Brainscape's Knowledge GenomeTM

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


See full index

AQA A Level Business > 3.7.2 > Flashcards

3.7.2 Flashcards

1
Q

what are the 6 main features of an income statement?

A
  1. cost of goods sold
  2. gross profit
  3. rent
  4. operating cost
  5. exceptional expenses and income
  6. net profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what does it mean by goods sold?

A

direct costs associates with the production of sales

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

what does it mean by gross profit? definition and Equation

A

profit - direct cost

indication of success of trading activity

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

what does it mean by rent?

A

indirect/operating costs

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

what does it mean by operating costs? definition and equation

A

direct and indirect costs - profit

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

what does it mean by exceptional expenses and income?

A

expenses or incomes not associates with the direct activity if the business

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

what does it mean by net profit/profit of the year?

A

what the business has left over after tax is deducted

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

what are the 7 main features of a balance sheet?

A
  1. non-current assets
  2. current assets
  3. current liabilities
  4. net current assets
  5. non-current liabilities
  6. net assts
  7. total equity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what does it mean by non-current assets?

A

owned for over a year, fixed assets?

land, machinery

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

what does it mean by current assets?

A

assets expected to be used or sold within a year

inventories/debtors

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

what does it mean by current liabilities?

A

payments due within a year

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

what does it mean by net current assets? definition and equation

A

current assts - current liabilities

working capital available

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

what does it mean by non-current liabilities?

A

debts not expected o be payed within a year

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

what does it mean by net assets?

A

total assets - total liabilities

the value of the business

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

what does it mean by total equity?

A

always the same as net assets

re[resents how it has been financed

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

what are the 4 types of financial ratio?

A
  1. profitability ratio
  2. efficiency ratio
  3. liquidity ratios
  4. gearing ratio
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what is profitability ratio?

A

key measure of success when comparing profit to revenue and investment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what are the profitability ratios?

A

profit margin ratios

ROCE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what are profit margin ratios? what are the there types of profit margins?

A

comparing profit o revenue generated over a period of time.

gross profit margin, operating profit margin, net profit margin

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what is ROCE ratio? what if the equation for capital employed? what is the equation for ROCE?

A

compared operating profit with the amount of capital employed by the business.

capital employed = total equity + any non current liabilities.

operating profit/capital employed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what is the efficiency ratio?

A

gives an indication of how well parts of the business is being managed.

22
Q

what is a type of efficiency ratio?

A

Payables days ratio
Receivables days ratio
Inventory turnover ratio

23
Q

what is liquidity ratio?

A

assesses the ability of a business to pay its debts

24
Q

what is a type a of liquidity ratio?

A

current ratio

25
Q

what is current ratio? definition and equation

A

compared current assets to current liabilities, this shows if the business has enough working capital to pay its short term debts]

current assets/current liabilities

26
Q

what does gearing ratio do?

A

assesses the extent to which a business is based on borrowed finance.

27
Q

what is a type of gearing ratio?

A

gearing ratio

28
Q

what is getting ratio?

A

how the business has raised long term finance

29
Q

how do you interpret current ratio?

A

e.g. expresses as 2:1, means £2 current assets to £1 current liabilities

30
Q

how do you interpret gearing ratio?

A

highly geared means more than 50% of capital in he form of a loan. Business is vulnerable to increased interest rates

low geared have opportunity to borrow funds to expand

31
Q

what three things are financial ratio used for?

A
  1. performance as a trend
  2. the economic environment
  3. benchmarkerss and industry average
32
Q

what does benchmarkers and industry average mean?

A

manufacturers have lower operating profit margins. business needs to know the industry

33
Q

what is inventory turnover ratio? definition and equation

A

measures the success of turning inventory into revenue

it compares the value of inventory with the sales achieved

cost of goods sold/average inventories held

34
Q

how do you interpret inventory turnover ratio?

A

the lower the number the more efficient

ratio only really apply’s to manufacturers

perishable goods?

35
Q

what are receivable days ratio? definition and equation

A

the time it takes for the business to revive its debts owed

(receivables/revenues) x 365

36
Q

how do you interpret a receivables days ratio?

A

the shorter the period the quicker they have cash

trade credit links to a long waiting period

37
Q

what is a payables days ratio? definition and equation

A

calculates how long it takes for the business to pay its creditors

(payables/cost of sales) x 365

38
Q

how do you interpret a payables days ratio?

A

the longer the period the longer they have a lot of short term cash.

can damage relationships and can make future deals difficult

39
Q

what are the 4 main categories financial accounts are used by?

A
  1. managers
  2. potential investors and lenders
  3. shareholders
  4. government
40
Q

what do managers use financial accounts for?

A

assess performance and efficiency

41
Q

what do shareholders use financial accounts for?

A

assess possible dividends

42
Q

what do governments use financial accounts for?

A

calculate tax liability

43
Q

what do potential investors and lenders use financial accounts for?

A

assess businesses security and liquidity

44
Q

what are 4 benefits of ratio analysis?

A
  1. can compare and calculate trends
  2. greater insight into financial accounts
  3. information can be used against benchmarkers data
  4. assess performance of other functional areas
45
Q

what are 3 limitations of ratio analysis?

A
  1. no account for qualitative issues like brand issues
  2. no account for impact of long-term decisions
  3. economic climate
46
Q

What 5 stakeholders are interested in profitability ratios?

A
  1. Shareholders
  2. Creditors
  3. Managers
  4. Competitors
  5. Employees
46
Q

What 3 stakeholders are interested in liquidity ratios?

A
  1. Creditors
  2. Suppliers
  3. Managers
47
Q

What 3 stakeholders are interested in gearing ratios?

A
  1. Shareholders
  2. Managers
  3. Creditors
48
Q

What 4 stakeholders are interested in efficiency ratios?

A
  1. Shareholders
  2. Managers
  3. Employees
  4. Competitors
49
Q

What is the equation for gearing?

A

(Non-current liabilities/capital employed) x 100

AQA A Level Business (19 decks)

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