Brainscape's Knowledge GenomeTM

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


See full index

Business > 7. Analysing the Strategic Performance of the Business INCOMPLETE ONLY EQUATIONS > Flashcards

7. Analysing the Strategic Performance of the Business INCOMPLETE ONLY EQUATIONS Flashcards

1
Q

Operation Profit Margin

A

Operational Profit
————————- X100
Revenue

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

Gross Profit

A

Revenue - Cost of Sales

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

Current Ratio

A

Current Assets
————————
Current Liabilities

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

Gearing

A

NC Liabilities
——————— X100
(Equity + NCL)

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

Capital Employed

A

Total Equity + Non Current Liabilities

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

ROCE (Return on Capital Employed)

A

Operating Profit
———————— X100
(Equity + NC Liab

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

Name all the Long Term Assets

A

Land, Buildings
Machinery
Vehicles

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

Name all 3 Current Assets

A

Inventories
Receivables
Cash

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

Receivables Days

A

Receivables
———————— X365
Annual Revenue

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

Payables Days

A

Trade Payables
———————- X365
Cost of Sales

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

Name 2 Long Term Liabilities

A

Loan

Mortgage

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

Name 2 Current Liabilities

A

Payables

Overdraft

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

Why would a shareholder need an income statement

A

To assess profitability, stability and to help obtain loans for a business

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

Why would shareholders use the balance sheet information?

A

To see whether to:

Invest
Lend the business money
Buy the organisation

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

What is the rule for converting £ —> € and then € —> £

A

£ ———> € you time’s

€ ———> £ you divide

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

Name the 4 different key words the economic cycle

A

Slow Down
Recovery
Boom
Recession

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

Define economic growth

A

The total value of all goods and services an economy is and can produce

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

What happens when exchange rates fall

A

Export prices fall and import prices rise

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

What does SPICED stand for

A 
Strong
Pound 
Imports
Cheaper
Exports
Dearer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Define inflation

A

An increase in the average prices of goods in an economy measured by the consumer price index

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

Define unemployment

A

The number of people able, available and willing to find work and are actively seeking work but aren’t employed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How do you calculate the unemployment rate

A

% of unemployed
————————-
Labour force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Why does unemployment happen? Name 4 reasons

A

Seasonal changes
Structural unemployment (mismatch of skills needed and have)
Frictional (transitioning between jobs)
Cyclical (fall of demand)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Name 2 opportunities and 2 threats of high unemployment

A

+ Demand for inferior goods
+ Greater supply of labour

  • Lower spending
  • Lower morale
  • Social issues increase
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Name 2 opportunities and 2 threats of low unemployment

A

+ Consumers have more income
+ High Demand for income elastic goods
- Labour market tightens
- Harder to recruit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What does PESTEL stand for

A 
Political 
Economical
Social
Technological
Ethical
Legal
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Name 2 pros and cons of protectionism

A

+ Countries develop new industry’s
+ Small businesses grow

  • Import prices rise
  • Countries retaliate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Name 2 pros and cons of open trade

A

+ Business get economies of scale
+ More consumer choice
+ Businesses in countries specialise at what they’re good at

  • Business exploit laws abroad
  • Fewer local jobs as companies go abroad
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Define demographic changes

A

Changes in the structure of the UK population in terms of: gender, buying habits, race and age

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Define CSR

A

Corporate social responsibility: pressures that lead some businesses to act with integrity towards society

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

From top to bottom name the 4 steps in Carroll’s CSR pyramid

A

Philanthropy
Ethical
Legal
Economic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Explain the stakeholder concept

A

It suggests managers should take into account their responsibilities to other groups, not just the owners when making decisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Explain the shareholder concept

A

It suggests managers should run the company in the direct interest of the shareholders disregarding other stakeholder groups

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Name 2 pros and a con of technology on a business

A

+ Use to advertise
+ Record info costs easily

  • Decreased productivity of technology breaks down
35
Q

Name 3 calculations in investment appraisal

A

ARR
Payback
Net Present Value

36
Q

Define Payback

A

The time period required for the earnings from an investment to cover the initial cost

37
Q

How do you calculate payback?

A

Number of years +

Outlay
————
/12

38
Q

Name 2 pros and cons of payback

A

+ Easy to calculate
+ Accurate

  • Doesn’t consider after the payback period
  • Doesn’t consider NPV and value of money
39
Q

Define ARR

A

The average rate of return generated by an initial investment

40
Q

How do you calculate ARR?

A

Average Annual Return
——————————— X 100
Initial Outlay

AAR: inflows - outflows / no. of years

41
Q

Define NPV

A

Discounting cash flow taking into account the time value of money

42
Q

Name 2 pros and cons of NPV

A

+ Accounts for time
+ Useful in what if scenarios as you can calculate different interest rates
- Difficult choosing a discount factor
- Hard to calculate

43
Q

Name 4 other factors the Board of Directors consider before making a decision based on investment appraisal

A

1) Objectives
2) Finance
3) Reliability of Data
4) Social Responsibilities

44
Q

When are sensitivity analysis used?

