Chapter 4 Small Business Evaluation Flashcards
What is effectiveness
Effectiveness is the degree to which a business has achieved its objectives.
What efficiency
Efficiency refers to ‘how well’ a business uses resources to achieve objectives.
What are performance indicators
Performance indicators are measurable statements which businesses use to evaluate performance.
What are financial indicators
Financial indicators are found in the accounting records and are expressed in dollar terms.
What are non-financial indicators
Non-financial indicators are commonly expressed in real terms and often make use of qualitative data.
What are financial statements
Financial statements summarise the activities of a business over a period of time.
What is net profit
Net profit is the difference between revenue earned from the operations of the business and any expenses incurred in earning that revenue.
What are expenses
Expenses are what it has cost the business to provide its services or sell its products.
What is revenue
Revenue is what the business receives in the normal course of trading or operating, including sales, fees, interest, dividends, royalties and rent.
What is profitability
the earning performance of the business and indicates its capacity to use its resources to maximise profits.
What is evaluation
Evaluation is the process of assessing whether the business has achieved stated objectives.
What is costs 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.
What is a 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.
What are assets
Assets are items of value owned or controlled by the business and that can be given a monetary value.
What are liabilities
Liabilities are items of debt that the business owes.
What is owners equity
Owner’s equity refers to money given to the business by the owner for the purchase of resources and for undertaking operations. An owner’s equity in a successful business will increase in value over time.
What is liquidity
Liquidity is the extent to which
the business can meet its financial commitments in the short term (less than 12 months).
What are credit terms
Credit terms are the payment requirements stated on an invoice. It is fairly common for sellers to offer early payment terms to their customers in order to accelerate the flow of inbound cash.
What is solvency
Solvency is the extent to which
the business can meet its financial commitments in the longer term (more than 12 months).
What is gearing
Gearing measures the percentage of the assets of the business which are funded by external sources.
What is a gross profit margin
The gross profit ratio shows the amount of revenue that results in gross profit.
What is a net profit margin
The net profit ratio shows the amount of revenue that results in net profit.
What is working capital ratio
The working capital ratio measures the level of current assets available to meet a business’s current liabilities — that is, the ability of the business to meet its short-term debts.
What is customer satisfaction
Customer satisfaction is the degree to which the business’s perceived performance meets a customer’s expectations.
What is bench marking
Benchmarking compares 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 business’s objectives.
What is market share
Market share is the share of the total market that a business has, expressed as a percentage.
What is triple bottom line
Triple bottom line refers to the economic, environmental and social performance of a business.
What is a sustainability report
A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance.
