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A Level Business (AQA) > 3.5 - Financial Managment > Flashcards

3.5 - Financial Managment Flashcards

1
Q

What is the equation for gross profit?

A

sales revenue - cost of goods sold

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2
Q

What is the equation for operating profit?

A

gross profit - operating expenses

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3
Q

What is the equation for net profit?

A

Operating profit - interest

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4
Q

Net Profit vs. Net Cash Flow

A

Timing differences
- business may not receive cash straight away, delayed payments
The way fixed assets are accounted for

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5
Q

What are the benefits of serving financial objectives?

A
  • focus for decision making
  • provide a yardstick for success or failure to be measured against
  • Shareholders assess whether investment is worthwhile
  • Outside organisations may be able to judge financial viability if a business
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6
Q

What are some examples of financial objectives?

A
  • ROCE
  • cash flow targets
  • profit and shareholder returns
  • cost minimisation
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7
Q

What are some cash flow objectives?

A

-Reduce bank borrowings
-Minimise the time taken by customers who pay on credit
-Extend the period taken to pay suppliers
-Minimise Interest Rates
-Reduce the affect of seasonal swings

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8
Q

What is the formula for return on investment?

A

(net profit/ amount invested) x100

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9
Q

What is the equation for capital gearing?

A

(loan capital/total capital employed) x100

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10
Q

What are some external influences on a business?

A
  • Market factors
  • Actions of other businesses
  • PESTLE analysis
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11
Q

What are some internal influences on a business?

A
  • Overall corporate objectives
  • Operational factors
  • Resources available
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12
Q

What are the three types of budgets?

A

Expenditure, revenue, profit

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13
Q

What is variance?

A

difference between actual figures and budgeted figures

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14
Q

What is favourable variance?

A

When costs are lower than expected or revenue is higher than expected

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15
Q

What is adverse variance?

A

When costs are higher than expected or revenue is lower than expected

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16
Q

What are cash flow forecasts?

A

State the inflows and outflows of cash that the managers of a business expect over some future period

17
Q

What is the opening balance?

A

the amount carried forward from the previous month (previous month’s closing balance)

18
Q

What is the closing balance?

A

sum of net cash flow and opening balance

19
Q

What is the importance of budgeting?

A
  • Planning
  • Assessing performance
  • Motivation
20
Q

What is a break-even chart?

A

A graphic presentation of the break-even analysis that shows when total revenue and total cost intersect to identify profit or loss for a given quantity sold.

x axis - output
y axis - costs and revenue

21
Q

What is the formula for contribution per unit?

A

selling price per unit - variable cost per unit

22
Q

What is the formula for breakeven output?

A

Fixed costs / contribution per unit

23
Q

What is the formula for margin of safety?

A

Actual level of output - Breakeven level of output

24
Q

What is the formula for gross profit margin?

A

Gross profit / revenue x 100

25
Q

What is the formula for operating profit margin?

A

Operating profit / sales revenue x 100

26
Q

What is the formula for net profit margin?

A

Net profit / sales revenue x100

27
Q

What are payables?

A

short-term liabilities owed to suppliers for purchases made on credit

28
Q

What are receivables?

A

amounts due from individuals and companies that are expected to be collected in cash

29
Q

What are some internal sources of finance?

A

Personal funds, retained profit, sale of assets

30
Q

What are some external sources of finance?

A

loans
overdraft
venture capital
crowdfunding
debt factoring

31
Q

What are overdrafts?

A

allow a business to spend in excess of the amount in its bank account, up to a predetermined limit. They are the most flexible form of borrowing in the short term.

32
Q

What is debt factoring?

A

A financial service whereby a factor (such as a bank) collects debts on behalf of other businesses, in return for a fee. Useful when finance is required quickly

33
Q

What is trade credit?

A

the practice of buying goods and services now and paying for them later

34
Q

What is equity?

A

The amount an owner(s) would receive if their ownership interests in a business (stock) were sold. (The money the owner has left over)

35
Q

What is borrowing?

A

Obtaining money, goods, or services in exchange for promise of future payment

36
Q

What are some methods of improving cash flow?

A
  • speed up inflows
  • slow down outflows
  • debt factoring
  • short-term borrowing

A Level Business (AQA) (10 decks)

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