A

Used when assessing the likely outcomes of a decision where quantitative techniques are used

45
Q

How do you work out Equity

A

Share capital + Retained Profit

46
Q

Name all 5 parts of Porter’s 5 Forces Model

A

1) Competitive Rivalry
2) Buyer Power
3) Supplier Power
4) Threat of Substitution
5) Threat of New Entry

47
Q

Name two strategies to combat competitive rivalry

A

1) Differentiate
2) Promotion

Takeover/Merge
Lower costs

48
Q

Name one strategy to combat the threat of substitutes

A

1) Differentiate

49
Q

Name two strategies to combat bargaining power of suppliers

A

1) Build strong relationships

2) Agree to a long term contract

50
Q

Name two strategies to combat the threat of new entrants

A

1) Trademarks or parents

2) Control of distribution channels

51
Q

Name two strategies to combat bargaining power of buyers

A

1) USP

2) Forward vertical integration

52
Q

Name 2 pros and 2 cons of Porter’s 5 Forces Model

A

+ Analytic tool
+ Build on strengths and spot opportunity

  • Misses our important forces
  • It underestimated the forces of change
53
Q

Name 2 risks with investment decisions

A

1) Costs may be higher than expected

2) Sales may be lower than expected

54
Q

When are sensitivity analysis’ used?

A

When assessing the likely outcomes of a decision where quantitative techniques are used

55
Q

How do you conduct a sensitivity analysis?

A
  • Change one variable at a time

- Create a table or pessimistic, optimistic and expected outcomes and then the difference

56
Q

What does a sensitivity analysis show?

A

It shows which variable has the greatest impact. It allows investor to assess the impact on profit and expected dividend levels

57
Q

What the difference between a balance sheet and an income statement

A

A balance sheet shows the companies assets, liabilities and capital whereas the income statement shows all revenues and costs after a given period

58
Q

Name the 4 types of ratio

A

1) Profitability
2) Liquidity
3) Gearing
4) Efficiency

59
Q

What does liquidity show

A
  • Investigates the short term financial stability

* Examined whether there are enough short term assets to meet short term liabilities

60
Q

Name the liquidity ratio

A

Current Ratio

61
Q

What does gearing show?

A

Gearing shows the reliance on borrowed money indicating how vulnerable a firm is to financial setbacks

62
Q

Name 2 ways you can raise and reduce the gearing

A

1) Buy back shares
2) Obtain more loans

1) Issue more shares
2) Repay loans
Or retain more profit

63
Q

Name the 3 profitability ratios

A

1) Gross Profit
2) Operating Profit
3) ROCE

64
Q

How do you interpret ROCE

A

The higher the value suggests resources are being used efficiently. A high profitability will please shareholders

65
Q

How do you calculate inventory turnover?

A

Cost of goods sold
—————————
Inventories

66
Q

What does inventory turnover show?

A

It measures the number of times per year a business sells and replaces its inventories

67
Q

When calculating inventory turnover where you would you find each figure

A

Cost of good sold - Income statement

Inventories - Balance sheet

68
Q

How do you raise or reduce the inventory turnover?

A

1) Reduce the level of inventories held

2) Increase the rate of sales

69
Q

What does it mean if your receivable days is shorter than your payable days

A

You receive money faster than you pay your debts which is a positive

70
Q

Name 3 problems when interpreting accounts

A

The figure could be made up of receivables you won’t receive

It may not be reliable as the value of stock changes rapidly

Low quality profit - you may have sold off an asset but this won’t continue

71
Q

Name 2 strengths and 1 weakness of ratio analysis

A

+ Insights into competitors performance through ratios
+ Focusing on specific areas helps make compromises quicker and easier

  • Figures aren’t facts. They are only averages that can be deceiving
72
Q

Name 4 types of financial objectives

A 
Profit
Revenue
Cash flow
ROCE
Shareholder returns
73
Q

Name 4 internal influences on financial objectives

A

Labour force
Financial
Type of business
Operational

Extra:
Ownership
Shareholders
Stakeholders

74
Q

Name 4 external influences on financial objectives

A

Competitive environment
Economy
Government
Stakeholders

75
Q

Name 4 non financial data pieces relating to finance

A

Market data
Economies of scale
Product quality
Customer retention

Extra:
Labour turnover: productivity

76
Q

Define short termism

A

Obsession with immediate issues

77
Q

Name 3 causes of short termism

A

Pressure
Threat of takeover
Lack of financial understanding

78
Q

Define core competencies

A

Something unique a business can do strategically well

79
Q

Define a balance scorecard

A

Provides information on financial and non financial performance

80
Q

Who came up with the balance score card

A

Kaplan & Norton

81
Q

Name the 4 perspectives of the balance scorecard

A

Financial
Customer
Internal processes
Organisational capacity

82
Q

Explain Elkington’s triple bottom line

A

It assess performance based on; profit, plant and people. It aims to measure the financial, social and environmental performance

83
Q

Name 2 pros and 2 cons of the triple bottom line

A

+ Encourages CSR
+ Goes beyond the measure of profit
- Hard to measure people and planet
- Only used to improve public relations

Extra:
- Is one measure more important than another

Business (8 decks)

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