miss duddigan-managing finance

Question 1

how do you measure percentage change in profit

Answer 1

current years profit-previous years profit divided previous years profit times 100

Question 2

what are the three measurements of profit

Answer 2

gross profit
operating profit
net profit

Question 3

gross profit

Answer 3

amount left over when costs of sales is subtracted from revenue

Question 4

what is profit

Answer 4

difference between total revenue and total costs

Question 5

what is the cost of sales

Answer 5

costs directly related to making product e.g cost of raw materials

Question 6

gross profit calculation

Answer 6

total revenue-cost of sales

Question 7

operating profit calculation

Answer 7

gross profit-other operating expenses

Question 8

net profit calculation

Answer 8

operating profit-interest

Question 9

revenue

Answer 9

how much money coming into a business

Question 10

expenses

Answer 10

how much money coming out of a business

Question 11

profit margins

Answer 11

show how profitable a business is
measure relationship between profit and revenue

Question 12

gross profit margin calculation

Answer 12

gross profit divided by revenue times 100

Question 13

net profit margin calculation

Answer 13

net profit divided by revenue times 100

Question 14

operating profit calculation

Answer 14

operating profit divided by revenue times 100

Question 15

ways a business can improve their profit margins

Answer 15

increasing their revenue
could do this by increasing their prices
could also reduce costs of sales by getting cheaper suppliers

Question 16

why are cash and profit not the same

Answer 16

cash-what a business has now to pay its bills
profit-may not get profit staright away
customers may not pay staight away etc

Question 17

balance sheets (statement of financial position)

Answer 17

snashop of a fixed point in time
shows businesses assets (things they belong)
shows businesses liabiities (money business owes)
also show capital
and how they souce that capital e.g loans

Question 18

net assets calculation

Answer 18

net current assets +non current assets - non current assets

Question 19

non current assets

Answer 19

assets business is likely to keep for more than a year
e.g porperty, land

Question 20

current assets

Answer 20

assets business likely to exchange for money within a year
e.g stock inventory

Question 21

current liabilities

Answer 21

debts that need to be payed off within a year
e.g. tax, overdrafts

Question 22

non current liabilities

Answer 22

debts business will pay off within several years e.g. mortgages

Question 23

what are bad debts

Answer 23

debts that aren’t payed back

Question 24

liquidity

Answer 24

how easily an asset can be turned into cash to buy things
cash is very liquid, non current assets e.g factories are liquid

Question 25

insolvent

Answer 25

business doesnt have enough current stock to pay of its liabilities

Question 26

liquidistaion

Answer 26

sell assets to pay off debts

Question 27

how do you calculate current ratio

Answer 27

current assets divided by current liabilities

Question 28

how to calculate acid test ratio

Answer 28

current assets-inventory divided y current liabilities

Question 29

working capital

Answer 29

finance available for day to day spending

Question 30

working capital calculation

Answer 30

current assets - current liabilities

Question 31

business failure

Answer 31

when a business cant cover its expenses
does not have enough cash to cover its current liabilities

Question 32

internal factors that may cause business failure

Answer 32

bad managemnt of working capital
poor efficiency (have costs that could be lower)
bad decisions pn how business can be financed

Question 33

non financial factors

Answer 33

poor communication
different departments not working well together reducing efficiency