Definitons Flashcards
Ansoff’s Matrix
An analytical tool that considers risk and the potential reward from strategic options.
Acid Test
Liquid Assets / Current Liabilities
Asset Turnover
Revenue / Net Assets
Average Rate of Return
- Net cash flow / N.O years = Average Annual Profit
2. (Annual profit / initial investment) x 100
Current Ratio
Current Assets / Current Liabilities, expressed as x:1
Dividend per Share
Total Dividends / Number issued, expressed in pence per share
Dividend Yield
(Ordinary Share Dividend (in pence) / Current Market Price) x 100
Gearing
(Non Current Liabilities / (Total equity + non current liabilities)) x 100
Gross Profit
Sales Revenue - Cost of sales
Inventory Turnover
Cost of Sales / Average inventory held
Market Share
(Sales of a Firm / Total Market Sales) x 100
Moving Averages (3 point moving average)
Add 1,2,3 divide by 3
Add 2,3,4 divide by 3
Add 3,4,5 deivide by 3
Continue until the last number is included in a set of 3
Net Assets
Non-Current Assets + Current Assets - Current Liabilities - Non current Liabilities
Net Current Assets/Liabilities
Current Assets - Current Liabilities.
Net Present Value
- Net Cash flow Table
- Multiply each years net cash flow by the discount factor year 0 is multiplies by 1
- Add all the net values including the negative for year 0
Net Profit Margin
(Operating profit (net profit) / Sales Revenue) x 100
Payable Day’s
Payable x 365 / Cost of Goods Sold
Payback
- Net cash flow Table
- Cumulative to identify when investment is covered
- ÷ amount paid in last year by net cash flow same year
- Times figure in step 3 by 12 to get monthly.
Receivables
Receivables x 365 / Revenue (in days)
ROCE
Operating Profit / Total equity + Non Current Liabilities.
Working Capital
Current Assets - Current Liabilities
Asset Turnover Def
Measures how the assets of the business are being utilise to generate revenue.
Acid Test Def
A measure of a firm’s short term survival i.e its ability to meet short term debts and day to day expenses.
Average Rate of Return Def
An investment appraisal technique that calculates average profit as a percentage of the total cost of the initial investment.
Current Ratio Def
A measure of a firm’s liquidity and short term survival i.e its ability to meet short term debts and day to day expenses
Dividend per Share Def
The return paid to the shareholders for each unit of their investment.
Dividend Yield Def
Measures the return on a shareholder’s investment as a percentage of the current market price.
Float Time Def
The amount of extra time available to complete a non critical activity without delaying the project.
Gearing Def
A measure of the proportion of a business’s capital that is funded through long term loans.
Gross Profit Def
Profit after cost of sales has been deducted and before expenses.
Inventory Turnover Def
Measures how efficiently a business replaces its stock in a year and hence whether stock is being used efficiently to generate sales.
Moving Averages Def
A method of market analysis which shows whether a trend is significant by smoothing out fluctuations.
Net Assets Def
The net worth of a business by the balancing of assets against liabilities.
Net Current Assets/Liabilities Def
The difference between Current Assets and Current Liabilities.
Net Present Value Def
An investment appraisal technique that calculates the total return on an investment taking into account the time value of money.
Net Profit Margin Def
A measure of Profitability that looks at operating profit as a percentage of sales revenue.
Payable Day’s Def
Measures how long on average it takes a business to pay its suppliers it has purchased on credit.
Payback Def
An investment appraisal technique that measures how long it would take to pay back the cost of the initial investment.
Receivable Days Def
A measure of how long it takes a customer to pay for credit purchases.
ROCE Def
A measure of how efficiently a business is using its capital employed to generate profit.
Working Capital Def
A measure of a firms liquidity / ability to meet day to day expenses.
Centralisation
The responsibility of decision making it made by the few individuals at the top of the hierarchy.
Corporate Objective
Long term goals of a business which determines its guiding principles.
Cost Centre
A financial strategy where costs are attributed to different sections of the business.
CPA
A process which decides which tasks can be completed simultaneously and the order in which they need to be completed.
Decentralisation
The responsibility of decision making is delegated to middle managers in the hierarchy.
Delayering
A cost saving strategy that removes levels in the hierarchy.
Differentiation (Porter)
The ability to provide a product or service that stands out from the competition.
Diseconomies of Scale
Increasing the scale of production that leads to increasing unit costs.
Diversification
Where companies aim to provide :
NEW PRODUCT
NEW MARKET
Dividend
A share of profit paid to the shareholder as a reward for their investment.
Economies of Scale
Increasing the scale of production that leads to falling unit costs.
Functional Objectives
Medium to Long term goals of departments e.g Marketing/Finance which help achieve the corporate objective.
Hard HR
Employees are treated as a resource that need to be managed to control costs and output.
Investment Appraisal
Techniques that analyse the predicted financial outcomes of potential investments.
J-I-T
Ordering materials just before they are needed. Lower storage / wastage costs. Suppliers are nearby and are flexibility / reliability. Late delivery could be costly.
Kaizen
Continuous improvement - employees make suggestions for small-scale improvements. Provides motivation for employees given power / opportunity to increase efficiency
Low Cost Strategy (Porter)
When businesses provide goods/services at lower costs than their competitors.
Market Development (Porter)
Where the businesses puts existing products into new markets.
Product Development (Porter)
Where the businesses puts new products in existing markets.
Market Penetration (Porter)
Where the businesses puts existing products into existing markets.
Operational Objectives
Targets of which help the business to produce goods/services in the most effective way.
Porters Generic Strategy
Marketing Strategies that a business can adopt in order to achieve a comparative advantage.
Soft HR
Employees are regarded as an asset and can help the business achieve its long term targets.
TQM
An approach where each employee in the chain puts quality first and treats the next link like an external customer.
Lean Production
Working practices that focus on removing waste, whilst maintaining or improving quality.
Stakeholders
A group or individual that has a vested interest in a firm
Operation Management
The attempt to ensure that the right goods/services are produced at the right time at the right cost at the right quality.
