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Business A Level > Advanced Information for Paper 2 > Flashcards

Advanced Information for Paper 2 Flashcards

1
Q

Contribution

A

The amount of each sale that is left after the cost of sales is taken off. This goes towards paying the fixed costs of a business

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2
Q

Contribution per unit

A

Selling price - Variable cost per unit

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3
Q

Total contribution

A

Contribution per unit x Quantity sold OR Total Revenue - Total Variable Costs

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4
Q

Break even output

A

Fixed costs / Contribution per unit. This shows the amount of units that must be sold in order to break even (meet all costs with revenue)

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5
Q

Break even chart

A

The chart that shows the costs and revenues on a graph, showing the point at which revenues meet with total costs.

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6
Q

Margin of safety

A

Actual output - Break even output. This shows how many sales the business was above the break even point.

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7
Q

Budget

A

A financial plan for the future concerning the revenues and costs of a business

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8
Q

Historical budgeting

A

Using last year’s figures as the basis for the next year’s budget

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9
Q

Zero budgeting

A

Setting budgets at £0 and people will have to put proposals forwards for sales and costs

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10
Q

Revenue / income budget

A

A budget showing expected revenues and sales

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11
Q

Cost / expenditure budget

A

A budget showing expected costs based on sales

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12
Q

Profit budget

A

A budget based on both the sales and cost budgets

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13
Q

Variance

A

Looking at the difference between a forecast budget and an actual budget

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14
Q

Favourable variance

A

Actual figure - Budgeted figure WHEN spending is less than budgeted, or revenue is more than budget

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15
Q

Adverse variance

A

Actual figure - Budgeted figure WHEN spending is more than budgeted, or revenue is less than budget

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16
Q

Gross profit

A

Revenue - Cost of sales

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17
Q

Operating profit

A

Gross profit - Fixed overheads OR Revenue - Cost of sales - Fixed Overheads

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18
Q

Net profit

A

Operating profit - Financing costs and tax OR Revenue - Cost of sales - Fixed overheads - Financing costs and tax

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19
Q

Profitability

A

The extent to which a business is able to make a profit

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20
Q

Liquidity

A

The extent to which a business is able to use cash to meet debts as they are due

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21
Q

Statement of comprehensive income

A

(Income statement) Measures the performance of a business over a given time period, comparing the income of the business against the cost of goods or services and expenses

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22
Q

(Balance sheet) A snapshot of a business’ assets (what it owns) and liabilities (what it owes)

A

Statement of financial position

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23
Q

Current assets

A

What a business owns and will be able to turn into cash in the next 12 months (i.e. stock, money in the bank)

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24
Q

Assets

A

What a business owns

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25
Q

Non-current assets

A

What a business owns that will last for over a year (i.e. a building, machinery)

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26
Q

Liabilities

A

What a business owes

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27
Q

Non-current liabilities

A

What a business owes over a longer term than the next 12 months (i.e. mortgages, long term loans)

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28
Q

Current liabilities

A

What a business owes within the next 12 months (i.e. suppliers debt, overdrafts, short term loans)

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29
Q

Credit control

A

The management of accounts owed on credit by the customers of a business

30
Q

Debt factoring

A

Selling the rights to collect amounts owed by customers in order to release cash flow. Debt factoring involves a business selling their invoices to a third party at a discounted price in order to bypass the hefty waiting times which are associated with invoice payments.

31
Q

Production capacity

A

The measure of how much output it can achieve in a given time

32
Q

Capacity utilisation

A

The proportion of a business’ capacity that is being used within a specific time period. What percentage of the total capacity was produced?

