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Business > Financial Performance > Flashcards

Financial Performance Flashcards

1
Q

Adverse variance

A

actual profit is lower thn the budgeted profit - due to costs being higher than targeted

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2
Q

assets

A

items of value e.g. land, cash

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3
Q

balance sheet

A

statement of an organisations assests at on point in time - shpws the value of the company, also shows where liabilities came from

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4
Q

break even output

A

quantity of output at which total revenue just equals total costs

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5
Q

budget

A

financial plan - states future expected costs and revenue - may be used by management to keep control of business profitiablity

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6
Q

budgeting

A

making a budget, below a certain level of spending

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7
Q

capital expenditure

A

spending on new non current assets

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8
Q

capital structure

A

way in which a business raises finance to purchase assets

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9
Q

capital structure objectives

A

raising finance in a cheap way - provides sufficient funds for survival and expansion

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10
Q

contribution

A

how much money is left over after the sale of a product after variable costs have been deducted that can pay off fixed costs

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11
Q

contribution per unit

A

amount unit sold towards covering the fixed costs

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12
Q

contribution per unit equation

A

contribuition per unit = price - variable cost per unit

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13
Q

current asset

A

items of value owned by a business that are likely to be turned into cash within 1 year

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14
Q

current liability

A

debts scheduled for repayment within 1 year

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15
Q

current ratio

A

measurement of the level of liquidity in particular as to whether there are enough liquid assets to pay for bills

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16
Q

current ratio equation

A

current ratio = current assets (cash + inventories + recievables) / current liabilities (trade payables and other current liabilties)

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17
Q

debt factoring

A

business that sells its recievables to a third party at a discount

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18
Q

direct costs

A

includes raw materials, direct labour, all expenses involved with production

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19
Q

external source of finance

A

funding that comes from outside of the business e.g. bank loan, overdraft

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20
Q

favourable variance

A

describes the situation where the financial outcome is better than budgeted for (may be due to lower cost than budget or more revenue than budget)

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21
Q

financial decision making

A

strategies chosen to help improve cash flow

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22
Q

financial efficiency ratios

A

way of measuring how well an organisation manages its working capital

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23
Q

financial objectives

A

monetary goals that a business sets itself usually a set target in a certain time e.g. cost minimisation, return on investment

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24
Q

gearing

A

measure to the extent to which a firms capital is financed using long term loans may include bank loans, debentures - between 25% to 50% is best

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25
Q

gearing equation

A

gearing = non current liabilities / total equity + non current liabilities = X 100

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26
Q

going into administration

A

court appoints accountants to run a business after it has been declared insolvent and unable to pay its liabilities

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27
Q

gross profit

A

excess of revenue over the cost of sales

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28
Q

gross profit equation

A

gross profit = revenue - direct costs

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29
Q

gross profit margin

A

shows the gross profit as a % of turnover

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30
Q

gross profit margin equation

A

gross profit margin = gross profit x 100 / turnover

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31
Q

income statement

A

an account that shows the income and expenditure of a firm over a set time span usuallyt 1 year

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32
Q

insolvent

A

company with little hope of ever being able to pay its debts

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33
Q

internal source of finance

A

funding that comes from the business owners e.g. personal funds, retained profit

34
Q

inventory

A

stock of raw materials, work in progress and finished goods

35
Q

inventory turnover

A

ratio that shows how many times a business sell its stock in a year

36
Q

inventory turnover equation

A

inventory turnover = cost of goods sold / average inventories held

37
Q

liabilities

A

debts owed

38
Q

liquidation

A

turning all the business assets into cash and paying it off when a business closes down

39
Q

liquidity

A

ability of a firm to meet its short term debts

40
Q

loan

A

sum of money that are borrowed an paid back with interest

41
Q

long term funding

A

finance raised that does not have to be repaid in the next year

42
Q

margin of safety

A

the quantity by which sales may fall before a firmincurs losses

43
Q

margin of safety equation

A

safety margin = demand - break even output

44
Q

net assets

A

shows the value of the company

45
Q

net assets equation

A

net assets = total assets - total liabilities

46
Q

net current assets

A

the amount of spare liquid assets once current liabilities have been taken into account

47
Q

net current assets equation

A

net current assets = current assets - current liabilities

48
Q

operating profit

A

profit generated by the ongoing business

49
Q

operating profit equation

A

operating profit = gross profit - indirect costs

50
Q

operating profit margin

A

percentage of sales revenue that is operating profit

51
Q

operating profit margin equation

A

operating profit margin = operating profit x 100 / sales

52
Q

overdraft

A

borrowing facility in which any amount up to an agreed limit can be used

53
Q

overhead

A

costs not generated by the production process

54
Q

overtrading

A

expanding beyond the level at which there is a safe level of cash - causes cash outflow for materials and wages before cash from revenue returns

55
Q

payables

A

debts owed by a business

56
Q

payables days

A

a measure of the average number of days taken to pay suppliers

57
Q

payables days equation

A

payables days = payables x 365 / cost of sales

58
Q

profit for the year

A

the total profit that the firms owners can do what they like with

59
Q

profit of the year equation

A

profit for the year = operating profit + interest recieved - interest paid - tax on profits

60
Q

profit for the year margin

A

% of revenue that is profit for the year

61
Q

profit for the year equation

A

profit for the year margin = profit for the year x 100 / turnover

62
Q

profitability

A

measure of financial performance that compares a business’s profits to some other factors such as revenue or capital employed, profitability is usually measured as a %

63
Q

recievables

A

amount owning to a firm of debtors

64
Q

recievables days

A

number of days it takes to convert receivables into cash

65
Q

recievables days equation

A

recievables days = recievables x 365 / revenue

66
Q

retained profits

A

value of all of the profit over all the years that has not been given out to shareholders in the form of dividends but kept for use by the company

67
Q

return on capital employed

A

shows the return on an investment and how efficiently management uses capital to generate profits

68
Q

return on capital employed equation (ROCE)

A

return on capital employed x 100 /total equity + non current liabilities

69
Q

return on investment

A

measure of how profitable a particular project may be as a % of the orignal investment

70
Q

return on investment equation

A

return on investment = return on investment x 100 / cost of the investment

71
Q

share capital

A

amount of money invested into the business by the shareholders

72
Q

total contribution

A

difference between toal revenue and total variable costs

73
Q

total contribution equation

A

total contribution = total revenue - total revenue costs

74
Q

total equity

A

money belonging to the shareholders which comes from the original share purchase plus retained profit occuring as a result of the firms activities

75
Q

total equity equation

A

total equity = share capital + retained profit

76
Q

variance

A

compares the actual outcome with the budgeted one

77
Q

variance equation

A

variance = actual figure - budgeted figure

78
Q

venture capital

A

investment funding for small or medium sized businesses which is taking risks

79
Q

window dressing

A

presenting the accounts in a way that make the accounts look healthier than they really are

80
Q

working capital

A

day to day finance used in a business

81
Q

working capital equation

A

working capital = current assets - current liabilities

Business (12 decks)

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