7 Mission, corporate objectives, functional objectives and strategy Flashcards
mission
overriding purpose of business
determines the strategic position of business
useful for communication between stakeholders and giving overall strategy
tactics
short term achievable
strategy
medium to long term plan to meet corporate objectives
SWOT
use: identify SWOT to help with business decision makings
internal factors: strength and weakness
external factors: opportunities and threats
financial ratio analysis
- profitability (ROCE- return on capital employed)
- liquidity (current ratio)
- gearing
- efficiency ratios: payables days, receivables
days, inventory turnover.
balance sheet
shows the financial position of business
snaptshot of CA, CL, non-CL,equity and debt on a particular day
current assets
-cash in hand
-receivables
-inventory
current liabilities
-overdraft
-payables
non-current liabilities
money owned for more than 12 months
equity
amount of investment by owners (using internal source of finance like retained profits and shared capital)
debt
finance borrowed from external sources
liquidity
use: the ease and cost which assets can be tuned into cash and used immediately
formula: CA/CL : 1
(ratio to CL is always 1)
acceptable range of ratio: 1.5-2.5
gearing
use: measure financial health of business by focusing on the debt created from investment
formula 1: non-CL / (total equity+non-CL) 100%
formula 2: (debt/equity) 100%
acceptable ratio: 20%-50%
inventory turnover
Cost of sales/inventories
payables days
(trade payables/ cost of sales) x 365
