Business performance

Question 1

What is a budget variance?

Answer 1

Actual budgets not being exact to their predicted value

Question 2

What are the two types of budget variances?

Answer 2

Favourable and adverse

Question 3

What is a balance sheet?

Answer 3

A snapshot of a businesses’ financial position, providing evidence of assets and liabilities to give an idea of liquidity.

Question 4

What is the main formula for a balance sheet outcome?

Answer 4

Long term liabilities + shareholder funds

Question 5

What is working capital?

Answer 5

Represents operating liquidity of a business and needed to ensure costs can be financed.

Question 6

What is the formula for working capital?

Answer 6

current assets - current liabilities.

Remember working = current

Question 7

What is capital employed?

Answer 7

Tool used to measure profitability of certain projects, to see if capital employed is less than what is earnt from it.

Question 8

What is the formula for capital employed?

Answer 8

Total assets - current liabilities

Question 9

What is depreciation?

Answer 9

The general reduction in value of an asset over a period of time.

Question 10

What is the formula for depreciation?

Answer 10

expected lifetime in years

Question 11

What are the three ways of calculating liquidity?

Answer 11

Current ratio
Acid ratio
Gearing

Question 12

What is the formula for current ratio?

Answer 12

current assets / current liabilities

‘Current’ ratio so both are current

Question 13

What is the formula for acid ratio test?

Answer 13

current liabilities

Question 14

What is the formula for gearing?

Answer 14

Long term liabilities
————————— x 100
capital employed

Question 15

What is a profit and loss account also known as?

Answer 15

An income statement

Question 16

What is a profit and loss account?

Answer 16

An accounting statement showing a businesses’ sales revenue over a trading period and comparing it to its’ losses.

Question 17

What is the main formula for a profit and loss account outcome?

Answer 17

Opening stock + purchases - closing sales

Question 18

What is window dressing?

Answer 18

A method used to display financial positioning of a business in a more favourable light

Question 19

What are the 5 types of window dressing?

Answer 19

Manipulating sales (incorrect sales recorded)
Depreciation (decreasing values)
Appreciation (increasing values)
Writing off debts (less expenditure)
Borrowing money (to seem able to cover costs)

Question 20

In what 4 ways can a business record performance non-financially?

Answer 20

Customer and employee attitude surveys, market share, productivity and environmental awareness

Question 21

What is a special order?

Answer 21

Anything limited in regards to the design, access or age of a product.