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business Flashcards

1
Q

What is financial information?

A

information made up of figures, reports, data and analysis of companies financial performance. It is used to measure the performance and sustainability of a business.

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2
Q

What is equity?

A

Assets - liabilities

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3
Q

What current assests?

A

Cash and other assets that are expected to be converted to cash within a year

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4
Q

What are non-current assests?

A

Items of value owned by a business for more than a year. (can be tangible or intangible)

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5
Q

What are tangible assests?

A

Assets that you can touch and are tangible such as buildings machinery and equipment

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6
Q

What are intangible assests?

A

Assets that cannot be touched are are intangible such as goodwill and trademarks

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7
Q

What is the purpose of financial information?

A

-to provide information to outside stakeholders and the authorities

-to record financial transactions

-to help managers make good decisions and see the results of their past decisions

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8
Q

What are financial records?

A

The actual revenue figures for the business along with all the data and transactions for the business made into repots and journals

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9
Q

Why is having financial records important?

A

-it is important for a businesses success
-To see if a businesses goals are being met

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10
Q

What is income statement?

A

Records the companies performance in terms of revenue and expenses over a period of time usually every month or year and states whether a profit or loss has been made

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11
Q

What is gross profit?

A

The profit a business makes on selling the goods but does not take into account other costs.
gross profit = sales revenue - cost of goods sold

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12
Q

What is net profit?

A

The final profit figure after all expenses (costs) have been deducted.
Net profit=
gross profit + other income - expenses

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13
Q

What is the income statement used for?

A

measuring a firms profitability and deciding whether a business can generate profit by increasing revenues, decreasing cost or both.

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14
Q

What is GPM Gross profit margin?

A

A measure of a firms profitability by looking at the relationship between gross profit and revenue.

Gross profit / Revenue x100

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15
Q

What is profit margin?

A

A measure of a firms profitability by looking at the relationship between operating profit and revenue

Profit / Revenue x100

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16
Q

Why is profit important to a business?

A

-A return on investment
-A reward for taking risks
-A key source of finance

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17
Q

What is statement of financial position or balance sheet?

A

A ‘snapshot’ of a businesses assets, liabilities and equity at a single point in time

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18
Q

What is included in the sofp?

A

-A summary of the financial state of a business at a point in time

-An overview of the value of a businesses assets liabilities and owners equity

-Assets on one side liabilities on the other

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19
Q

What is liquidity?

A

A measure of a businesses ability to survive in the short term (its ability to meet short term debts and day to day expenses)

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20
Q

What is working capital?

A

A liquidity metric expresses as the difference between a companies current assets and its current liabilities

wc = current assests - current liabilities

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21
Q

What are current liabilities?

A

Financial obligations or debts that must be paid for within the next 12 months (short term debt)

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22
Q

Examples of current liabilites

A

accounts payable
pensions payable
sales tax payable

23
Q

What are non current liabilities?

A

Financial obligations or debts that wont be due for at least a year.
(long term debt)

24
Q

Examples of non current liabilities

A

Building lease
machinery

25
Q

How can a business use financial reports when purchasing raw materials or assets?

A

Reports show how much money is being earned, which products are most profitable and which costs have been increasing or decreasing.

It can help see what the. business can afford or not.

26
Q

How can a business use financial reports when increasing or reducing staff numbers?

A

Reports. highlight the cost of employing new staff. The reports also show rises and falls in sales revenue which might suggest a need for more or fewer employees.

27
Q

How can a business use financial reports when cutting costs and boosting sales?

A

By comparing reports from one month to another, owner and manager can monitor progress toward financial goals.

27
Q

How can a business use financial reports when deciding whether to offer promotions or increase advertising?

A

If the companies market share is slipping, the business might want to increase promotion and advertising.

28
Q

What is cash flow statement?

A

Giving details of all cash that has come into the business and what it has been spent on during a specific period. This statement identifies the cash that is flowing in and out of the company.

29
Q

How is cash flow statement useful for a business?

A

Shows how much cash they have to pay for day to day expenses.

important for businesses survival in the short and long term

30
Q

What is a budget?

A

A budget is a list of all planned expenses and revenues over a period of time. Budgets are estimates and aim to achieve company objectives.

31
Q

How are budgets built?

A

By making financial forecast - A financial forecasts is normally an estimate of future financial outcomes for a business.

32
Q

What is the purpose of budgeting?

A
  • A method of planning the use of resources
  • A means of resources
  • A means of motivating individuals to achieve performance levels agrees and set
33
Q

What are the advantages of budgeting?

A
  • Establishes targets and standards
  • Evaluates performance against the budget goals
  • Allocates limited resources
34
Q

What are the disadvantages of budgeting?

A
  • Budgets can be done innaccurately
    and might be demotivating for manager and workers trying to keep targets set by someone who isn’t hands onworking.
  • Time consuming when needing to collect all the resources such as previous financial records accounts data and market data ect
  • Resentment and rivalry is created when businesses need to compete for money.
35
Q

What are fixed costs?

A

An expense that does not change when sales or production volumes increase or decrease. They are the expense a business incurs that do not change with the amount of goods or services produced and provided.

36
Q

What are variable costs?

A

Any expense that change based on how much a company produces and sells

37
Q

What are semi variable costs?

A

A cost composed of a mixture of both fixed and variable components e.g electricity

38
Q

What are total costs?

A

The sum of fixed costs and variable costs

39
Q

What is revenue?

A

The money generated from normal business operations, calculated as the average sales price times the number of units sold

40
Q

What is Break even point?

A

The level of output at which the costs of production equal revenue

41
Q

What is breaks even analysis?

A

The process of calculating the number of units of a good or service a company must sell to cover all of its costs

42
Q

What are contributions?

A

When a business has to pay its variable costs then contribute towards fixed costs until there are enough contributions to cover all of the fixed costs the business can not start to make a profit

43
Q

What are the uses of break even

A

-sets targets for minimum sales
-show to pontential investors to illustrate ability to potentially make a prrofit
-calculate profit and loss at different levels of output

44
Q

How do you calculate contribution?

A

Selling price - variable costs

45
Q

How do you calculate total contribution?

A

Total sales revenue - total variable costs

46
Q

How do you calculate BEP break even point using contribution and fixed costs?

A

Fixed costs / contribution

47
Q

What is an entrepreneur?

A

Someone who takes the financial risk of starting and managing a new business.

48
Q

What is value added?

A

When a business increases the value of its resources by creating a new output / product.

49
Q

What is Variance?

A

The difference between projected and actual figures

These can be expresses as both a raw figure and or a percentage.

50
Q

What is the purpose of variance analysis?

A

To identify where results differ from the plan

Understand the reasons why there are differences

Be able to take action to remedy

51
Q

How is variance calculated?

A

(actual / forecast-1)x100

(forecast - actual) / forecast x 100

52
Q
A

commerce (3 decks)

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