Business performance Flashcards
What is a budget variance?
Actual budgets not being exact to their predicted value
What are the two types of budget variances?
Favourable and adverse
What is a balance sheet?
A snapshot of a businesses’ financial position, providing evidence of assets and liabilities to give an idea of liquidity.
What is the main formula for a balance sheet outcome?
Long term liabilities + shareholder funds
What is working capital?
Represents operating liquidity of a business and needed to ensure costs can be financed.
What is the formula for working capital?
current assets - current liabilities.
Remember working = current
What is capital employed?
Tool used to measure profitability of certain projects, to see if capital employed is less than what is earnt from it.
What is the formula for capital employed?
Total assets - current liabilities
What is depreciation?
The general reduction in value of an asset over a period of time.
What is the formula for depreciation?
expected lifetime in years
What are the three ways of calculating liquidity?
Current ratio
Acid ratio
Gearing
What is the formula for current ratio?
current assets / current liabilities
‘Current’ ratio so both are current
What is the formula for acid ratio test?
current liabilities
What is the formula for gearing?
Long term liabilities
————————— x 100
capital employed
What is a profit and loss account also known as?
An income statement
What is a profit and loss account?
An accounting statement showing a businesses’ sales revenue over a trading period and comparing it to its’ losses.
What is the main formula for a profit and loss account outcome?
Opening stock + purchases - closing sales
What is window dressing?
A method used to display financial positioning of a business in a more favourable light
What are the 5 types of window dressing?
Manipulating sales (incorrect sales recorded)
Depreciation (decreasing values)
Appreciation (increasing values)
Writing off debts (less expenditure)
Borrowing money (to seem able to cover costs)
In what 4 ways can a business record performance non-financially?
Customer and employee attitude surveys, market share, productivity and environmental awareness
What is a special order?
Anything limited in regards to the design, access or age of a product.
