F- Financial performance of a business Flashcards
Statement of comprehensive income (Profit and Loss Account)
shows the trading position of the business which is used to calculate gross profit. It then takes into account all other expenses to calculate the profit or loss for the year.
Statement of financial position (Balance Sheet)
a snapshot of a business’ net worth at a particular moment in time, normally at the end of a financial year.
Cost of goods sold
the actual value of inventory used to generate sales
Opening inventory (stock)
the value of inventory in a business at the start of a financial year.
Closing inventory (stock)
he value of inventory at the end of a financial year.
Historic cost
the cost of an asset when it was first purchased.
Expected life
how long an asset is expected to be used within a business
Residual value
the value of an asset when it is disposed of by the business, e.g. resale value.
Current assets
items owned by the business that change in value on a regular basis, such as stock.
Capital employed
the total amount of capital tied up in a business at a point in time. It is calculated as owners’ or shareholders’ capital + retained profit – drawings.
Interfirm
between different firms, e.g. comparing the performance of two different house builders.
Intrafirm
within the firm, e.g. comparing this year’s results with last year’s, or the performance of the York branch with the Leicester branch of a retail store.
Stakeholder
anyone with an interest in the activities of a business, whether directly or indirectly involved.
Illiquid
not easily converted into cash
Business-to-business
B2B refers to when one business sells to another business, e.g. a stationery business selling to a firm of accountants.
