calcualtions

Question 1

capacity utilisation

Answer 1

operating output/ total possible output x100

Question 2

what is the current ratio

Answer 2

current assists / current liabilities
-measures how effectively the companies net assets are being used to generate its sales

Question 3

what is the acid test ratio

Answer 3

current liabilities - inventory/ current liabilities

Question 4

what are the uses of ratios

Answer 4

-helps tbe business get a picture of their performance, can relate it to past figures and see improvements

Question 5

ROCE

Answer 5

operating profit/ capital employed x100
-shows the profitability of an investment by calculating its percentage return- this can then be compared to expected return from other investments, comparing to previous years- ideal is 20-30%

Question 6

how do you calculate gross, operating and net profit and profit margins

Answer 6

gross = revenue - cost of sales (variable)
operating= gross- other costs (not tax or interest)
net profit= operating profit -tax and interest

margins = type of profit / sales revue x100

Question 7

how to calculate EMV

Answer 7

-probability x expected revues of both outcomes of an options then add together
-for net gain= minus the initial outlay

Question 8

what are the benefits of decision trees

Answer 8

-good tool to evaluate opportunity cost in comparison with other projects
-forces managers to use an element of quantitative data into the decision making process
-most use when comparing to decisions that may have been taken in the past, more viable and tangible

Question 9

what are the disadvantages to decisions trees

Answer 9

-time consuming to carry out
-probabilities can’t always be relied upon as they are just a prediction
-managerial bias- prioritising projects by using persuasive figures that make them more appealing within the business decision
-less useful when new situations are faced
-many lead to qual factors being ignored so therefore shouldn’t be used in isolation