firms ability to pay for debts with its assets
what’s the difference between current and non current assets with examples of NCA
non current assets are assets owned for the long term eg. buildings, machinery
current assets are assets that can quickly be turned to cash
what’s the difference between current and non current liabilities with examples
non current liabilities are liabilities that don’t need to be paid back within the next 12 months eg mortgages, bank loans
current liabilities need to be owed soon such as an overdraft
what is the gearing ratio used for
to show how much of a firms finance is from non current liabilities
gearing ratio (%) equation
non current liabilities/ capital employed x 100
capital employed equation
total assets - current liabilities
what is ROCE
return on capital employed is the profit made from capital invested
ROCE (%) equation
operating profit/ capital employed x100
implications of a low gearing
most finance comes from shareholders etc
less risky as not as much interest payments need to be made
implications of a high gearing
most funds come from borrowing (due to non current liabilities being higher)
riskier as a rise in interest will decrease profits
high gearing benefits
extra funds for expansion
can see high profits after the loans have been paid back
high gearing drawbacks
affected by a large change in interest rates
may not be able to afford the repayments
labour productivity definition
output per employee
labour productivity equation
total output/ number of employees
chain of analysis for high labour productivity
high labour productivity->lower labour cost per unit->improved efficiency->higher competitiveness
labour turnover definition
amount of staff that leave in a time period
labour turnover equation
staff leaving / number of staff x 100
absenteeism meaning
staff absent from work during a time period
absenteeism rate equation
number of staff absent/ number of staff employed x100
