Chap 4

Question 1

Effectiveness

Answer 1

Is the degree to which a business has achieved it’s objectives.

Question 2

Efficiency

Answer 2

Refers to how well a business uses resources to achieve objectives.

Question 3

Performance indicators

Answer 3

Are measurable statements which businesses use to evaluate performance.

Question 4

Non financial indicators

Answer 4

Are commonly expressed in real terms and often make use of qualitative data.

Question 5

Financial statements

Answer 5

Summarise the activities of a business over a period of time.

Question 6

Net profit

Answer 6

Is the difference between revenue earned from the operations of the business and any expenses incurred in earning the revenue.

Question 7

Expenses

Answer 7

Are what it has cost the business to provide it’s services or sell it’s products.

Question 8

Revenue

Answer 8

Is what the business receives in the normal coarse of trading or operating, including sales, fees, interest, divedends, royalties, and rent.

Question 9

Profitability

Answer 9

Measures the earning performance of the business and indicates the businesses ability to maximise profits.

Question 10

Cost of goods sold

Answer 10

Includes the cost of materials used to produce the goods and any direct labour costs involved in producing the goods. It does not include indirect costs such as sales staff wages of distribution costs.

Question 11

Balance sheets

Answer 11

Shows a businesses assets and liabilities at a point in time using the heading as at to pinpoint when it was created.

Question 12

Assets

Answer 12

Are items of value owned or controlled by the business and that can be given monetary value.

Question 13

Evaluation

Answer 13

Is the process of assessing whether the business has achieved stated objects.

Question 14

Liabilities

Answer 14

And a liabilities

Question 15

Evaluation

Answer 15

Is the process of assessing whether the business has achieved stated objectives.

Question 16

Liquidity

Answer 16

Is the extent to which the business can meet it’s financial commitments in the short term.

Question 17

Credit terms

Answer 17

In business are the terms and conditions of sale between a customer and a business, including the amount of time provided for making final payment.

Question 18

Solvency

Answer 18

Is the extent to which the business can meet it’s financial commitments in the longer term.

Question 19

Gearing

Answer 19

Measures the percentage of the assets of the business which are funded by external sources.

Question 20

Gross profit margin

Answer 20

shows the amount of revenue that results in gross profit.

Question 21

Working capital ratio

Answer 21

Measures the level of current assets available to meet a businesses current liabilities. That is the ability of the business to meet it’s short term debts.

Question 22

Customer satisfaction

Answer 22

Is the degree to which the businesses perceived performance meets a customers expectation.

Question 23

Benchmarking

Answer 23

Compares to the strengths and weaknesses of a business against those of other successful businesses, with the aim of reforming those processes that are not achieving the businesses objectives.

Question 24

Market share

Answer 24

Is the share of the total market that a business has, expresses as a percentage.