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Physics & Business P2 > P2 Business > Flashcards

P2 Business Flashcards

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1
Q

What is an investment?

A

An INVESTMENT:

. Money put into a business to make IMPROVEMENTS & make it more PROFITABLE
. eg new machine, new building, new vehicle

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2
Q

What is the AVERAGE RATE of RETURN on an investment?

A

The AVERAGE RATE of RETURN on an investment = The return a business makes from an investment

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3
Q

What is the AVERAGE RATE of RETURN on an investment?

A

The AVERAGE RATE of RETURN on an investment = The return a business makes from an investment

AAR = AVERAGE ANNUAL PROFIT/COST OF INVESTMENT x 100

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4
Q

How you do calculate the AAR (Average Annual Profit)?

A

How you do calculate the AAR (Average Annual Profit)?

  1. Work out the TOTAL PROFIT of investment (add profits together LESS initial investment) divide by NUMBER OF YEARS this equals AAP (Aver annual profit)
  2. Work out AAR (%) = AVERAGE ANNUAL PROFIT/COST OF INVESTMENT x 100
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5
Q

How you do calculate the AAR (Average Annual Profit)?

A

How you do calculate the AAR (Average Annual Profit)?

  1. Work out the TOTAL PROFIT of investment (add profits together less initial investment) divide by NUMBER OF YEARS this equals AAP (Aver annual profit)
  2. Work out AAR (%) = AVERAGE ANNUAL PROFIT/COST OF INVESTMENT x 100
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6
Q

3 parts to an INCOME STATEMENT

A

3 part to an INCOME STATEMENT

  1. Trading Account - gives GROSS profit
  2. Profit & Loss Account - gives NET profit (before tax)
  3. Appropriation Account - gives where the profit has gone to eg out in taxes, or dividends or kept as RETAINED PROFIT
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7
Q

3 parts to an INCOME STATEMENT

A

3 part to an INCOME STATEMENT

  1. Trading Account - gives GROSS profit
  2. Profit & Loss Account - gives NET profit (before tax)
  3. Appropriation Account - gives where the profit has gone to eg out in taxes, or dividends or kept as RETAINED PROFIT - just for limited companies
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8
Q

Revenue is the same as ….

A

Revenue is the same as SALES - how many have I received from selling teddy bears in £

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9
Q

What are other words for SALES?

A

Other words for SALES are:

REVENUE TURNOVER

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10
Q

Cost of sales

A

Cost of sales -

OPENING STOCK of materials

+ PURCHASES how much have I spent on materials to make the teddy bears?
- Less CLOSING STOCK of materials

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11
Q

How do I find what is the GROSS PROFIT?

A

Gross Profit = REVENUE (can be called sales or turnover) less COST OF SALES

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12
Q

How do I find what is the GROSS PROFIT?

A

Gross Profit = REVENUE (sales) less COST OF SALES

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13
Q

What are other words for SALES?

A

Other words for SALES are:

REVENUE TURNOVER

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14
Q

What is depreciation?

A

Depreciation is:

. the VALUE lost over time from a piece of MACHINERY due to WEAR and TEAR

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15
Q

What are the two methods of calculation DEPRECIATION?

A
  1. STRAIGHT LINE method of depreciation - eg cost/number of year eg £5,000 car will last 5 years so depreciation = £1,000 per year
  2. REDUCING BALANCE method of depreciation eg £5,000 car might depreciate by 25% each yearYr 1 - 25% or £5,000 = £1,250 depreciation - the value of the car is now £5,000 less £1,250 = £3,750
    Yr 2 - 25% of £3,750 = £938 depreciation - the value of the car is now £3,750 less £938 = £2,812
    Yr 3 etc
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16
Q

What are the two methods of calculation DEPRECIATION?

A
  1. STRAIGHT LINE method of depreciation - eg cost/number of year eg £5,000 car will last 5 years so depreciation = £1,000 per year
  2. REDUCING BALANCE method of depreciation eg £5,000 car might depreciate by 25% each yearYr 1 - 25% or £5,000 = £1,250 depreciation - the value of the car is now £5,000 less £1,250 = £3,750
    Yr 2 - 25% of £3,750 = £938 depreciation - the value of the car is now £3,750 less £938 = £2,812
    Yr 3 etc
17
Q

Gross Profit Margin =

A

Gross Profit Margin = GROSS PROFIT/SALES*x 100

Sales can be called turnover or revenue

High GPM is good

18
Q

Net Profit Margin =

A

Net Profit Margin = net profit/sales x 100

%

19
Q

What is Cash Flow Forecasting?

A

Cash Flow Forecasting shows:

  1. CASH coming INTO the business
  2. CASH going OUT of the business
  3. It helps you to plan - might need to take out a LOAN (borrow)
20
Q

What is cash flow?

A

Cash flow is the INFLOW and OUTFLOW of cash into a business over a period of time

20
Q

What is cash flow?

A

Cash flow is the INFLOW and OUTFLOW of cash into a business over a period of time

21
Q

Sales revenue =

A

Sales revenue = number of units sold x sales price per unit

Sales revenue can be called Turnover sometimes

21
Q

Sales revenue =

A

Sales revenue = number of units sold x sales price per unit

Sales revenue can be called Turnover sometimes

22
Q

Poor cash flow means:

A

Poor cash flow means:

. Employees are not paid on time - DEMOTIVES them - might leave

. The company may not be able to pay its bills on time - it might LOSE OUT ON SAVINGS FOR PAYING EARLY

. If suppliers are not paid on time they might refuse to SUPPLY YOU IN THE FUTURE

22
Q

Poor cash flow means:

A

Poor cash flow means:

. Employees are not paid on time - DEMOTIVES them - might leave

. The company may not be able to pay its bills on time - it might LOSE OUT ON SAVINGS FOR PAYING EARLY

. If suppliers are not paid on time they might refuse to SUPPLY YOU IN THE FUTURE

23
Q

What is a credit period?

A

A credit period is

the TIME given to PAY A BILL

eg 30 days credit - you have 30 days BEFORE you have to pay - DON’T have to pay immediately

Physics & Business P2 (13 decks)

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