Brainscape's Knowledge GenomeTM

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


See full index

business a level > 3.5 decision making to improve financial perfirmance > Flashcards

3.5 decision making to improve financial perfirmance Flashcards

1
Q

what is revenue

A

the amount (value) of a product that customers actually buy from a business

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

what is demand

A

the amount of a product that customers are prepared to buy

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

how can demand be measured

A

in terms of volume (quantity bought) and/or value (value of sales)

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

what factors can affect the level of demand

A

government decisions
prices and incomes
tastes and fashions
competitor actions
social and demographic change
changing technology
seasonal changes

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

how can the relationship between quantity demanded and price be shown graphically

A

on a simple demand curve

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

what is the formula for revenue

A

total revenue= volume sold x average selling price

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

what are the two main ways of increasing revenue

A

increase the quantity (amount) sold
-could do this by lowering price
-could offer volume related incentives
achieve a higher selling price
-could conduct market research
-best to add value than just increase price

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

what is profit

A

the total revenue minus total costs
- is measured in absolute terms

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

what is profitability

A

measures the amount of profit made in relation to the size (turnover) of the bus jess and as such measures how efficient the business is at generating profit

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

how can profitability be measured

A

via the net profit margin

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

what is net profit

A

the difference between total revenue and total costs

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

what is the net profit margin

A

the % return made on sales

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

how do you calculate the net profit margin

A

net profit/sales revenue x100

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

what does a business need to do to improve profit

A

increase sales revenue and/or reduce costs

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

what are the methods used to improve profit

A

-increasing/decreasing price- depends on price elasticity of demand
-labour productivity- an increase will lead to lower labour costs/unit therefore lower unit costs
-managing capacity-higher capacity utilisation will lead to lower unit costs
-promotion-there will be a cost involved however if sales volumes increase so will revenue

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

what is profit

A

the reward or return for taking risks and making investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what is the formula for profit

A

total revenue-total costs

18
Q

what are the three main profitability ratios

A

gross profit margin
return on capital employed
operating profit margin

19
Q

what is the gross profit margin

A

revenue-cost of sales

20
Q

how do you calculate the gross profit margin

A

gross profit/revenue x100

21
Q

what is net/operating profit

A

what is left after all the costs of a business have been taken away from its sales revenue

22
Q

what is the net/operating profit margin

A

operating profit/sales x100

23
Q

what does net profit tell us

A

-how effective a business turns it’s revenue into profit
-how effective a business is run
-whether a business is able to ‘add value’ during the production process (a high margin business must be doing sonething right)

24
Q

what should be done with the net profit margin over time

A

should be compared with competitors in the same market and over time

25
Q

what is the formula for return on capital employed (ROCE%)

A

operating profit/capital employed x100

26
Q

what should you do with ROCE

A

higher % is better
watch for trend over time
watch out for low quality profit which boosts ROCE
leased equipment will not be included i. capital employed

27
Q

what is return on capital

A

a measure of the returns made from investing in the business
shows opportunity cost
provides a means of comparison with other investment opportunities
shows how good the business is at converting money invested into profit

28
Q

what is the formula for return on capital

A

net profit (before tax)/capital invested x100

29
Q

what is capital in terms of return on investment

A

the amount invested in a business

30
Q

what is opportunity cost

A

what an investor could have done by investing elsewhere

31
Q

what are costs

A

amounts that a business incurs in order to make foods and/or provide services

32
Q

why are costs important

A

-are the difference between making a good or a bad profit
-are the main cause of cash flow problems in business
-change as the output or activity of a business changes

33
Q

what are the two types of costs

A

variable or fixed

34
Q

what are variable costs

A

costs which change as output varies

35
Q

what are fixed costs

A

costs which do not change when output varies

36
Q

examples of variable costs

A

-bought in stocks
-wages based on hours worked or amount produced
-marketing costs based on sales
-raw materials

37
Q

what is the formula for total costs

A

total costs= fixed costs + variable costs

38
Q

how does cash flow affect a business

A

cash flow is dynamic and unpredictable
cash flow problems are the main reason business fail
regular and reliable cash flow forecasting can adress many problems

39
Q

what are some advantages of cash flow forecasts

A

+advanced warning of cash shortages
+important part of financial control
+make sure the business can pay suppliers and employees
+provide reassurance to investors and lenders that the business is being managed properly

40
Q

examples of cash inflows

A

-cash sales
-receipts from trade debtors
-sale of fixed assets
-interest on bank balances
-grants
-loans from bank
-share capital invested

41
Q

examples of cash outflows

A

-payment to suppliers
-wages and salaries
-payments for fixed assets
-tax on profit
-interest on loans and overdrafts
-dividends paid to shareholders
-repayment of loans

42
Q

what is breakeven

A

break even (output) is reached when the total revenues= total costs

business a level (2 decks)

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