extra - specific Flashcards
how can we increase gross profit?
- increase revenue
- reduce cost of salesr
how can we increase net profit?
- increase revenue
- reduce cost of sales
- reduce expenses
start-up costs
money used to set up the business before it starts trading
how can we gain income from sales ?
- over the counter sales
- credit sales
- repairs
how can we gain income from assetts ?
- selling uused assetts
- renting out space to other enterprises
- leasing out assetts (equipment)
r
retained profit ?
net profit kept within the enterprise to help it grow
net current assets
current assets - current liabilities
long term liabilities
loans or payments that need t payed within a long period of time
current liabiliies
loans or payments that need to be payed within a year
current assets
cash or items that can be turned into cash quickly
fixed asstes
enables products to be made orservices provided and sold
fixed costs
costs the enterprise must pay no matter how good or bad it is doing
statement of comprehensive income
- how much revenue the enterprise has received from sales and goods
- how much the enterprise has spent
- where the money was spent
measures how well they are doing in terms of gross profit ,costs and net profit
statement of financial postion
- the value of the enterprises assets and liabilities
- the source of capital used by the enterprise used to finance its operations
why will enterprise that deal with mostly cash sales have few debtors
reflected in liabilitie
liquidity
enterprises ability to turn assets into cash
what does solvent mean
an enterprise can pay it’s debts because it has posotive liquidity
what does insolvent mean?
an enterprise cannot pay its debts may have to cease trading because it has negatve liquidity
profitabilty
enterprises ability to turn revenue into profit
profit margin
amount of profit generated from each £1 made in sales revenue
GPM -gross profit margin (percentage)
gross profit /revenue *100
net profit margin(percentage)
net profit/revenue *100
what does gpm stand for
how much gross profit the enterprise makes for every £1 in sales (for every £1in sales the enterprise makes £ (gpm percentage/100) in gross profit)
current ratio may be misleading why?
if current assetts largely consist of inventory
current ratio
current assets /current liabilities
tougher measure of liquidity
liquid capital ratio(doesn’t include inventory) - helpful for debts that need to be payed in the near future (for example wages)
liquid capital ratio
current assets -inventory/current liabilties *100
