Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business (LC) > Chapter 18 - Monitoring The Business > Flashcards

Chapter 18 - Monitoring The Business Flashcards

1
Q

What does a profit and loss account do?

A

Records sales less expenses the Organisation has incurred throughout the financial year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What can we learn from a profit and loss?

A

Tells us gross profit and net profit and whether we need to spend less/ sell more or of everything is good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does a balance sheet do?

A

It shows how much wealth a business has generated by providing a statement of it assets and liabilities as well as its sources of finance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How do you find working capital?

A

Current assets - current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is working capital?

A

The amount of money available for the day to day running of a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is capital employed?

A

Total amount of money invested in a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is a debtor?

A

Individuals who owe a business money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a creditor?

A

Someone who money is owed to

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What can we learn from a balance sheet?

A

Gearing and liquidity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How is capital employed calculated?

A

Ordinary share capital + retained earnings + long term loans + preference shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Name the 3 profitability ratios.

A

Gross profit margin
Net profit margin
Return on investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How do you calculate gross profit margin?

A

Gross profit x 100
_______________
Sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How do you calculate net profit margin?

A

Net profit x 100
______________
Sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How do you calculate return on investment?

A

Net profit x 100
______________
Capital employed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are preference shares?

A

Shares that are entitled to a dividend, they are taken priority over ordinary shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the 2 liquidity ratios?

A 
Current ratio (working capital ratio)
Acid test ratio (quick)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How do you calculate current ratio?

A

Current assets : current liabilities

18
Q

What is the ideal ratio for current ratio?

A

2:1

19
Q

How do you calculate acid test ratio?

A

Current assets - closing stock : current liabilities

20
Q

What is the ideal ratio for acid test?

A

1 : 1

21
Q

What is liquidity?

A

The ability to pay short term debts as they fall due

22
Q

What is solvency?

A

The ability to pay all debts as they fall due

23
Q

How can a business overcome a liquidity problem?

A

Credit control
Stock control
Raise finance
Financial planning

24
Q

What is the gearing ratio?

A

Debt/equity ratio

25
Q

How do you calculate debt/equity ratio?

A

Debt capital :equity capital

26
Q

What is debt capital?

A

Bank loans + debentures + preference shares

27
Q

What is equity capital?

A

Ordinary shares capital + retained earnings

28
Q

What is the ideal ratio for gearing?

A

Debt capital less than equity capital

29
Q

What is high gearing?

A

Debt capital is greater than equity capital

30
Q

What problems face a highly geared business?

A

Less money to pay dividends
Difficulty obtaining finance (loans/shareholder)
Management stress

31
Q

What are the 3 steps to analyzing ratios?

A

State the change in figures (increase/decrease)
What are causes (expenses increased)
What are solutions (increase selling price)

32
Q

What are the limitations to ratio analysis?

A 
Doesn’t show: 
Industrial relations
Past performance
Ethical behavior
Non financial information
33
Q

What financial information do banks use?

A

Liquidity ratios

Gearing ratios

34
Q

What financial information do management use?

A

Profitability ratios
Liquidity
Gearing

35
Q

What financial information do shareholders use?

A

Profitability

Liquidity

36
Q

What financial information do suppliers use?

A

Liquidity

37
Q

What financial information do employees use?

A

Profitability

Liquidity

38
Q

What financial information do competitions use?

A

Profitability

Gearing

39
Q

What financial information do the government use?

A

Profitability

Liquidity

40
Q

What is gearing?

A

Assessing how much debt the business is in

41
Q

What is liquidation?

A

Trying to find cash to pay debts e.g. selling assets

42
Q

What is receivership?

A

When a receiver repossesses an assets that a borrower has failed to pay debenture repayments on

Business (LC) (23 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions