'Chap 4' - Small Business Evaluation Flashcards
Evaluation
Evaluation is the process of assessing whether the business has achieved stated objectives.
Effectiveness
Effectiveness is the degree to which a business has achieved its objectives.
Efficiency
Efficiency refers to ‘how well’ a business uses resources to achieve objectives.
Performance Indicators
Performance Indicators are measurable statements which businesses use to evaluate performance.
Financial Indicators
Financial Indicators are found in the accounting records and are expresses in dollar terms.
Non-Financial Indicators
Non-Financial Indicators are commonly expressed in real terns and often make use of qualitative data.
Financial Statements
Financial statements summarise the activities of a business over a period of time.
Net Profit
Net profit is the difference between revenue earned from the operations the business and any expenses incurred in earning that revenue.
Expenses
Expenses are what it has cost the business to provide its services or sell its products.
Revenue
Revenue is what the business received in the normal course of trading or operating, including sales, fees, interest, dividends, royalties and rent.
Profitability
Profitability measures the earning performance of the business and indicates the business’s ability to maximise profits.
Cost of Goods sold
The cost of goods sold 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 or distribution costs.
Balance Sheet
A balance sheet shows a business’s assets and liabilities at a point in time using the heading ‘as at’ to pinpoint when it was created/
Assets
Assets are items of value owned or controlled by the business and that can be given a monetary value.
Liabilities
Liabilities are items of debt that the business owes.
