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Theme 2 Business AS > Managing Finance > Flashcards

Managing Finance Flashcards

1
Q

What is the calculation for gross profit?

A

Revenue - cost of sales

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2
Q

What is the calculation for operating profit?

A

gross profit - expenses

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3
Q

What is the calculation for profit of the year?

A

operating profit - intrest - dividends - corporation tax

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4
Q

What is the calculation for gross profit margin?

A

gross profit / sales revenue X 100

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5
Q

What is the calculation for operating profit margin?

A

operating profit / sales revenue X 100

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6
Q

What is the calculation for profit of the year margin?

A

profit of the year / sales revenue X 100

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7
Q

Ways of improving profit? (3)

A

buy in bulk, economies of scale
Make workforce redundant
cut advertising costs

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8
Q

What are non current assets?

A

Assets owed in LT (fixed)

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9
Q

What are current assets?

A

Assets owed in ST

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10
Q

What are total assets?

A

non current + current assets

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11
Q

What are current liabilities?

A

money owed in ST

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12
Q

What are non current liabilities?

A

money owed in LT

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13
Q

What are total liabilities?

A

current + non current liabilities

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14
Q

What are net assets?

A

total assets - total liabilities

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15
Q

What is the calculation for current ratio?

A

current assets / current liabilities

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16
Q

What is the acid test ration?

A

current assets - stock / current liabilities

17
Q

What is liquidity?

A

The ability of a business to meet it ST liabilities using cash, working capital or assets that can quickly be turned into cash

18
Q

What does current ratio indicate?

A

Below 1 cash flow issues

high too much working capital

19
Q

What does the acid test ratio indicate?

A

significantly less than 1, bankrupt

20
Q

What is working capital?

A

The mount of money needed for a business to pay for its day to day operations

21
Q

What are fixed non current costs?

A

equipment premises

22
Q

What are current fixed costs?

A

stock
cash
debtors

23
Q

What are variable non current costs?

A

loans

24
Q

What are variable current costs?

A

overdraft
wages
suppliers

25
Q

How does overdraft improve working capital?

A

+increase cash, flexible payments

-creates current liability

26
Q

How does bank loans improve working capital?

A

+increase cash (current asset)

-creates non current liability

27
Q

How does reducing customer credit improve working capital?

A

+ speeds up cash coming in business

- loss of customers / USP

28
Q

How does selling assets improve working capital?

A

+ large cash addition to current assets

-loss of fixed assets, current liabilities created eg rent

29
Q

How does extending customer trade improve working capital?

A

+delays payments

-unethical

30
Q

Ways of improve working capital? (5)

A 
Overdraft
bank loan
reducing customer credit
sell assets
extending trade credit

Theme 2 Business AS (4 decks)

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