Business Finance :Unit 29 - 32 Flashcards
1
Q
- What is a statement of comprehensive income?
A
financial document showing a firm’s income-expenditure in a particular time period.
2
Q
- What is profit?
A
- money left over after all costs have been subtracted from revenue.
3
Q
- What is gross profit?
A
- Gross profit sales revenue less cost of sales.
4
Q
- What is operating profit?
A
- gross profit less expenses.
5
Q
- What is distributed profit?
A
- profit that is returned to the owners of a business.
6
Q
- What is retained profit?
A
- profit held by a business rather than returning it to the owners and which may be used in the future.
7
Q
- What is dividend?
A
share of the profit paid to shareholders in a company.
8
Q
- What is the information contained in the statement of comprehensive income? in order?
A
- revenue
- the cost of sales
- gross profit
- administrative expenses
- other operating expenses
- selling expenses
- operating profit
- finance costs
- Profit for the year
- Profit for the year after tax.
9
Q
- How can a statement of comprehensive income be used in decision-making?(4)
A
- investment decisions
- cost analysis
- the basis for future forecasts
- making comparisons
10
Q
- What is normal profit?
A
- minimum profit a business needs to make to retain the interest of the owners.
11
Q
- What are adjustments?
A
- includes adjustments for the profits made on the disposal of assets.
12
Q
- What is statement of financial position?
A
summary at a point in time of business assets, liabilities and capital(often called balance sheet)
13
Q
12.5 What is finance cost? finance income?
A
finance cost is interest paid on loans
finance income is interest received by businesses on deposit accounts.
14
Q
- What is assets?
A
- resources used or owned by a business.
15
Q
- What is liabilities?
A
- debts of the business, which provide a source of funds.
16
Q
- What is capital?
A
- finance provided by the owners of the business.
17
Q
- What is non current assets?
A
- asset that last for more than one year,
18
Q
- What are current assets?
A
- assets that are likely to be changed into cash within a year.
19
Q
- What is liquidity?
A
- ease or speed with which assets can be sold for cash.
20
Q
- What is trade receivables?
A
- amounts of money that are owed to a company by its customers.
21
Q
- What is current liabilities?
A
- debts that have to be repaid within a year.
22
Q
- What is net current assets/ working capital?
A
- current assets minus current liabilities,(
23
Q
- What are current assets? non-current liabilities?
A
- current assets that are likely to be changed into cash within a year.
- non-current liabilities debts that are payable after 12 months.
24
Q
- What is net assets?
A
- the value of all assets less the value of all liabilities.
25
Q
- What is goodwill?
A
- value that a company has because it has a good relationship with its customers and suppliers.
26
Q
- What is ratio analysis? what are the 2 types?
A
- mathematical approach to investigating accounts by comparing two related figures.
- profitability ratio
- Liquidity ratio
27
Q
What are the 4 types of profitability ratios?
A
- Gross profit margin
- Operating profit margin
- Mark up
- ROCE(return on capital employed)
28
Q
- What is the gross profit margin?
how to calculate it.
A
- gross profit expressed as a percentage of turnover.
Gross profit = Gross Profit
———————– X 100
Revenue
29
Q
- What is the operating profit margin?
how to calculate it,
A
- operating profit expressed as a percentage of turnover.
- Operating profit
————————— X 100
Revenue
30
Q
- What is markup?
how to calculate it.
A
- is used to calculate profit made per item.
- Profit per item
————————– X 100
Cost per item
31
Q
- What are the two types of liquidity ratios?
A
- Current ratio
- Acid test ratio
32
Q
- What is current ratio? How to calculate it?
A
- assess the firm’s liquidity by dividing current liabilities into current assets.
Current assets
————————-
Current liabilities
33
Q
- What is the acid test ratio? How to calculate it?
A
- assesses firm’s severe liquidity by dividing current assets from current liabilities by excluding stocks from current assets.
(current assets - inventory)/ current liabilities
34
Q
- What is the return on capital employed?(ROCE). how to calculate it.
A
- profit of a business as a percentage of the total amount of money used to generate it.
Operating profit
————————– X 100
Capital employed
35
Q
34, What are the benefits of using ratios in a business? (3)
A
- helps to monitor progress over time.
- can be used to make comparisons between businesses.
-Proves effective in gauging the short-term financial standing of a firm - Enables to identify of future trends of business and subsequently helps formulate an effective budget.
36
Q
- Who are the 2 internal stakeholders of a business?
A
- Employees and managers.
- owners and shareholders.
37
Q
- Who are the 4 external stakeholders of a business?
A
- competitors
- customers
- government
- suppliers
38
Q
- What are the 4 ways financial documents help businesses to make better-informed decisions?
A
- Funding decisions - help to predict when money is needed.
- Reducing costs - can asses whether costs are under control.
- increasing profitability - could try to increase profit margins by increasing prices or reducing the cost of production.
- Investment decisions - assess the the company’s financial state,
39
Q
- What are the other 6 usages of financial documents?
A
- government
- competitors
- the media
- tax authorities
- auditors
- registrar of companies
40
Q
- What is auditing?
A
- accounting procedure that checks thoroughly the accuracy of a company’s accounts.
