Evaluating Business Information

Question 1

Force field analysis

Answer 1

• used to decide whether or not to undertake a change to avoid a hasty decision
• drivers are factors that force change to happen and knowing their relative strength will increase a strategy’s chance of success
• resistors are factors that hinder change and knowing their relative weighting can avoid risky decisions being made
• assets for change are identified which can resource/support a decision

Question 2

Gantt chart

Answer 2

• identifies the various activities so that decisions as to what resources are required can be made
• visually shows a project on a chart which marks progress with a today line, making it easier to meet/track deadlines
• helps to show how long each activity is scheduled to last so that efficient timetabling of resources/inventory/deliveries can be carried out
• identifies where activities overlap with other activities and by how much so that a manager can plan how to divide the firm’s resources - delays and setbacks can be better avoided
• identifies the critical path which will allow the manager to work out the most efficient timescale of the project

Question 3

Critical path analysis

Answer 3

• allows a manager to work out the quicker way to complete a project by identifying the best order to perform all the necessary tasks
• plans in advance all the individual activities that make up a project which means the manager will reduce the chance of unforeseen problems that may affect decision making
• shows the order in which activities should be undertaken which allows the manager to decide on the necessary material as and employees required - saves on wasted resources and time
• shows which activities can only take place once other activities have been completed so a decision can e made about which activities should be prioritised
• allows the manager to decide which activities can be undertaken simultaneously mea big the overall time to complete the project is reduced
• decisions can be made about when certain resources will be needed and will reduce costs as the resources won’t be needed for the length of the entire project

Question 4

Ratio analysis - profitability

Answer 4

• analyse the profit-making capacity and whether the business has met its objectives
• gross profit as a percentage of sales (gross profit/sales) x 100%
• net profit as a percentage of sales (net profit/sales) x 100%

Question 5

Ratio analysis - liquidity

Answer 5

• how the business has performed over the time period in the use of its assets and the control of its debts
• current ratio - business’s ability to meet its short term debts. Usually between 1:1 and 3:1. When ratio is very low indicates business may have liquidity problems. High = possibly too much cash in the business
• current ratio = current assets : current liabilities
• acid test ratio - takes into account that stocks of raw materials and goods for resale can take some time to be turned into cash. Business’s ability to pay its short term debt without including stock. Average figure 1:1. Less = business won’t be able to meet its short term debts without selling stock/money

Question 6

Ratio analysis - efficiency

Answer 6

• analyse how easily a business can meet its debts
• return on capital employed (%) - measures how well/Bailey a business has utilised the capital that has been invested in it
• (net profit/capital employed) x 100%
• if low shareholders receive lower dividends on their investment