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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
gearing equation
gearing = non current liabilities / total equity + non current liabilities = X 100
26
going into administration
court appoints accountants to run a business after it has been declared insolvent and unable to pay its liabilities
27
gross profit
excess of revenue over the cost of sales
28
gross profit equation
gross profit = revenue - direct costs
29
gross profit margin
shows the gross profit as a % of turnover
30
gross profit margin equation
gross profit margin = gross profit x 100 / turnover
31
income statement
an account that shows the income and expenditure of a firm over a set time span usuallyt 1 year
32
insolvent
company with little hope of ever being able to pay its debts
33
internal source of finance
funding that comes from the business owners e.g. personal funds, retained profit
34
inventory
stock of raw materials, work in progress and finished goods
35
inventory turnover
ratio that shows how many times a business sell its stock in a year
36
inventory turnover equation
inventory turnover = cost of goods sold / average inventories held
37
liabilities
debts owed
38
liquidation
turning all the business assets into cash and paying it off when a business closes down
39
liquidity
ability of a firm to meet its short term debts
40
loan
sum of money that are borrowed an paid back with interest
41
long term funding
finance raised that does not have to be repaid in the next year
42
margin of safety
the quantity by which sales may fall before a firmincurs losses
43
margin of safety equation
safety margin = demand - break even output
44
net assets
shows the value of the company
45
net assets equation
net assets = total assets - total liabilities
46
net current assets
the amount of spare liquid assets once current liabilities have been taken into account
47
net current assets equation
net current assets = current assets - current liabilities
48
operating profit
profit generated by the ongoing business
49
operating profit equation
operating profit = gross profit - indirect costs
50
operating profit margin
percentage of sales revenue that is operating profit
51
operating profit margin equation
operating profit margin = operating profit x 100 / sales
52
overdraft
borrowing facility in which any amount up to an agreed limit can be used
53
overhead
costs not generated by the production process
54
overtrading
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
payables
debts owed by a business
56
payables days
a measure of the average number of days taken to pay suppliers
57
payables days equation
payables days = payables x 365 / cost of sales
58
profit for the year
the total profit that the firms owners can do what they like with
59
profit of the year equation
profit for the year = operating profit + interest recieved - interest paid - tax on profits
60
profit for the year margin
% of revenue that is profit for the year
61
profit for the year equation
profit for the year margin = profit for the year x 100 / turnover
62
profitability
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
recievables
amount owning to a firm of debtors
64
recievables days
number of days it takes to convert receivables into cash
65
recievables days equation
recievables days = recievables x 365 / revenue
66
retained profits
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
return on capital employed
shows the return on an investment and how efficiently management uses capital to generate profits
68
return on capital employed equation (ROCE)
return on capital employed x 100 /total equity + non current liabilities
69
return on investment
measure of how profitable a particular project may be as a % of the orignal investment
70
return on investment equation
return on investment = return on investment x 100 / cost of the investment
71
share capital
amount of money invested into the business by the shareholders
72
total contribution
difference between toal revenue and total variable costs
73
total contribution equation
total contribution = total revenue - total revenue costs
74
total equity
money belonging to the shareholders which comes from the original share purchase plus retained profit occuring as a result of the firms activities
75
total equity equation
total equity = share capital + retained profit
76
variance
compares the actual outcome with the budgeted one
77
variance equation
variance = actual figure - budgeted figure
78
venture capital
investment funding for small or medium sized businesses which is taking risks
79
window dressing
presenting the accounts in a way that make the accounts look healthier than they really are
80
working capital
day to day finance used in a business
81
working capital equation
working capital = current assets - current liabilities

Business (12 decks)

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