AMA Q22 - Chapter 13

Question 1

Where do financial performance indicators come from?

Answer 1

the P&L and SoFP

Question 2

Another term for profitability indicator

Answer 2

efficiency indicator

Question 3

What Is ROCE?

Answer 3

Return on Capital Employed

Question 4

What does ROCE indicate?

Answer 4

How successful a business has been at using its equity to generate profit

Question 5

How do you calculate Capital Employed?

Answer 5

= Total assets - current liabilities

or

equity + non current liabilities

Question 6

ROCE calculation

Answer 6

Operating profit/capital employed x 100%

Question 7

Another term for Operating Profit

Answer 7

PBIT (profit before Interest and Taxes)

Question 8

What does Operating Profit indicate?

Answer 8

How well expenses have been controlled in a business overall

Question 9

How is showing individual expense categories as a percentage of revenue helpful?

Answer 9

It shows whether expenses have increased/decreased proportionally in line with revenue

Question 10

Asset Turnover formula

Answer 10

revenue / net assets (all assets - current liabilities)

Question 11

Asset Turnover indicates?

Answer 11

How much revenue each £1 of assets produces

Question 12

ROCE can be calculated by multiplying which two ratios?

Answer 12

Asset turnover x net profit margin

Question 13

What is Working Capital?

Answer 13

current assets - current liabilities

Question 14

What is net assets?

Answer 14

All assets less all liabilities

Question 15

working capital cycle

Answer 15

days inventory waits before being sold + days it takes for a customer to transfer cash + days it takes to pay a supplier

Question 16

two ways Inventory Days can be calculated

Answer 16

1. (inventory/COS) x 365
2. (open. Inv + clos. Inv) / 2

Question 17

Receivables days calculation

Answer 17

(AR/revenue) x 365

Question 18

Payables Days calculation

Answer 18

(AP/purchases) x 365

Question 19

Value Added (formula)

Answer 19

sales value - cost of purchased materials and bought-in services

Question 20

Types of quality costs

Answer 20

Prevention (Preventing defects)

Appraisal (monitoring quality)

Internal failure (rework costs)

External failure (running a customer service department)

Question 21

Labour Activity Ratio

Answer 21

(standard hours to meet output / budgeted output) x 100%

Question 22

Production Volume Ratio

Answer 22

Actual output/budgeted output x 100%

Question 23

Labour Efficiency Ratio

Answer 23

standard hours to make output/ actual hours taken x 100%

Question 24

Capacity Ratio

Answer 24

Actual Hours/ Budgeted Hours x 100%

Question 25

Efficiency ratio x capacity ratio

Answer 25

Activity Volume Ratio