cash, profit, liquidity and profitability

Question 1

what are all cash, profit, liquidity and profitability linked to?

Answer 1

the health of an enterprise

Question 2

what will analysing the enterprises will reveal?

Answer 2

whether an enterprise is solvent - able to pay its debts - or Insolvent.

Question 3

what is cash?

Answer 3

the money that an enterprise has
it is the coins and notes on the premises and money In the bank

Question 4

cash:
where does the value of an enterprise’a cash appear in?

Answer 4

the balance sheet (statement of financial position) as a current asset

Question 5

cash:
why is cash the most liquid form of asset?

Answer 5

as it means the enterprise is able to pay its short-term debts

Question 6

cash:
what could mean for the enterprise to unable to make a profit?

Answer 6

the debts Include suppliers who may not be willing to continue to supply the enterprise

Question 7

what is liquidity?

Answer 7

the ability of an enterprise to pay its debts

Question 8

how will an enterprise have good (positive) liquidity?

Answer 8

will have sufficent net current assets to pay its creditors. It means the enterprise is solvent - can pay its debts.

Question 9

how will an enterprise have a poor (negative) liquidity?

Answer 9

may not be able to pay its debts. The enterprise may become insolvent and have to cease trading

Question 10

liquidity and cash:
what will an enterprise need if it needs to pay debts in the near future?

Answer 10

it will need to have access to cash

Question 11

liquidity and cash:
what are 3 examples of an enterprise that needs to pay off its debts?

Answer 11

wages, heating and lighting

Question 12

liquidity and cash:
The ability of an enterprise to convert its assets into cash is known as what?

Answer 12

it’s liquidity

Question 13

liquidity and cash:
what could an enterprise sell if needs to pay to it suppliers £5000 in 10 days time but only has £2000 in cash?

Answer 13

it could sell one of its fixed assets, such as a company vehicle it no longer requires, or sell some of its inventory (stock) at reduced prices.

Question 14

differences between cash & profit:
what is profit?

Answer 14

what Is left once all costs have been deducted from revenue

Question 15

differences between cash & profit:
where does figures for profit appear?

Answer 15

In the profit and loss account

Question 16

differences between cash & profit:
when will profit become cash?

Answer 16

once the enterprise has recelved payment for its products. This could take several weeks.

Question 17

what is profitability?

Answer 17

the ability of an enterprise to turn revenue Into profit

Question 18

what is profit also known as?

Answer 18

profit margin

Question 19

what is the profitability of the amount of generated from each what?

Answer 19

each £1 generated in sales revenue

Question 20

what does a profit margin of 20% mean?

Answer 20

the enterprise is generating £0.20 from each £1 of sales revenue

Question 21

how can an enterprise increase its profit? (2)

Answer 21

by raising prices without demand falling
or lower it’s costs without a noticeable change to the product/service

Question 22

what does a high profit margin mean?

Answer 22

that the enterprise will have a large profit