33
Q

Spare (excess) capacity

A

Where actual output is less than capacity

34
Q

Excess demand

A

Where demand for a business’ products or services is more than their capacity

35
Q

Ratio analysis

A

A series of ratios allowing a business to assess their profitability and liquidity

36
Q

Ratio Analysis - Gross profit margin

A

(Gross profit / Revenue) x 100 A profitability ratio showing what percentage of the revenue is gross profit

37
Q

Ratio Analysis - Operating profit margin

A

(Operating profit / Revenue) x 100 A profitability ratio showing what percentage of the revenue is operating profit

38
Q

Ratio Analysis - Net profit margin

A

(Net profit / Revenue) x 100 A profitability ratio showing what percentage of the revenue is net profit

39
Q

Ratio Analysis - Current ratio

A

Current assets / Current liabilities. A liquidity ratio calculated by dividing current assets by current liabilities

40
Q

Ratio Analysis - Acid test ratio

A

Current ratio - Inventories / Current liabilities A liquidity ratio calculated by dividing current assets (minus stock) by current liabilities

41
Q

Ratio Analysis - ROCE (Return on Capital Employed)

A

(Operating profit / Capital employed) x 100 A profitability ratio calculating the percentage of capital invested that is operating profit

42
Q

Capital Employed

A

equity + non-current liabilities

43
Q

Portfolio analysis

A

Where a business uses tools to identify strengths and weaknesses among their range of products

44
Q

Strength

A

Features within the control of a business that are a source of competitive advantage.

45
Q

Weakness

A

Features within the control of a business that are a source of competitive disadvantage.

46
Q

Opportunity

A

Features of the external environment that create opportunities for a business to leverage its strengths towards.

47
Q

Threat

A

Features of the external environment that threaten the performance and position of a business if not addressed.

48
Q

External influence

A

Influences from outside the business

49
Q

Political factor

A

Government policy and its administration that has the potential to change or influence a business. e.g. competition policy

50
Q

Economic factor

A

Changes such as costs and prices of goods, interest rates, wage rates, exchange rates and the rate of inflation that have the potential to change or influence a business.

51
Q

Social factor

A

Changes that affect lifestyle, such as religion, wealth or family. It is important for businesses to be aware of these factors as they are very important for marketing purposes. E.g changes in taste and fashion

52
Q

Technological factor

A

Changes in technology available to businesses or consumers that have an impact on either a business or consumers. This could be to change the way consumers and businesses interact, or a change in production technology available to a business, for example.

53
Q

Legal factor

A

Law and changes in law that have an impact on either businesses or consumers. E.g. the minimum wage act.

54
Q

Environmental

A

Changes in the way businesses or consumers look at and care for the environment, or changes to the environment that have an impact on business.

55
Q

Quantitative

A

Something numeric / based on statistics

56
Q

Sales forecast

A

A prediction of future revenues

57
Q

Moving average

A

Calculated to smooth out fluctuations in data (e.g. sales) to provide a smoother, more averaged line. Calculated by adding together data points and dividing by the number of data points.

58
Q

Extrapolation

A

The use of trends established by historical data to make predictions about future values.

59
Q

Correlation

A

A method of forecasting that looks at the strength of a relationship between two variables.

60
Q

Trend

A

Used to identify patterns in behaviour, such as sales increasing or decreasing.

61
Q

Investment appraisal

A

An evaluation of the attractiveness of an investment proposal, using methods such as average rate of return (ARR), net present value (NPV), or payback period.

62
Q

Investment

A

The act of committing money or capital to a business project with the expectation of obtaining an additional income or profit.

63
Q

Payback period

A

The act of committing money or capital to a business project with the expectation of obtaining an additional income or profit.

64
Q

ARR

A

The total accounting return for a project to see if it meets a target. Or the average amount of profit the project returns per year as a percentage of the initial investment cost. ((Net return / Number of years) / Initial Cost)) x 100

65
Q

Discounted cash flow / Net present value

A

Calculates the monetary value now, of the projects future cash flows. Using discount factors to show that £100 in 3 years is not worth the same as £100 now.

66
Q

Creditors

A

An individual or business that is owed money by an individual or business

67
Q

Debtors

A

An individual or business who owes money to an individual or business.

68
Q

Profitability ratios

A

A series of financial ratios that analyse how much a business is able to make a profit

69
Q

Liquidity ratios

A

A series of financial ratios that analyse the ability of a business to meet short term debts.

70
Q

Gearing

A

A ratio that calculates the proportion of a business’ capital that is in the form of debt. Non-current liabilities/ capital employed

71
Q

Capital employed 2

A

Capital employed = Share capital + retained earnings + long-term liabilities

72
Q

Equity

A

The proportion and amount of the capital structure that is provided by shareholders or left as retained profits

Business A Level (39 decks)

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