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Edexcel A Level Business Studies > Quantitative Skills > Flashcards

Quantitative Skills Flashcards

1
Q

Present Value

A

A financial concept that states an amount of money today is worth more than that same amount in the future. Eg: cash flow £20000 * discount factor 0.9 = present value £18000

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2
Q

Calculating present value

A

Cash flow multiplied by discount factor

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3
Q

What is a discount factor

A

It is a weighing factor used to find the present value of future cash flows. Basically the number you use to calculate how much your money will be worth some time from now, for example one year.

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4
Q

Net Present Value

A

Calculates the monetary value now of a project’s future cash flows

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5
Q

Calculating NPV

A

Add together all the Present Values of Future Cash Flows

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6
Q

What are index numbers

A

Used to report key percentage changes within an economy. Their purpose is to show percentqge changes compared with a base number. Can be used to work backwards.

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7
Q

Calculating index number

A

(Current Number divided by Base Number) multiplied by 100

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8
Q

Calculating Current Market Size using index numbers

A

Base Market Size multiplied by (Current Index divided by Base Index)

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9
Q

Decision Tree

A

A mathematical model used to help managers make decisions when faced with choices.

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10
Q

How does a decision tree work?

A

A decision tree uses estimates and probabilities to calculate likely outcomes. Calculating these estimates helps to decide whether the net gain from a decision is worthwhile.

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11
Q

What is probability?

A

The percentage chance of possibility that an event will occur? Ranges between 1 (100%) and 0. If all the outcomes of an event are considered, the total probability must add up to 1.

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12
Q

What is Expected Value?

A

The financial value of an outcome calculated by multiplying the financial result by its probability.

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13
Q

What is Net Gain?

A

The value to be gained from taking a decision. Calculated by adding together the expected value of each outcome and deducting the costs associated with the decision.

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14
Q

How to calculate total expected value

A

Probability A + Probability B value
Eg:
(0.7250000)+(0.350000)=(175000+15000)=190000

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15
Q

How to calculate net gain

A

Net gain = total expected value - cost
Eg: 190000-60000=£130000

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16
Q

Ratios

A

Show the relationship between two values. Ratio analysis involves the comparison of financial data to gain insights into business performance.

17
Q

Return on Capital Employed

A

Operating Profit/Capital Employed

18
Q

Liquidity ratios

A

Assess whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due.

19
Q

Current ratio

A

Current Assets divided by Current Liabilities

20
Q

Trade receivables (debtors)

A

Amounts owed to a business by customers

21
Q

Trade Payables (Creditors)

A

Amounts owed by a business to suppliers & others

22
Q

Calculating receivables days ratio

A

Trade Receivables divided by Annual Sales Revenue * 365

23
Q

Inventory turnover

A

How many times you turn your inventory over in a year

24
Q

Mean

A

Add up all the values, divide by how many there are.

25
Q

Percentage Change

A

Change Between Values divided by Original Value * 100

26
Q

Percentage Change alt method

A

(Changed Value divided by Original Value) -1 * 100

27
Q

Market growth

A

Market growth = change in sales / original sales * 100

28
Q

Market share percentage

A

Market share percentage = business sales divided by market sales times by 100

29
Q

Break-even output

A

Break-even output is the point at which revenue and total costs are the same, meaning the business is making neither a profit nor a loss

30
Q

Net cash flow

A

Net cash flow = cash inflows - cash outflows

31
Q

Gearing Ratio

A

Non-current Liabilities / capital employed * 100

32
Q

Capital Employed

A

Non-Current Liabilities + Share Capital + Retained Profit

Edexcel A Level Business Studies (6 decks)

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