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As-level Business > Finance > Flashcards

Finance Flashcards

1
Q

Financial objective

A

Monetary targets a business wants to achieve within a set period of time

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2
Q

Return on investment (ROI)

A

A measure of a business’s profitability and performance and how effectively its using the money to generate profit

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3
Q

Return on investment formula

A

Operating profit/ capital invested x100

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4
Q

What are the two sources of long term funding?

A

Equity
Debt

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5
Q

Gearing

A

The proportion of long term funding that is debt
(Highly geared businesses have more risk)

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6
Q

Formula for gearing

A

Debt / total long term funding x100

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7
Q

Sales revenue formula

A

Quantity sold x selling price

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8
Q

Gross profit formula

A

Sales revenue- cost of sales

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9
Q

Operating profit

A

Gross profit - expenses

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10
Q

Profit for the year

A

Operating profit - interest and taxation

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11
Q

What are the 3 types of budget?

A

•income
•expenditure
• profit

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12
Q

Budgets

A

Forecasts or plans for the future finances of a business

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13
Q

Process of setting budgets

A
  1. Set clear objectives
  2. Carry out market research
  3. Produce a sales forecast
  4. Set income budget
  5. Set expenditure budget
  6. Set profit budget
  7. Set divisional targets
  8. Review against objective
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14
Q

Variance

A

The difference between the predicted outcome and what actually happened
(Can be favourable or adverse)

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15
Q

Break even

A

Point where a business is not making a loss or a profit

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16
Q

Fixed costs

A

Costs stays the same in the short term and doesn’t change dependent on output

17
Q

Contribution

A

The amount of “profit” made on a product only factoring in fixed costs

(Contributing to paying costs)

18
Q

Contribution formula

A

Selling price - variable costs

19
Q

How do you work out profit margins?

A

Divide the specific profit by the revenue and multiple by 100

Eg. Gross profit/ revenue x100

20
Q

Debt factoring

A

Business sells their debt and the debt factoring company will chase up the debt from the customer

As-level Business (7 decks)

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